1. Which of the following is not a reason to extend credit to customers?
a. To increase company sales.
b. To encourage customers to become repeat customers.
c. To reduce the amount of uncollectible accounts from customers.
d. To remain competitive with other companies practices.
2. The major advantage of the direct write-off method of accounting for uncollectible accounts is that it is:
a. consistent with accrual based accounting.
b. simple.
c. the best method to use to match costs with revenues.
d. required for external financial reporting purposes.
3. The allowance for uncollectible accounts is what type of account?
a. A contra asset account.
b. An expense account.
c. A liability account.
d. An owners’ equity account.
4. When using the allowance for uncollectible accounts method, the accounts receivable are shown in the balance sheet at:
a. cost, less depreciation.
b. book value plus accrued interest.
c. future value of cash flows.
d. net realizable value.
5. The aging of accounts receivable shows:
a. the amount of accounts receivable for each customer and how long each invoice amount has been outstanding.
b. the time that any accounts receivable were written off.
c. when various accounts receivable were collected.
d. the date collections are expected for sales made to customers.
6. Which of the following are used to determine the accounts receivable turnover?
a. Sales and cost of goods sold.
b. Cost of goods sold and average accounts receivable.
c. Net credit sales and total accounts receivable written off during the period.
d. Net credit sales and average accounts receivable.
7. The relative age of the accounts in the accounts receivable schedule shows:
a. how much time elapses before an account is written off as uncollectible.
b. the dollar amount of sales made on account each month.
c. the changes over time in the relative amounts in the various aging categories for accounts receivable
d. how much time elapses before an account is collected in cash.
8. The Knoll Vista Company has just completed operations for April. Selected data regarding accounts receivable and credit sales follows:
Sales on account for April $140,000
Accounts receivable, April 1 200,000
Accounts receivable, April 30 196,000
Allowance for uncollectible accounts, April 1 7,000
Accounts written off as uncollectible during April 1,000
If the Knoll Vista Company expects 1.5% of sales to become uncollectible and uses the percentage-of-sales approach to determine bad debt expense, the bad debt expense for April should be:
a. $3,000
b. $2,100
c. $1,960
d. Zero
9. The Knoll Vista Company has just completed operations for April. Selected data regarding accounts receivable and credit sales follows:
Sales on account for April $140,000
Accounts receivable, April 1 200,000
Accounts receivable, April 30 196,000
Allowance for uncollectible accounts, April 1 7,000
Accounts written off as uncollectible during April 1,000
If the Knoll Vista Company expects $6,500 of receivables to become uncollectible and uses the aging-of-accounts-receivable approach to determine bad debt expense, the bad debt expense for April should be:
a. $7,500
b. $6,500
c. $1,500
d. $500
10. The Knoll Vista Company has just completed operations for April. Selected data regarding accounts receivable and credit sales follows:
Sales on account for April $140,000
Accounts receivable, April 1 200,000
Accounts receivable, April 30 196,000
Allowance for uncollectible accounts, April 1 7,000
Accounts written off as uncollectible during April 1,000
If the Knoll Vista Company recorded $2,500 of bad debt expense for April, the accounts receivable, net, would be shown in the current asset section of the April 30 balance sheet as:
a. $196,000
b. $190,000
c. $187,500
d. $193,500
11. Using the allowance approach, over time the amount of "a" should approximate "b". The words "a" and "b" should be:
a. bad debt expense and the allowance for uncollectible accounts
b. bad debt expense and write-offs of bad debts
c. the allowance for uncollectible accounts and write-offs of bad debts
d. write-offs and recoveries of bad debts
12. The Daniels company had accounts receivable of $25,000 at the beginning of the year and $30,000 at year end. During the year, the company had credit sales of $220,000. The accounts receivable collection period for the company is:
a. 45.63 days
b. 49.77 days
c. 41.48 days
d. 8.00 days