Financial Accounting Chapter 9 Quiz TRUE/FALSE 1) The expense recognition (match

Question

Financial Accounting Chapter 9 Quiz TRUE/FALSE 1) The expense recognition (matching) principle requires use of the allowance method of accounting for bacd Name debts. 1) 2) As long as a company accurately records total credit sales information, it is not necessary to have separate accounts for specific customers. 2) 3) A comp any borrowed $10,000 by signing a six-month promissory note at 5% interest. The amount of interest to be paid at maturity is $25. 3) Problem 4) A compan uncollectible accounts. Experience suggeststhat 6% of outstanding receivables are uncollectible. The current credit balance (before adjustments) in the allowance for doubtful accounts is $1,200. The journal entry to record the adjustment would be how much? y has $80,000 in outstanding accounts receivable and it uses the allowance method to account for T or F 5) A company borrowed S 16,000 by signing a 4-month promissory note at 12%. The amount of interest to be paid at maturity is $640. 5) T or F 6) BizCom's customer, Redding, paid off an $8,300 balance on its account receivable. BizCom should record th transaction as a debit to Accounts Receivable-Redding and a credit to Cash. 6) Problem 7) A company has $80,000 in outstanding accounts uncollectible accounts. Experience suggests that 6% of outstanding receivables are uncollectible. The current debit balance (before adjustmen the adjustment would be how much? receivable and it uses the allowance method to account for ts) in the allowance for doubtful accounts is $1,200. The journal entry to record T or F 8) No attempt is made to estimate bad debts expense under the allowance method of accounting for uncollectible accounts receivable. 8) T or F 9) Allowance for Doubtful Accounts is a contra asset, its balance is added to Accounts receivable. 9) Tor F 10) The aging of accounts receivable involves classifying each account receivable by how long it is past its due date and estimating the percent of each uncollectible class. 10)

Explanation / Answer

1) TRUE Since allowance method provides for estimating bad debts it tries to match the expenses 2) FALSE without specific customer account it will not be easy to know the amount dues, when due and other such information 3) FALSE interest 10,000*5%*6/12 250 4) Estimated bad debts = 80,000*6% 4800 adjustment required for 4800-1200= $3600 journal entry Accounting titles & Explanations Debit Credit Bad debts expense 3,600 Allowance for uncollectible accounts 3,600 5) TRUE interest 16000*12%*4/12 640 6) FALSE entry should be to debit cash and credit account receivable 7) Estimated bad debts = 80,000*6% 4800 adjustment required for 4800+1200= $6000 journal entry Accounting titles & Explanations Debit Credit Bad debts expense 6,000 Allowance for uncollectible accounts 6,000 8) FALSE 9) FALSE it is a contra asset account but its balance is deducted from accounts receivable 10) TRUE

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