Accounting CH5

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The entry to write off an account under the allowance method for estimating uncollectible accounts:
A) reduces total assets.
B) reduces net income.
C) has no effect on total assets or net income.
D) increases net income.

C

A separate account for each customer is kept in a:
A) control account.
B) subsidiary ledger.
C) general ledger.
D) control ledger.

B

Under the allowance method, the entry to write off a $2,600 uncollectible account includes a:
A) debit to Accounts Receivable for $2,600.
B) credit to Uncollectible Account Expense for $2,600.
C) credit to Allowance for Uncollectible Accounts for $2,600.
D) debit to Allowance for Uncollectible Accounts for $2,600.

D

The purpose of owning trading securities is to:
A) increase cash reserves.
B) hold for a long-term period.
C) sell the investment for more than its cost.
D) sell the investment to decrease net income

C

The net realizable value of accounts receivable is the amount:
A) the company can collect from a factor when the receivables are sold.
B) remaining after uncollectible accounts are written off.
C) the company expects to collect from customers.
D) the company expects to pay to creditors

C

The journal entry to record the receivable from performing a service on account is:
A) debit notes receivable, credit service revenue.
B) debit notes receivable, credit cash.
C) debit service revenue, credit accounts receivable.
D) debit accounts receivable, credit service revenue.

D

When a company sells a trading investment, the gain or loss on the sale is reported in the:
A) revenue section of the Income Statement.
B) short-term investments section of the Balance Sheet.
C) other revenue, gains, and losses section of the Balance Sheet.
D) other revenue, gains, and losses section of the Income Statement.

D

When a company receives a cash dividend from a trading investment, the journal entry includes:
A) a debit to cash and credit to dividend revenue.
B) a debit to dividend revenue and credit to cash.
C) a debit to cash and credit to trading investment.
D) none of the above.

A

A year-end review of Accounts Receivable and estimated uncollectible percentages revealed the following:
1-30 Days = 40K @1.5%
31-60 Days = 10K @ 8%
Over 60 Days = 6K @ 22%
Amounts over 90 days past due are written off. The credit balance in Allowance for Uncollectible Accounts was $520. The uncollectible-account expense for the year is:
A) $600.
B) $2,260.
C) $2,200.
D) $3,240.

C

Last Bank lends money to a customer on a six month note. The entry to record the issuance of the note by Last Bank is:
A) debit Note Receivable and credit Service Revenue.
B) debit Service Revenue and credit Note Receivable.
C) debit Note Receivable and credit Cash.
D) debit Cash and credit Note Receivable.

C

Investments in trading securities are reported on the Balance Sheet at their _________ value.
A) current market
B) investment
C) market or investment
D)fair

A

The net realizable value of accounts receivable is:
A) the difference between accounts receivable and its contra asset account.
B) the difference between accounts receivable and uncollectible-account expense.
C) the amount of accounts receivable that the company expects to collect.
D) both A and C.

D

The ABC Company is preparing its financial statements on December 31. During the year, they purchased IBM stock for $20,000. On December 31, the market value of the stock is $8,000. The journal entry on December 31 will include a:
A) debit to unrealized gain for $12,000.
B) debit to unrealized loss for $8,000.
C) debit to unrealized loss for $12,000.
D) debit to realized loss for $12,000.

C

The following account balances were extracted from the accounting records of AD Corporation:
Accts Recv = 110K
Allowace for Uncollectable Accts = 35K
Uncollectavle Acct Expense= 60K
What is the net realizable value of the accounts receivable?
A) $145,000
B) $110,000
C) $75,000
D) $50,000

C

The biggest risk of selling on credit is:
A) the risk of posting a payment to the wrong subsidiary account.
B) the risk of not collecting some of the receivables.
C) the risk of losing a sale.
D) none of the above.

B

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