Chapter 8 Quiz - Principles of Accounting

When a company uses the allowance method of accounting for uncollectible receivables, the entry to reinstate a previously written off account would include a

• credit to Bad Debt Expense

• debit to Bad Debt Expense

• debit to Allowance for Doubtful Accounts

• credit to Allowance for Doubtful Accounts

The direct write-off method of accounting for uncollectible accounts

• A. emphasizes balance sheet relationships

• B. is often used by small companies and companies with few receivables

• C. emphasizes cash realizable value

• D. emphasizes the matching of expenses with revenues

Which of the following phrases best describes accounts receivable?

• created from selling merchandise or services on account

• a list of customer accounts sorted by age classes

• a contra asset that represents the amount of estimated uncollectible receivables

• all money claims against other entities

Russell Company sold merchandise and has accounts receivable. Allowance for doubtful accounts has a credit balance. Russell Company estimates a percentage of sales will not be collected. What is the value of allowance for doubtful accounts after recording bad debt expense?

• $30,500

• $30,000

• $29,500

• $500

Allowance for doubtful accounts is what type of account?

• contra asset

• expense

• equity

• liability

What is a name for accounts that go uncollected?

• Bad Debt Expense

• Uncollectible Accounts Expense

• Both A and B

• None of the above

• $625,000

• $600,000

• $575,000

• $25,000

Marks received a notice that Alexandria Inc has filed for bankruptcy. Using the direct write-off method, what account is debited to write off a $3,000 balance owed?

• Bad Debt Expense

• Allowance for Doubtful Accounts

• Accounts Receivable

• Notes Receivable

Martin received a notice that Akara Inc has filed for bankruptcy. Using the allowance method, what account is debited to write off a $4,000 balance owed?

• Bad Debt Expense

• Allowance for Doubtful Accounts

• Accounts Receivable

• Notes Receivable