Study Guide: Accounts Receivable

Topics: Accounts receivable Pages: 105 (14932 words) Published: August 18, 2015
 

True / False Questions
 
1. Credit sales transfer products and services to a customer today while bearing the risk of collecting payment from that customer in the future.  True    False
 
2. At the time of a credit sale, a company would record an increase in assets and an increase in revenues.  True    False
 
3. A sale on account is recorded as a debit to revenue and a credit to accounts receivable.  True    False
 
4. Accounts receivable represent the amount of cash owed to the company by its customers from the sale of products or services on account.  True    False
 
5. Trade discounts represent a discount offered to the purchasers for quick payment.  True    False
 
6. When a company sells a $100 service with a 20% trade discount, $80 of revenue is recognized.  True    False
 
7. A sales discount represents a reduction, not in the selling price of a product or service, but in the amount to be paid by a credit customer if payment is made within a specified period of time.  True    False

 

8. A sale on account for $1,000 offered with terms 2/10 means that the customers will get a $2 discount if payment is made within 10 days.  True    False
 
9. The sales discount account is an example of a contra revenue account.  True    False
 
10. The sales discount account is an expense account. 
True    False
 
11. Sales returns and allowances occur when the buyer returns the goods or the seller reduces the customer's balance owed.  True    False
 
12. A sales allowance is recorded as a debit to accounts receivable and credit to sales allowance.  True    False
 
13. The sales returns and allowances account is an expense account.  True    False
 
14. If a company has total revenues of $100,000, sales discounts of $3,000, sales returns of $4,000, and sales allowances of $2,000, the income statement will report net revenues of $91,000.  True    False

 
15. Accounts receivable are reported at their net realizable value.  True    False
 

16. The net realizable value of accounts receivable is the full amount owed by customers.  True    False
 
17. Customers' accounts that we no longer consider collectible are referred to as uncollectible accounts (or bad debts).  True    False
 
18. The direct write-off method involves recording an adjusting entry at the end of each period to account for the possibility of future uncollectible accounts.  True    False
 
19. The adjusting entry to account for future bad debts has the effect of (1) reducing assets and (2) increasing liabilities.  True    False
 
20. The adjusting entry for uncollectible accounts involves a debit to bad debt expense and a credit to the allowance for uncollectible accounts.  True    False
 
21. The allowance for uncollectible accounts is a contra asset account representing the amount of accounts receivable that we do not expect to collect.  True    False
 
22. Bad debt expense is the amount needed to adjust the allowance for uncollectible accounts to its desired ending balance.  True    False
 

23. One disadvantage of the allowance method (over the direct write-off method) for recording uncollectible accounts is that it generally matches bad debt expense with the revenue it helped to generate.  True    False

 
24. If a company is owed $10,000 by its customers but expects that $1,000 will not be collected, accounts receivable in the balance sheet are reported at the net amount of $9,000.  True    False
 
25. When a company writes off an account receivable as an actual bad debt, it reduces total assets.  True    False
 
26. When a company writes off an account receivable as an actual bad debt, it records an expense.  True    False
 
27. The write-off of an actual bad debt is recorded with a debit to the allowance for uncollectible accounts and a credit to accounts receivable.  True    False
 
28. When a company collects cash from an account previously written off, total assets increase.  True    False
 ...
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