The Bear Creek School Accounting Questions

8 Tetor8)
When a specific account becomes uncollectible and must be written off,
allowance for doubtful accounts should be credited.
accounts receivable should be credited.
c) bad debts expense should be credited.
d) sales returns and allowances should be debited.
a)
b)
9)
A debit balance in the Allowance for Doubtful Accounts
is the normal balance for that account.
a)
indicates that actual bad debt write-offs have been more than what was estimated.
6)
indicates that actual bad debt write-offs have been less than what was estimated.
C)
d) can only occur if an incorrect accounting entry was recorded.
The collection of an account that had been previously written off under the allowance method of
accounting for uncollectibles
a) will increase profit.
b) will decrease profit.
will not affect profit.
d) will increase sales.
10)
11
)
To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a
debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts.
a)
debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts.
b)
debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable.
d)
debit to Bad Debts Expense and a credit to Accounts Receivable.
c)
12)
If an account is collected after having been previously written off,
a)
the allowance account should be debited.
bad debt expense should be credited.
the gross accounts receivable will remain unchanged.
there will be both a debit and a credit to accounts receivable.
b)
c)
d)
13)
In 2018, Able Co. wrote off a $2,000 accounts receivable from Kane Limited. In late 2018, Kane paid
the full amount of the receivable. After the repayment has been recorded, the balance in
a) accounts receivable will be $2,000 higher.
b) bad debt expense will be $2,000 lower.
c) accounts receivable will be the same as before the collection was recorded.
allowance for doubtful accounts will be $2,000 lower.
d)
14) If a note receivable has not been collected at the maturity date
a)
it should be written off.
b)
it should continue to be recorded as note receivable until the company is certain it will not be
collected by the debtor.
c) it should be reclassified as an account receivable.
it should be reclassified as an account receivable if it is reasonably likely that the note will be
collected after the maturity date.
BAT4M – Chapters 8 & 9 Test
Name: ….. Mela.in
1)
Three accounting issues associated with both accounts receivable and notes receivables are
a) valuing, disposing, and statement presentation
b) recognizing, valuing, and statement presentation
C) recognizing, valuing, and disposing
d) revenue recognition, expense recognition, and disposing.
2) Retailers often add a financing charge to a customer’s accounts receivable balance
a) if the customer fails to buy additional merchandise.
b) if the customer pays more than the required amount.
c) if the account is not paid within a reasonable period of time.
d) if the account is not paid within the stated credit term.
Use the following information for the next two questions.
A customer uses their Gary’s Sport Shop Credit Card to purchase a treadmill at Gary’s Sport Shop. The price is
$1,000 and the financing charge is 18% annually if the bill is not paid in 30 days. The customer fails to pay the
bill and a finance charge is added to the customer’s account.
3)
b)
What is the amount of the finance charge?
a) $30
$15
c) $180
d)
$6
4)
To journalize the above finance charge, Gary’s Sport Shop needs to
a) Debit Accounts Receivable and Credit Cash
b) Debit Interest Receivable and credit Interest Revenue
c) Debit Accounts Receivable and credit Interest Payable
d) Debit Accounts Receivable and credit Interest Revenue
5)
Under the allowance method, writing off an uncollectible account
a) affects only balance sheet accounts.
affects both balance sheet and income statement accounts.
affects only income statement accounts.
d) is not acceptable practice.
6)
The final amount expected to be received in cash from receivables is generally referred to as the
a) net realizable value.
O net book value.
fair value.
d) cash-equivalent value.
c)
7)
If a company does not record the estimated bad debts expense,
a) profit will be understated.
b)
profit will be overstated.
c) there will be no effect on profit.
d) receivables will be understated.
19)
Singh Company lends Newell Company $40,000 on January 1, accepting a three-month, 5% note. Singh
Company prepares financial statements on January 31. What adjusting entry should be made before the
financial statements can be prepared?
a) Note Receivable
40,000
(a) Cash
40,000
b) Interest Receivable.
166.67
(a) Interest Revenue
166.67
c) Cash
166.67
(a) Interest Revenue
16.67
d) Interest Receivable
500
(a) Interest Revenue
500
Steinberg Co. loaned Field Co. $10,000, accepting a 4-month, 4.5% note. On the due date, Field Co.
20)
indicated that it could not pay right now but would likely be able to pay in two more months. Steinberg
would make the following entry at the time the note is dishonoured:
a) Accounts Receivable
10,000
Interest Expense..
150
Notes Receivable
10,150
b) Accounts Receivable,
10,150
Notes Receivable
10,000
Interest Revenue
150
© Notes Receivable..
10,150
Accounts Receivable
10,150
d) Notes Receivable
10,000
Accounts Receivable
10,000
21) The face value of a $2,000, 7%, 2-
month note receivable is
a) $2,023.
b) $2,014.
c) $2,000.
d) $2,140.
22)
Since a dishonoured note is no longer negotiable, the notes receivable account must be reduced by
a) the total interest accrued.
b) the face value of the note.
the note receivable account will not be reduced and allowance for doubtful notes will be credited.
d) the face value plus any interest that has already been accrued.
c)
23) Manery Company accepts a non-bank credit card on September 5 in payment of a $2,000 purchase. The
credit card company charges a 2% fee. What is the amount recorded in accounts receivable on
September 5?
a)
2,000
1,960
c) 2,040
d) 0
b)
24)
A company purchased land for $70,000 cash. $7,000 was spent for demolishing an old building on the
land before construction of a new building could start. The cost of the land would be recorded at:
a) $77,000
b)
$70,000
c) $63,000
$7,000
d)
Use the following information for the next two questions
Jenkins and John Company have prepared the following aging schedule for the company at December 31, 2018.
The company uses the percentage of receivables approach to estimate bad debts. Complete the table and then
answer the following two questions.
Number of Days Outstanding
31-60
61-90
91-120
Over 120
Total
0-30
$90,000
4%
$220,000
1%
$375,000
$15,000
30%
$10,000
16%
$40,000
8%
Accounts
Receivable
% Uncollectible
Estimated
Uncollectible
15)
Assuming the company has a $2,500 credit balance in the allowance account at the beginning of the
period, the journal entry to record bad debt expense will include a
a) debit to Bad Debt Expense for $15,100.
b) credit to Bad Debt Expense for $12,600.
c)
debit to the allowance account for $15,100.
credit to the allowance account for $12,600.
d)
16)
Assume that the company has a $1,000 debit balance in the allowance account before any adjustment for
the current year’s bad debt expense. The entry to record bad debt expense will include a
a) debit to Bad Debt Expense for $15,100.
b) credit to Bad Debt Expense for $16,100.
c)
debit to the allowance account for $15,100.
credit to the allowance account for $16,100.
d)
17) A note receivable differs from an account receivable in that
a) a note receivable is a formal promise to pay; an account receivable is an informal promise to pay.
b) a note receivable is used for purchases over $1,000.
a note is used for a receivable that extends beyond one year.
d)
there is no difference between an account receivable and a note receivable; they are
interchangeable terms.
18)
Wu Company receives a $5,000, 3-month, 12% promissory note from Enola Company in settlement of
an accounts receivable. What entry will Wu Company make upon receiving the note?
a) Notes Receivable.
5,150
Accounts Receivable—Enola Company.
5,150
b) Notes Receivable,
5,150
Accounts Receivable—Enola Company.
5,000
Interest Revenue
150
c) Notes Receivable.
5,000
Interest Receivable.
150
Accounts Receivable
Enola Company.
5,000
2701
Interest Revenue
150
d) Notes Receivable…
5,000
Accounts Receivable—Enola Company.
5,000
32)
Which of the following items is an operating expenditure?
a) Testing new equipment
b)
Installing equipment
Interest on loan to construct a building
c)
d)
Insurance on equipment in use
Which of the following is not a way of depreciating an asset?
a)
Straight line
b)
Diminishing Balance
c)
Perpetual Identification
d) Units of Production
33)
34)
The balance in the accumulated depreciation account represents the
a) Cash fund to be used to replace long-lived assets
Amount to be deducted from the cost of the long-lived asset to arrive at its fair value
b)
Amount charged to the expense account in the current period
C)
Total amount charged to the expense account since the long-lived asset was purchased
d)
Equipment was purchased for $15,000. Freight charges amounted to $700 and there was a cost of $2,000
for installing the equipment. It is estimated that the equipment will have a $3,000 residual value at the
end of its five-year useful life. Depreciation expense each year using the straight-line method will be:
a) $3,540
b) $2,940
c) $2,460
d) $2,400
35)
A company purchased office equipment for $10,000 and estimated a residual value of $2,000 at the end
36)
of its four-year useful life. The constant percentage to be applied against the carrying amount each year
if the double diminishing balance method is used is:
a)
20%
b)
25%
c) 50%
d)
4%
Bay of Fundy Company uses the units of production method in calculating depreciation. A new piece of
37)
equipment is purchased for $18,000 that will produce an estimated 100,000 units over its useful life.
Estimated residual value at the end of its useful life is $2,000. What is the depreciable cost per unit?
a) $1.60
b)
$1.80
c) $0.16
d) $0.18
38)
Use of the units-of-production method of depreciation results in
a)
Varying effects on profit as it depends on actual usage each year
b) Equal effects on profit each year
c)
The least effect on profit compared to other methods
The greatest effect on profit compared to other methods
d)