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13.4   Learning Objective 13-4

1) No entry was recorded to reinstate a bad debt when making a collection. The allowance method is being used. This error would cause:

A) total assets to be overstated.

B) total liabilities to be understated.

C) net income to be understated.

D) None of these are correct.

2) The journal entry to write off an account judged to be uncollectible under the allowance would include a debit to:

A) Sales.

B) Accounts Receivable.

C) Allowance for Doubtful Accounts.

D) Bad Debts Expense.

3) Town and Country Saddle learns the account receivable for a customer is uncollectible. The journal entry under the allowance method to write-off an account is to:

A) debit Allowance for Doubtful Accounts; credit Accounts Receivable.

B) debit Sales; credit Allowance for Doubtful Accounts.

C) debit Bad Debts Expense; credit Accounts Receivable.

D) debit Allowance for Doubtful Accounts; credit Bad Debts Expense.

4) What would be the basis for the following journal entry if it appears on Travis Company records? Travis uses the allowance method.

Allowance for Doubtful Accounts

150

Accounts Receivable—Tim Morgan

150

A) The firm is estimating its uncollectible accounts.

B) The firm is writing off a specific account.

C) The firm is making a collection of a previously written-off account.

D) It is a reversing entry.

5) Myra's balance of Accounts Receivable is $4,000. The balance of the Allowance account is $600 credit. Myra writes off a $150 uncollectible account. The effect on net realizable value of the receivables is that it:

A) reduces net realizable value.

B) increases net realizable value.

C) is unchanged.

D) is undeterminable.

6) The net realizable value of a company's Accounts Receivables is:

A) increased at the time of a specific write-off.

B) decreased at the time of a specific write-off.

C) unchanged at the time of a specific write-off.

D) the guaranteed amount the company will collect from its customers.

7) A company writes off a specific account as uncollectible, but later the customer pays. The journal entry to record the reinstatement under the allowance method includes a(n):

A) increase to Cash.

B) decrease to Sales.

C) decrease to Allowance for Doubtful Accounts.

D) decrease to Bad Debts Expense.

8) Aging Accounts Receivable measures:

A) days a bill has been due but not paid.

B) months a bill has been due but not paid.

C) sales for the year.

D) All of these answers are correct.

9) Miami Company uses Allowance for Doubtful Accounts. When Miami writes off an uncollectible account, there is:

A) a decrease in Accounts Receivable.

B) a decrease in expense.

C) an increase in net income.

D) None of these answers is correct.

10) After having written off a customer under the direct write-off method, the account will be reopened when the customer:

A) sends the full amount to pay off the account.

B) sends any amount to pay on their account.

C) pays the collection bureau.

D) none of the above

11


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