Question : 131.The direct write-off method of recognizing uncollectible accounts expense: A.Is acceptable : 1237643

 

 

131.The direct write-off method of recognizing uncollectible accounts expense:   

A.Is acceptable only when most of the company’s sales are on credit.

 

B.Records uncollectible accounts expense when individual accounts receivable are determined to be worthless.

 

C.Records uncollectible accounts expense when customers exceed their credit limits.

 

D.Uses a valuation account to record specific customer accounts deemed uncollectible.

 

 

 

 

132.Joe Costello handles cash receipts from customers and also has responsibility for issuing credit memoranda, writing off uncollectible accounts, and maintaining the accounts receivable records. When customers pay their accounts, Costello occasionally issues a credit memorandum and steals the cash received from the customer. This fraud should come to light if an employee other than Costello:   

A.Reconciles the bank statement to the accounting records.

 

B.Reconciles the accounts receivable subsidiary ledger to the accounts receivable controlling account.

 

C.Investigates weekly all accounts written off as uncollectible.

 

D.Reconciles credit memoranda for sales returns to returned merchandise accepted by the receiving department.

 

 

 

 

133.Shrek Cyclery sells a bicycle to W. O’Connor, a customer who uses Empress Charge (a national credit card, but not issued by a bank). In recording this sale, Shrek Cyclery should record:   

A.An account receivable from W. O’Connor.

 

B.A cash receipt.

 

C.An account receivable from Empress Charge.

 

D.A small increase in the allowance for doubtful accounts.

 

 

 

 

134.The Kansas Company makes credit sales to customers who use bank credit cards (such as Visa or MasterCard) as well as to customers who use non-bank credit cards (such as American Express or Diner’s Club). In this situation:   

A.Sales to customers using bank credit cards are recorded as cash sales.

 

B.Regardless of the type of credit card used by the customer, Kansas records a receivable from the credit card company when a credit sale is made.

 

C.Regardless of the type of credit card used by the customer, Kansas estimates uncollectible accounts related to these credit sales using the allowance method.

 

D.The fees charged by the credit card company reduce the dollar amount of sales recorded.

 

 

 

 

135.Sales to customers using bank credit cards, such as Visa or MasterCard, are recorded as:   

A.Cash sales.

 

B.An account receivable from the cardholder.

 

C.An account receivable from the bank.

 

D.Credit card discount expense.

 

 

 

 

136.Under the allowance method, when a receivable that had been previously written off is collected:   

A.Income is recognized.

 

B.An expense is reduced.

 

C.Net income is not affected.

 

D.Net assets are increased.

 

 

 

 

137.Which of the following activities affects net income, but has no immediate impact upon cash flows?   

A.Collection of an account receivable.

 

B.Making the end-of-period adjustment to record estimated uncollectible accounts.

 

C.Investing excess cash in marketable securities.

 

D.Write-off of an uncollectible account receivable against the allowance.

 

 

 

 

138.Taylor, Inc. had accounts receivable of $310,000 and an allowance for doubtful accounts of $19,500 just before writing off as worthless an account receivable from Burton Company of $1,300. The net realizable value of the accounts receivable before and after the write-off were:   

A.$290,500 before and $289,200 after.

 

B.$290,500 before and $290,500 after.

 

C.$310,000 before and $308,700 after.

 

D.$329,500 before and $328,200 after.

Before $310,000 – $19,500 = $290,500; After $308,700 – $18,200 = $290,500

 

 

 

139.Bert had accounts receivable of $280,000 and an allowance for doubtful accounts of $10,800 just before writing off as worthless an account receivable from Ernie Company of $1,600. After writing off this receivable what would be the balance in Bert’s Allowance for Doubtful Accounts?   

A.$10,800 credit balance.

 

B.$12,400 credit balance.

 

C.$9,200 credit balance.

 

D.$9,200 debit balance.

$10,800 – $1,600 = $9,200 (credit)

 

 

 

140.At December 31, before adjusting and closing the accounts had occurred, the Allowance for Doubtful Accounts of Seaboard Corporation showed a debit balance of $3,200. An aging of the accounts receivable indicated the amount probably uncollectible to be $2,100. Under these circumstances, a year-end adjusting entry for uncollectible accounts expense would include a:   

A.Debit to the Allowance for Doubtful Accounts for $1,100.

 

B.Credit to the Allowance for Doubtful Accounts for $1,100.

 

C.Debit to Uncollectible Accounts Expense of $2,100.

 

D.Debit to Uncollectible Accounts Expense of $5,300.

$3,200 + $2,100 = $5,300