1. c.

Extending credit to customers will increase, not decrease, the amount of uncollectible accounts from customers.

2. b.

The direct write-off method is simple to use as no estimates are required and requires only that the identified account receivable be written off when determined uncollectible.

3. a.

The allowance for uncollectible accounts account is a contra asset account, i.e., it is deducted from the asset account accounts receivable.

4. d.

The accounts receivable are shown in the balance sheet at their gross amount less the amount of the allowance for uncollectible accounts. The net difference is called the "net realizable value" of the receivables.

5. a.

The aging schedule is used to show how many accounts receivable are not yet due and how far past due other receivables are.

6. d.

Accounts receivable turnover is measured by dividing net credit sales by the average balance of accounts receivable.

7. c.

The relative age of the accounts in accounts receivable schedule shows the change over time or the relative amounts in various aging categories.

8. b.

When using the percentage-of sales method to determine uncollectible accounts expense the percentage is applied to the sales for the period. In this case, the expense would be $2,100 ($140,000 x 1.5%).

9. d.

When using the aging of accounts receivable approach, the aging schedule determines how large the ending allowance account should be. In this case it should total $6,500 at the end of April. It’s current balance is $6,000 ($7,000 beginning balance – $1,000 write-off) and needs to be increased by only $500 at April 30.

 10.c.

The amount of accounts receivable, net, would be the gross receivables at April 30 of $196,000 less the amount in the allowance account of $8,500. (The $8,500 in the allowance account is computed by taking the beginning allowance of $7,000 adding the uncollectible accounts expense of $2,500 and subtracting the write-off of $1,000.) Thus the amount shown in the current asset section of the balance sheet would be $187,500 ($196,000 - $8,500).

11. b.

Over time, the amount of write offs should approximate the amount of uncollectible accounts expense.

12. a.

To compute the accounts receivable collection period, you first need to compute the accounts receivable turnover. The turnover is equal to the credit sales of $220,000 divided by the average accounts receivable of $27,500 which equals 8.00 times per year. (Average AR is ($25,000 + $30,000) ¸ 2). The collection period is 365 ¸ the accounts receivable turnover of 8.00 or 45.63 days.