ACC 210 PS Chapter 5 Quiz

True or False: "Sales Returns" and "Sales Allowances" are expense accounts

• TRUE

• FALSE

What is the correct Accounts Receivable Turnover Formula?

• Net Credit Sales/ Avg Accts Rec

• 365/Receivable Turnover Ration

• Cost of Goods Sold/ Avg Inventory

• Sales/ Avg Net PP&E

When the seller records a sales return for merchandise, two journal entries are required.

• True

• False

Sales Returns and Allowances is classified as a

• revenue account

• owner's equity account

• contra revenue account

• none of the above

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

A method of estimating bad debts that focuses on the balance sheet rather than the income statement is the allowance based on

• Direct write-off.

• Aging the trade receivable accounts.

• Credit sales.

• Specific accounts determined to be uncollectible.

TRUE or FALSE: Allowance for Uncollectible Accounts is a contra-asset

• True

• False