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For multiple-choice and true/false questions, simply press or click on what you think is the correct
answer. For fill-in-the-blank questions press or click on the blank space provided.
If you have difficulty answering the following questions, learn more about this topic by reading our
Accounts Receivable and Bad Debts Expense (Explanation).
1. When a sale is made with the credit terms of 2/10, net 30, the "10" refers to the __________ period.
2. On June 1, $800 of goods are sold with credit terms of 1/10, n/30. How much should the seller expect to receive if
the buyer pays on June 8?
$720
$784
$792
$800
3. On June 1, $800 of goods are sold with credit terms of 1/10, n/30. On June 3 the customer returned $100 of the
goods. How much should the seller expect to receive if the buyer pays on June 8?
$692
$693
$700
$792
4. With credit terms of 2/10, n/30, the annual interest rate for paying in 10 days instead of 30 days is closest to
2%
24%
30%
36%
5. When the terms of a sale are FOB __________, ownership of goods will transfer to the customer at the customer's
dock.
6. The seller is responsible for the costs of shipping its goods to the buyer when the terms of the sale are FOB
Destination
Shipping Point
7. The buyer is responsible for the costs of shipping when goods are sold with the terms FOB
Destination
Shipping Point
8. When the Allowance for Doubtful Accounts appears on a company's financial statements, its balance will be a
__________ balance.
Debit
Credit
9. On which financial statement would you expect to find Allowance for Doubtful Accounts?
Balance Sheet
Income Statement
10. Which method of reporting losses on accounts receivable is required in the U.S. for income tax purposes?
Allowance
Direct Write-off
11. Which method of reporting losses on accounts receivable is to be used for financial reporting?
Allowance
Direct Write-off
12. The seller of goods that is offering credit terms of net 30 days will likely be one of its customer's __________
creditors until it receives payment.
Secured
Unsecured
13. After several years of operations, a company's Bad Debts Expense for a given year is likely to be the same as its
balance in Allowance for Doubtful Accounts.
True
False
14. A company estimates that $20,000 of its $500,000 of accounts receivable will be uncollectible. Its Allowance for
Doubtful Accounts presently has a credit balance of $8,000. The adjusting entry will include a __________ to the
Allowance for Doubtful Accounts.
Debit Of $12,000
Credit Of $12,000
Debit Of $28,000
Credit Of $28,000
15. A company estimates that $20,000 of its $500,000 of accounts receivable will be uncollectible. Its Allowance for
Doubtful Accounts presently has a credit balance of $18,000. The adjusting entry will include a __________ to Bad
Debts Expense.
Debit Of $2,000
Credit Of $2,000
Debit Of $38,000
Credit Of $38,000
16. A company estimates that $20,000 of its $500,000 of accounts receivable will be uncollectible. Its Allowance for
Doubtful Accounts presently has a debit balance of $3,000. The adjusting entry will include a __________ to
Allowance for Doubtful Accounts.
Debit Of $3,000
Debit Of $23,000
Credit Of $3,000
Debit Of $17,000
Credit Of $17,000
Credit Of $23,000
17. The company's bad debts expense for its first week of operations will be $ __________.
18. The balance in Allowance for Doubtful Accounts at the end of the first week will likely be $ __________.
19. The company's bad debts expense for its second week of operations will be $ __________.
20. The amount of accounts receivable that you expect will be written off by the end of the company's second week of
operations is $ __________.
21. The balance in Allowance for Doubtful Accounts at the end of the second week of operations will likely be
$__________.
22. Which account should be debited for $1,800 when writing off the account?
Accounts Receivable
23. Which account should be credited for $1,800 when writing off the account?
Allowance For Doubtful Accounts
Accounts Receivable
24. Assuming that after the account is written off, the supplier receives full payment from the customer. Which account
will not be involved in the accounting entries made at the time when the payment is received?
Allowance For Doubtful Accounts
Accounts Receivable
25. Under the direct write off method, which account is debited when a company writes off one of its accounts
receivable?
Allowance For Doubtful Accounts
Accounts Receivable
26. Sorting a company's accounts receivable into classifications such as current, 1-30 days past due, and 31-60 days
past due is known as the __________ of accounts receivables.
27. The receivable turnover ratio is computed by dividing the net credit __________ for the year by the average
amount of accounts receivable during the year.
28. The days' sales in accounts receivable is calculated by dividing __________ days by the receivables turnover ratio
during the year.
29. A company's accounts receivable minus its allowance for doubtful accounts equals the net __________ value of
the accounts receivable.
30. In some industries, companies often sell their accounts receivable to a firm known as a __________.
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