CH. 7 Review

Sellers sometimes ask for a note receivable to replace an account receivable when a customer requests more time to pay a past-due account.

• True

• False

BizCom's customer, Redding, paid off an $8,300 balance on its account receivable. BizCom should record the transaction as a debit to Accounts Receivable—Redding and a credit to Cash.

• True

• False

Sellers generally prefer to receive notes receivable rather than accounts receivable when the credit period is long and the receivable is for a large amount.

• True

• False

The direct write-off method of accounting for uncollectible accounts requires a prediction of bad debts expense at the end of each period.

• True

• False

At the end of each period, the allowance method requires an estimate of the total bad debts expected from that period’s sales.

• True

• False

The percent of sales method for estimating bad debts uses only income statement account balances to estimate bad debts.

• True

• False

The journal entry to write off an uncollectible account under the direct write-off method consists of a debit to Accounts Receivable and a credit to Bad Debts Expense.

• True

• False

After adjustment, the balance in the Allowance for Doubtful Accounts has the effect of reducing Accounts Receivable to its realizable value.

• True

• False

When using the allowance method of accounting for uncollectible accounts, the entry to write off Jeannie’s uncollectible account is a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable—Jeannie.

• True

• False

The percent of sales method for estimating bad debts assumes that a percent of a company's credit sales for the period is uncollectible.

• True

• False