quiz 2 but chpt 6

Question 1

revenue recorded at point of shipping, because title changes hands at shipment (buyer normally pays for shipping)

Answer 1

FOB shipping point

Question 2

revenue recorded at point of destination, because title changes hands on delivery (seller pays for shipping)

Answer 2

FOB destination

Question 3

open accounts owed to the business trade by customers

Answer 3

accounts receivable

Question 4

written promises that required another party to pay the business under specific conditions (amount, time, interest)

Answer 4

Notes receivable

Question 5

Why do companies accept credit cards?

Answer 5

• it increases sales
  -avoids providing credit directly to customers
  -avoids losses due to bad checks
  -avoid losses due to fraudulent credit card sales
  -to receive payment quicker

Question 6

customers may be offered a sales discount to encourage early payment

Answer 6

sales discount (contra revenue account)

Question 7

if goods are defective, damaged, or unsatisfactory, must be deducted from gross sales revenue in determining net sales

Answer 7

sales returns and allowances

Question 8

credit card discounts, sales discounts, and sales return and allowances are all:

Answer 8

contra revenue accounts

Question 9

when a company sells on credit, it knows that some of these customers will not pay their debts

Answer 9

accounting for bad debts

Question 10

requires recording of bad debt expense in the same accounting period in which the related sales are made, BUT at the end of the period of sale

Answer 10

matching principle

Question 11

-make the end of period adjusting entry to record estimated bad debt expense
-write off specific accounts deteremined to be uncollectible during the period

Answer 11

allowance method of accounting for bad debts

Question 12

accounting containing the estimated uncollectible accounts receivable
- always subtracted from the balance asset on the BS

Answer 12

allowance for doubtful accounts

Question 13

selling, general and administrative expense in income statement

Answer 13

bad debt expense

Question 14

two methods are allowed under GAAP to estimate bad debt expense:

Answer 14

percentage of credit sales or aging of accounts receivable

Question 15

_____ relies on the fact that, as accounts receivable becomes older and more overdue, it is less likely that they will be collected

Answer 15

aging of accounts receivable method