Accounts Receivable & Bad Debts Expense 1 Quick Test

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1. Accounts receivable result from __________ sales as opposed to cash sales.
2. The receivables turnover ratio is: net __________ sales for the year divided by the __________ balance in Accounts Receivable during the year.
3. Accounts receivable is both a quick asset and a __________ asset.
4. The report that sorts accounts receivable balances according to the dates of the credit sales is an __________ of accounts receivable.
5. The term n/30 indicates that the __________ amount is due within thirty days.
6. The routine sale of accounts receivable to a finance company is known as __________.
7. Accounts Receivable minus the Allowance for Doubtful Accounts equals the net __________ __________ of the accounts receivable.
8. Allowance for Doubtful Accounts is a __________-account to accounts receivable.
9. The percentage of receivables approach to estimating bad debts expense focuses on the amounts to be reported on this financial statement: __________ __________.
10. The allowance method is favored over the direct write-off method for financial reporting because of the __________ principle.
11. Company J has received a formal written promise from another party. The note specifies the dates that interest and principal will be paid. Company J will record the principal amount in an account with the title __________ __________.
12. Accounts receivable and notes receivable that result from sales of merchandise are referred to as __________ receivables.
13. The account Allowance for Doubtful Accounts could temporarily have a __________ balance if the company writes off an account receivable that was larger than the account’s previous balance.
14. Accounts receivable will be reported on the balance sheet after cash and __________ inventory.
15. When reporting the Allowance for Doubtful Accounts on the balance sheet, the account should have a __________ balance or a zero balance.
16. The write-off of a customer’s balance will include a credit to this account.
17. Under the allowance method, the entry to write off bad accounts receivable will include a debit to
18. Company A sells merchandise to Company B with terms of net 30 days. Company A will be one of Company B’s __________ creditors.
19. The preferred method for recording bad debts expense on the financial statements, but is not allowed for income tax purposes is the __________ method.
20. Which of the following methods will record bad debts expense closer to the time of the credit sale?
21. Under the direct write-off method, the entry to write off bad accounts receivable will include a debit to
22. Under the allowance method, the percentage of sales approach is more focused on the proper amount for which account?
23. Under the allowance method, the aging of accounts receivable is more focused on the proper amount for which account?
24. If customers honored the credit terms 2/10, n/30 and paid within the discount period, the early payment would be equivalent to an annual interest rate of
25. Under the allowance method, the recovery of a previously written-off accounts receivable will include a debit to which account?
26. Under the allowance method, the recovery of a previously written-off accounts receivable will include a credit to which account?
27. A credit sale of $1,000 is made with terms of 2/10, n/30. The customer immediately returned $100 of the merchandise. The amount to settle the account within the discount period is $__________.
Use the following information for answering Questions 28 - 30:
Prior to an aging of accounts receivable, a company's Allowance for Doubtful Accounts has a credit balance of $3,000 and its Bad Debts Expense has a debit balance of $800. An aging of accounts receivable indicates that approximately $4,000 of its accounts receivable will not be collectible.
28. In the entry to record Bad Debts Expense, the debit amount will be $__________.
29. The balance in the account Allowance for Doubtful Accounts after the journal entry is posted will be: $ __________ . The balance will be a __________ (debit, credit) balance.
30. After the journal entry is posted, the balance in the account Bad Debts Expense will be $__________, a __________ (debit, credit) balance.
Use the following information for answering Questions 31 - 33:
Max Corp uses the allowance method for its receivables. Max Corp's Accounts Receivable has a balance of $60,000 and its Allowance for Doubtful Accounts has a credit balance of $3,000 before writing off Jay Corporation's account receivable of $1,800.
31. Prior to the write-off of Jay Corporation’s account receivable, Max Corp’s receivables show a net realizable value (or cash realizable value, or carrying value) of $__________.
32. Max Corp’s journal entry to write off Jay Corporation’s accounts receivable will include a debit to __________.
33. After the write-off of Jay Corporation’s account receivable, Max Corp’s receivables will report a net realizable value (or cash realizable value, or carrying value) of $__________.
Use the following information for answering Questions 34 - 37:
Jupiter Corp uses the allowance method for its receivables. Jupiter's Accounts Receivable has a balance of $75,000 and its Allowance for Doubtful Accounts has a credit balance of $3,000 before writing off Ray Corporation's account receivable of $4,100. After the write-off, Jupiter prepared an aging of its accounts receivable. The aging showed that $2,800 of its remaining accounts receivable were unlikely to be collected.
34. Jupiter Corp’s journal entry to write off Ray Corporation’s account will include a debit to which account?
35. Immediately after writing off Ray Corporation’s account receivable, the balance in the Allowance for Doubtful Accounts will be $__________, a __________ (debit, credit) balance.
36. Using the aging method (balance sheet approach, percentage of receivables), the amount of the journal entry to record bad debts expense will be $__________.
37. After bad debts expense has been recorded, the balance in the account Allowance for Doubtful Accounts will be $__________, a __________ (debit, credit) balance.
38. A company has been experiencing credit losses of 0.4% of net credit sales—a rate that is consistent with its industry. In August the company had net credit sales of $100,000. Its Allowance for Doubtful Accounts has a $6,000 credit balance which seems appropriate for customers’ past due balances. The amount for the journal entry under the sales or income statement approach for estimating bad debts expense for August is: $__________.
Use the following information for answering Questions 39 - 40:
JLL Corp received a promissory note from ADDCO. The note was for $100,000 and was dated December 1, 2023. The note promises to pay interest at an annual rate of 12%. The $100,000 of principal plus all of the interest is to be paid on May 31, 2024.
39. The total interest that JLL should receive on May 31 is $__________.
40. Under the accrual basis of accounting, the interest revenue to be reported in 2023 for this note is $__________.

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