ACCTG 211 AR Review

Which of the following statements is  true?

• Accounts receivable are liabilities.
• Notes receivable usually have longer collection terms than accounts receivable.
• Accounts receivable are more liquid than cash.
• Notes receivable are always classified as current assets.

When a company is using the direct  write-off method, and an account is written  off, the journal entry consists of a  ________.

• credit to Accounts Receivable and a debit to Bad Debts Expense
• debit to the Allowance for Bad Debts and a credit to Accounts Receivable
• debit to Accounts Receivable and a credit to Cash
• credit to Accounts Receivable and a debit to Interest Expense

Which of the following statements is true of the direct​ write-off method?

• It results in more accurate net income than any other method.
• It is only suitable for small companies that have very few uncollectible receivables.
• GAAP requires public companies to follow the direct​ write-off method.
• It provides better matching of revenues with expenses.

Two methods of estimating uncollectible receivables are​ ________.

• the allowance method and the amortization method
• the​ gross-up method and the direct​ write-off method
• the direct​ write-off method and the​ percent-of-completion method
• the​ aging-of-accounts-receivable method and the​ percent-of-sales method

Dean Art is a new business. During its first year of  operations, credit sales were  $41,000 and collections of credit sales were  $34,000. One  account, $725, was written off. Management uses the  aging-of-receivables method to account for bad debts expense and estimated  $500 as uncollectible at year end. The ending balance of the Allowance for Bad Debts is  ________.

• 
  ​$500
• 
  ​$505
• 
  ​$1,225
• $1,230

At the beginning of  2017, Elixir, Inc. has the following account  balances:
Accounts Receivable  $42,000  (debit balance)
Allowance for Bad Debts  $7,000  (credit balance)
Bad Debts Expense  $0
During the  year, credit sales amounted to  $800,000. Cash collected on credit sales amounted to  $770,000, and  $18,000 has been written off. At the end of the  year, the company adjusted for bad debts expense using the  percent-of-sales method and applied a  rate, based on past  history, of  2.5%. The ending balance in the Allowance for Bad Debts is  ________.

• 
  ​$2,000
• 
  ​$7,000
• 
  ​$8,250
• 
  ​$9,000

The entity that signs the promissory note and promises to pay the required amount is the​ ________.

• maker of the note
• holder of the note
• payee of the note
• banker of the note