Chapter 9--Receivables
Student: ___________________________________________________________________________
1. Notes Receivable and Accounts Receivable can also be called trade receivables.
True False

2. Receivables not currently collectible are reported in the investments section of the balance sheet.
True False

3. Trade receivables occur when two companies trade or exchange notes receivables.
True False

4. Other receivables include non trade receivables such as loans to company officers.
True False

5. Both Accounts Receivable and Notes Receivable represent claims that are expected to be collected in cash.
True False

6. When companies sell their receivables to other companies, the transaction is called factoring.
True False

7. Of the two methods of accounting for uncollectible receivables, the allowance method provides in advance
for uncollectible receivables.
True False

8. Generally accepted accounting principles do not normally allow the use of the direct write-off method of
accounting for uncollectible accounts.
True False


9. The direct write-off method records Bad Debt Expense in the year the specific account receivable is
determined to be uncollectible.

17. At the end of a period, (before adjustment), Allowance for Doubtful Accounts has a credit balance of
$250. The net credit sales for the period total $500,000. If the company estimates uncollectible accounts
expense at 1% of net credit sales, the amount of bad debt expense to be recorded in an adjusting entry is
$4,750.
True False

18. At the end of a period (before adjustment), Allowance for Doubtful Accounts has a debit balance of
$500. Net credit sales for the period totaled $800,000. If bad debt expense is estimated at 1% of net credit
sales, the amount of bad debt expense to be recorded in the adjusting entry is $8,500.
True False

19. At the end of a period (before adjustment), Allowance for Doubtful Accounts has a debit balance of $2,000.
The Accounts Receivable balance is analyzed by aging the accounts and the amount estimated to be
uncollectible is $15,000. The amount to be recorded in the adjusting entry for the bad debt expense is
$15,000.
True False

20. At the end of a period (before adjustment), Allowance for Doubtful Accounts has a credit balance of
$5,000. The Accounts Receivable balance is analyzed by aging the accounts and the amount estimated to be
uncollectible is $50,000. The amount to be recorded in the adjusting entry for the Bad Debt Expense is
$45,000.
True False

21. When using the analysis of receivables method for estimating uncollectible receivables, the amount
computed in the analysis is usually the amount that would be recorded in the end-of-period adjusting entry.
True False

22. The balance in the Allowance for Doubtful Accounts account at the end of the year includes the total of all
accounts written-off since the beginning year.
True False


32. The equation for computing interest on an interest-bearing note is as follows: interest equals maturity value
times interest rate times time.
True False

33. If the maker of a note fails to pay the debt on the due date, the note is said to be dishonored.
True False


34. When a note is received from a customer on account, it is recorded by debiting Notes Receivable and
crediting Accounts Receivable.
True False

35. When a note is written to settle an open account, no entry is necessary.
True False

36. The balance of the Allowance for Doubtful Accounts is added to Accounts Receivable on the balance sheet.
True False

37. Receivables that are expected to be collected in cash in eighteen months or less are reported in the Current
Asset section of the balance sheet.
True False

38. The accounts receivables turnover ratio is computed by dividing total gross sales by the average net
receivables during the year.
True False

39. The accounts receivable turnover measures the length of time in days it takes to collect a receivable.
True False


50. An alternative name for Bad Debt Expense is
A. Collection Expense.
B. Credit Loss Expense.
C. Uncollectible Accounts Expense.
D. Deadbeat Expense.

51. Two methods of accounting for uncollectible accounts are the
A. direct write-off method and the allowance method.
B. allowance method and the accrual method.
C. allowance method and the net realizable method.
D. direct write-off method and the accrual method.

52. If the direct write-off method of accounting for uncollectible receivables is used, what general ledger
account is credited to write off a customer's account as uncollectible?
A. Uncollectible Accounts Expense
B. Accounts Receivable
C. Allowance for Doubtful Accounts
D. Interest Expense

53. One of the weaknesses of the direct write-off method is that it
A. understates accounts receivable on the balance sheet
B. violates the matching principle
C. is too difficult to use for many companies
D. is based on estimates


54. The Lowery Co. uses the direct write-off method of accounting for uncollectible accounts
receivable. Lowery has a customer whose accounts receivable balance has been determined to likely be
uncollectible. The entry to write off this account would be which of the following?:
A. debit Allowance for Doubtful Accounts; credit Accounts Receivable

C. Allowance for Doubtful Accounts
D. Interest Expense


59. On the balance sheet, the amount shown for the Allowance for Doubtful Accounts is equal to the
A. Uncollectible accounts expense for the year
B. total of the accounts receivables written-off during the year
C. total estimated uncollectible accounts as of the end of the year
D. sum of all accounts that are past due.

60. What is the type of account and normal balance of Allowance for Doubtful Accounts?
A. Contra asset, credit
B. Asset, debit
C. Asset, credit
D. Contra asset, debit

61. When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited
when
A. a customer's account becomes past due.
B. an account becomes bad and is written off.
C. a sale is made.
D. management estimates the amount of uncollectibles.

62. A debit balance in the Allowance for Doubtful Accounts
A. is the normal balance for that account.
B. indicates that actual bad debt write-offs have been less than what was estimated.
C. cannot occur if the percentage of receivables method of estimating bad debts is used.
D. indicates that actual bad debt write-offs have exceeded previous provisions for bad debts.

63. To record estimated uncollectible receivables using the allowance method, the adjusting entry would be a

Allowance for Doubtful Accounts
65,000

66. You have just received notice that a customer of yours with an Account Receivable balance of $100 has
gone bankrupt and will not make any future payments. Assuming you use the allowance method, the entry you
make is to
A. debit Bad Debt Expense and credit Allowance for Doubtful Accounts.
B. debit Bad Debt Expense and credit Accounts Receivable.
C. debit Allowance for Doubtful Accounts and credit Accounts Receivable.
D. debit Allowance for Doubtful Accounts and credit Bad Debt Expense

67. The balance in Allowance for Doubtful Accounts will directly impact the end of period adjustment for the
bad debt expense when using which of the following methods?
A. Allowance method
B. Direct write-off method
C. Accrual method
D. declining value method

68. An aging of a company's accounts receivable indicates the estimate of uncollectible receivables totals
$7,900. If Allowance for Doubtful Accounts has a $700 credit balance, the adjustment to record the bad debt
expense for the period will require a
A. debit to Bad Debt Expense for $8,600.
B. debit to Bad Debt Expense for $7,900.
C. debit to Bad Debt Expense for $7,200.
D. credit to Allowance for Doubtful Accounts for $700.


69. An aging of a company's accounts receivable indicates that the estimate of uncollectible accounts totals
$6,400. If Allowance for Doubtful Accounts has a $1,300 debit balance, the adjustment to record the bad debt
expense for the period will require a

entries records the proper adjustment for Bad Debt Expense?
A. debit Bad Debt Expense, $14,000; credit Allowance for Doubtful Accounts, $14,000
B. debit Allowance for Doubtful Accounts, $14,000; credit Bad Debt Expense, $14,000
C. debit Allowance for Doubtful Accounts, $11,800; credit Bad Debt Expense, $11,800
D. debit Bad Debt Expense, $11,800; credit Allowance for Doubtful Accounts, $11,800


74. Allowance for Doubtful Accounts has a debit balance of $600 at the end of the year (before adjustment),
and an analysis of accounts in the customers ledger indicates uncollectible receivables of $13,000. Which of
the following entries records the proper adjusting entry for bad debt expense?
A. debit Bad Debt Expense, $600; credit Allowance for Doubtful Accounts, $600
B. debit Bad Debt Expense, $12,400; credit Allowance for Doubtful Accounts, $12,400
C. debit Allowance for Doubtful Accounts, $600; credit Bad Debt Expense, $600
D. debit Bad Debt Expense, $13,600; credit Allowance for Doubtful Accounts, $13,600

75. At the beginning of the year, the balance in the Allowance for Doubtful Accounts is a credit of
$760. During the year, $120 of previously written-off accounts were reinstated and accounts totaling $740 are
written-off as uncollectible. The end of the year balance (before adjustment) in the Allowance for Doubtful
Accounts should be
A. $760
B. $120
C. $140
D. $740

76. Using the allowance method of accounting for uncollectible receivables, the entry to reinstate a specific
receivable previously written off would include a
A. credit to Bad Debt Expense
B. credit to Accounts Receivable
C. debit to Allowance for Doubtful Accounts
D. debit to Accounts Receivable

C. net realizable value of accounts receivable increases
D. there is no effect on total current assets or total expenses

When the firm

81. Allowance for Doubtful Accounts has a credit balance of $1,300 at the end of the year (before
adjustment). The company prepares an analysis of customers' accounts to estimate the amount of uncollectible
accounts of $41,900. Which of the following adjusting entries would be made to record the Bad Debt Expense
for the year?
A. debit Allowance for Doubtful Accounts, $40,600; credit Bad Debt Expense, $40,600
B. debit Allowance for Doubtful Accounts $43,200; credit Bad Debt Expense, $43,200
C. debit Bad Debt Expense, $43,200; credit Allowance for Doubtful Accounts, $43,200
D. debit Bad Debt Expense, $40,600; credit Allowance for Doubtful Accounts, $40,600

82. Allowance for Doubtful Accounts has a debit balance of $2,300 at the end of the year (before adjustment).
The company prepares an analysis of customers' accounts and estimates the amount of uncollectible accounts to
be $31,900. Which of the following adjusting entries is needed to record the Bad Debt Expense for the year?
A. debit Bad Debt Expense, $34,200; credit Allowance for Doubtful Accounts, $34,200
B. debit Allowance for Doubtful Accounts, $34,200; credit Bad Debt Expense, $34,200
C. debit Allowance for Doubtful Accounts, $29,600; credit Bad Debt Expense, $29,600
D. debit Bad Debt Expense, $29,600; credit Allowance for Doubtful Accounts, $29,600

83. Allowance for Doubtful Accounts has a debit balance of $2,500 at the end of the year (before adjustment),
and bad debt expense is estimated at 4% of net credit sales. If net credit sales are $800,000, the amount of the
adjusting entry to record the estimate of the uncollectible accounts is
A. $29,500
B. $34,500
C. $32,000
D. cannot be determined


D. contra-asset, credit

88. Under the allowance method of accounting for uncollectible receivables, writing off an uncollectible
account.
A. affects only income statement accounts.
B. is not an acceptable practice.
C. affects only balance sheet accounts.
D. affects both balance sheet and income statement accounts.


89. When comparing the direct write-off method and the allowance method of accounting for uncollectible
receivables, a major difference is that the direct write-off method
A. uses a percentage of sales method to estimate uncollectible accounts.
B. is used primarily by large companies with many receivables.
C. is used primarily by small companies with few receivables.
D. uses an allowance account.

90. When a company uses the allowance method of accounting for uncollectible receivables, which entry would
not be found in the general journal?
A. Bad Debt Expense
500
Allowance for Doubtful Accounts
500
B. Bad Debt Expense
500
Accounts Receivable - Bob Smith
500
C. Cash
300
Allowance for Doubtful Accounts 200

B. $7,140
C. $7,840
D. $7,000

95. A 60-day, 9% note for $10,000, dated May 1, is received from a customer on account. The maturity value
of the note is
A. $10,000
B. $10,150
C. $10,900
D. $9,100

96. Interest on a note can be calculated without knowledge of the
A. fair value of the note
B. rate of interest
C. notes duration
D. principal amount

97. On October 1, Black Company receives a 9% interest bearing note from Reese Company to settle a $20,000
account receivable. The note is due in six months. At December 31, Black should record interest revenue of
A. $0
B. $450
C. $900
D. $1,800

98. If the maker of a promissory note fails to pay the note on the due date, the note is said to be
A. displaced
B. disallowed
C. dishonored
D. discounted


Accounts Receivable—Dame Company
6,000
B. Notes Receivable
6,090
Accounts Receivable—Dame Company
6,090
C. Notes Receivable
6,090
Accounts Receivable—Dame Company
6,000
Interest Revenue
90
D. Notes Receivable
6,000
Interest Revenue
90
Accounts Receivable—Dame Company
6,000
Interest Receivable
90

104. The maturity value of a $40,000, 9%, 40-day note receivable dated July 3 is
A. $40,000
B. $40,400
C. $43,600
D. $44,000


105. Harper Company lends Hewell Company $40,000 on March 1, accepting a four-month, 6% interest note.
Harper Company prepares financial statements on March 31. What adjusting entry should be made before the

C. alphabetically
D. of liquidity

108. Accounts Receivable Turnover measures
A. how frequently during the year the accounts receivable are converted to cash
B. the number of days of accounts receivable outstanding
C. the fair market value of accounts receivable
D. the efficiency of the accounts payable function

109. The number of days' sales in receivables
A. is an estimate of the length of time the receivables have been outstanding
B. measures the number of times the receivables turn over each year
C. is Net Credit Sales divided by Average Receivables
D. is not meaningful and therefore is not used


110. Given the following information, compute Accounts Receivable Turnover:

Gross Sales:
Net Sales:

$150,000
$135,000

Accounts Receivable, Beginning of Year: $18,000
Accounts Receivable, End of Year:
$22,000

A. 6.75
B. 7.5

4. A contra asset that represents the amount of
estimated uncollectible receivables at a specific
date.
5. A receivable created from selling merchandise
or services on account.
6. All money claims against other entities.
7. Another term for selling receivables.
8. Records bad debt expense only when a specific
customer’s account is deemed worthless.
9. Measures how frequently during the year
accounts receivables are being turned into cash.

Accounts Receivable ____
Aging Report ____
Allowance for
Doubtful Accounts ____
Direct Write-off
Method ____
Bad Debt Expense ____
Net Realizable Value ____
Factoring ____
Receivables ____
Accounts Receivable
Turnover ____

114. Match each of the following terms associated with notes receivable with the best description of that term.

1. The amount due when the note is paid off.
2. The amount charged for using the money of another
party.


116. Discuss the similarities and differences between accounts receivables, notes receivables and other
receivables.

117. List at least three things that indicate a receivable may be uncollectible.

118. Discuss the two methods for recording bad-debt expense. What type of company uses each method?


119. Journalize the following transactions using the direct write-off method of accounting for uncollectible
receivables.
April 1 Sold merchandise on account to Jim Dobbs, $7,200. The cost of the merchandise is $5,400.
June 10 Received payment for one-third of the receivable from Jim Dobbs and wrote off the remainder.
Oct. 11 Reinstated the account of Jim Dobbs for and received cash in full payment.

120. Stephanie Roe utilizes the direct write-off method of accounting for uncollectible receivables. On
September 15th she is notified by the attorneys for Jacob Marley that Jacob Marley is bankrupt and no cash is
expected in the liquidation of Jacob Marley. Write off the $675 of accounts receivable due Jacob Marley.

121. Journalize the following transactions using the direct write-off method of accounting for uncollectible
receivables:
Feb 20 Received $1,000 from Andrew Warren and wrote off the remainder owed of $4,000 as uncollectible.
May 10 Reinstated the account of Andrew Warren and received $4,000 cash in full payment.


122. The following journal entries would be used in one of the two methods of accounting for uncollectible
receivables. Identify each.
(a)
Bad Debt Expense
Accounts Receivable-Billings

Accounts has a credit balance of $5,500; and net sales for the year total $3,500,000. Bad debt expense is
estimated at 1/2 of 1% of net sales.
Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts
Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value of
accounts receivable.

126. At the end of the current year, Accounts Receivable has a balance of $750,000; Allowance for Doubtful
Accounts has a debit balance of $6,200; and net sales for the year total $3,500,000. Bad debt expense is
estimated at 1/2 of 1% of net sales.
Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts
Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value of
accounts receivable.


127. At the end of the current year, Accounts Receivable has a balance of $90,000; Allowance for Doubtful
Accounts has a credit balance of $850; and net sales for the year total $300,000. Bad debt expense is estimated
at 2.5% of net sales.
Determine (a) the amount of the adjusting entry for uncollectible accounts; (b) the adjusted balances of
Accounts Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value
of accounts receivable.

128. At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful
Accounts has a credit balance of $5,500; and net sales for the year total $2,500,000. An analysis of receivables
estimates uncollectible receivables as $25,000.
Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts
Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value of
accounts receivable.

129. At the end of the current year, Accounts Receivable has a balance of $675,000; Allowance for Doubtful
Accounts has a debit balance of $5,400; and net sales for the year total $3,000,000. An analysis of receivables