7.2 Use the allowance method to account for uncollectible accounts
1) There are two methods for accounting for uncollectible receivables.
2) Receivables of a company CANNOT be long-term assets.
3) The aging method of calculating uncollectible accounts considers the existing balance in the Allowance for Doubtful Accounts.
4) The percentage-of-sales method is called the balance sheet method.
5) Bad Debts Expense is debited when writing off customer accounts under the Allowance method.
6) Which is NOT a benefit to extending credit to customers?
A) Bad debt expenses
B) Increased revenues
C) Increased profits
D) Wider range of customers
E) Additional customers
7) What type of account is Allowance for Doubtful accounts?
A) Asset
B) Contra-asset
C) Liability
D) Expense
E) Contra-sales
8) The period-end adjusting entry for Bad Debts Expense under the direct write-off method is:
A) debit Bad Debts Expense; credit Allowance for Doubtful Accounts.
B) not required.
C) debit Cash; credit Accounts Receivable/customer name.
D) debit Bad Debts Expense; credit Accounts Receivable/customer name.
E) debit Bad Debts Expense; credit Sales Revenue.
9) The journal entry to write off a customer's account under the direct write-off method is:
A) debit Bad Debts Expense; credit Allowance for Doubtful Accounts.
B) not required.
C) debit Cash; credit Accounts Receivable/customer name.
D) debit Bad Debts Expense; credit Accounts Receivable/customer name.
E) debit Sales Revenue; credit Accounts Receivable/customer name.
10) Under the direct write-off method, to record the receipt of cash after an account has previously been
written off, you would first:
A) debit Cash and credit the customer's account.
B) reinstate the customer's account.
C) debit Allowance for Doubtful Accounts.
D) debit Bad Debts Expense.
E) credit Accounts Receivable.