 |
| 1.
| |
Generally, when a customer uses a credit card issued by a bank, the firm records the sale as a cash sale. |
| | A) | True |
| | B) | False |
|
|
|
| 2.
| |
The Credit Card Expense account should always be shown on the income statement as a discount deducted from sales to determine the net amount received from the sale. |
| | A) | True |
| | B) | False |
|
|
|
| 3.
| |
In order to meet the requirements of the matching principle, the direct write-off method of recording bad debts should be used. |
| | A) | True |
| | B) | False |
|
|
|
| 4.
| |
The recognition of bad debts through the allowance method of accounting for bad debts is accomplished with the closing entry that closes the Bad Debt Expense account to the Income Summary account. |
| | A) | True |
| | B) | False |
|
|
|
| 5.
| |
The Allowance for Doubtful Accounts account is a contra account. |
| | A) | True |
| | B) | False |
|
|
|
| 6.
| |
Estimating bad debts by focusing on the income statement would involve the determination of bad debts based on the history of uncollected credit sales. |
| | A) | True |
| | B) | False |
|
|
|
| 7.
| |
Using an aging of accounts receivable to estimate the amount of bad debt expense is one example of estimating bad debts by focusing on the balance sheet. |
| | A) | True |
| | B) | False |
|
|
|
| 8.
| |
The acceptability of the direct write-off approach to recognizing bad debts is provided through the matching principle. |
| | A) | True |
| | B) | False |
|
|
|
| 9.
| |
A 60-day, 6%, $1,000 note receivable has a maturity value of $1,010, rounded to the nearest dollar. |
| | A) | True |
| | B) | False |
|
|
|
| 10.
| |
A 60-day note that is dated June 23 will have a maturity date of August 23. |
| | A) | True |
| | B) | False |
|
|
|
| 11.
| |
When a note receivable is dishonoured, the firm has a contingent liability until the dishonoured note is either paid or written off as a bad debt. |
| | A) | True |
| | B) | False |
|
|
|
| 12.
| |
The buyer of accounts receivable must pay a factoring fee to the seller. |
| | A) | True |
| | B) | False |
|
|
|
| 13.
| |
A potential obligation that may become a realized obligation is called a contingent liability. |
| | A) | True |
| | B) | False |
|
|
|
| 14.
| |
The maturity date of a 90-day note receivable dated August 29 is November 28. |
| | A) | True |
| | B) | False |
|
|
|
| 15.
| |
To write-off a bad debt using the allowance method requires a debit to the Bad Debt Expense account. |
| | A) | True |
| | B) | False |
|
|
|
| 16.
| |
Bad debts are estimated to be 3% of the net sales of $120,000. The Allowance for Doubtful Accounts account currently has a credit balance of $100. The amount of the adjusting entry will be $3,700. |
| | A) | True |
| | B) | False |
|
|
|
| 17.
| |
The allowance method satisfies GAAP because it satisfies the matching and conservatism principles. |
| | A) | True |
| | B) | False |
|
|
|
| 18.
| |
Under the conservatism principle, a company is required to disclose contingent liabilities in notes to its financial statement. |
| | A) | True |
| | B) | False |
|
|
|
| 19.
| |
Using the percentage of sales to estimate bad debt is the most reliable of the three methods. |
| | A) | True |
| | B) | False |
|
|
|
| 20.
| |
To record an estimated bad debt expense requires a debit to Bad Debt Expense and credit to Accounts Receivable. |
| | A) | True |
| | B) | False |
|
|
|
| 21.
| |
To write-off a bad debt using the direct write-off method requires a debit to Bad Debt Expense and credit to Accounts Receivable. |
| | A) | True |
| | B) | False |
|
|
.