11) The most acceptable way to measure bad debts is by:
A) the direct write-off method.
B) the percent-of-sales method.
C) the allowance method.
D) none of the above.
12) When evaluating the collectability of accounts receivable:
A) the uncollectible-account expense is a contra account.
B) the allowance for uncollectible accounts is an operating expense in the selling, general and administrative category.
C) the allowance method uses estimates developed from the company's collection experience.
D) the direct write-off method uses the allowance for uncollectible accounts to record bad debts.
13) The aging-of-receivables method is:
A) not an acceptable method of estimating bad debts.
B) a balance sheet approach, since it focuses on accounts receivable.
C) an income statement approach, since it focuses on the amount of expense to be reported on the income statement.
D) not concerned with the balance in the Allowance for Doubtful Accounts.
14) Under the allowance method:
A) the company records the uncollectible-account expense when the customer does not pay.
B) the allowance for uncollectible accounts is a contra account to gross revenue.
C) the allowance for uncollectible accounts will normally have a debit balance.
D) the company sets up an allowance for uncollectible accounts to estimate the amount of the receivables the company does not expect to collect.
15) Estimating uncollectible accounts by analyzing individual accounts receivable according to the length of time they have been outstanding is known as the:
A) aging-of-receivables method.
B) percent-of-sales method.
C) allowance method.
D) direct write-off method.
16) Allowance for uncollectible accounts is classified as:
A) a contra-expense account.
B) a contra-revenue account.
C) a contra-asset account.
D) none of the above.
17) Which account shows the amount of accounts receivable that the business does NOT expect to collect?
A) Sales Returns and Allowances
B) Unearned Accounts Receivable
C) Allowance for Uncollectible Accounts
D) Uncollectible Accounts Expense
18) Which method does NOT use estimates?
A) Direct-write off method
B) Percent-of-Sales
C) Aging-of-receivables method
D) Allowance method
19) The net realizable value of accounts receivable is the:
A) amount the company can collect from a factor when the receivables are sold.
B) amount remaining after uncollectible accounts are written off.
C) amount the company expects to collect from customers.
D) amount the company expects to pay to creditors.
20) The percent-of-sales method of computing uncollectible accounts is used for:
A) interim statements because it is more accurate than the aging method.
B) annual statements because it is more accurate than the aging method.
C) interim statements because it is easier than the aging method.
D) annual statements because it is easier than the aging method.
