i ice (IAA) JON 21-12 multiple choice (IAA) UESTI -1 oi | Q vunting, prineile primal upporty an | : Wit oe bt doubtful accoun’™ ‘ al ity principle b Contin te paniple Matching, princlp le a. Conservatis™ method preferred over th, .. e Wy ig counting for bad debts? he dy writ unas anol a el Fas DBOIse by Esti ed b Bait oe accounts under direct . is difficult to do © dg st es vi ebiting accounts receivable and cre 3 The one doubtful accounts would be made aa a, A-customer pays an account balance. b. Acustomer defaults on the account. c. A previously defaulted customer pays the balance, & etimated uncolletible accounts are too low. 4, In recording cash discounts related to accounts rece which is more theoretically correct? a. Net method b. Gross method c. Allowance method d. Direct writeoff method 5, All of the following are problems associated with measurement of accounts receivable, except a, Uncollectible accounts b. Returns c. Cash discounts under the net method d. Allowances granted ANSWER 21-12 BARA eBid y Be 4aQUESTION 21-13 Multiple choice (AICPA Adapted) ich method i its i 1 wise bone pai spooning bad debt loss is consistent with a. Allowance method b. Direct writeoff method c. Percent of sales method 4. Percent of accounts receivable method When the allowance method is used, the entry to the writeoff of a specific account would Rn a. Decrease both accounts receivable and the allowance b. Decrease accounts receivable and increase allowance e Increase both accounts receivable and the allowance {. Increase accounts receivable and decrease the allowance Under the allowance method, the journal entry to record the writeoff of a specific uncollectible account a. Affects neither net income nor working capital b. Affects neither net income nor accounts receivable ¢ Decreases both net income and working capital 4. Decreases both net income and accounts receivable method, the entries at the time of Under the allowance t previously written off would collection of an account a. Decrease the allowance for doubtful accounts b. Increase net income c. Have no effect on the allowance for doubtful accounts d. Have no effect on net income receivable previously written off yh and an inerease in The collection of accounts results in an increase in cas a, Accounts receivable b. Allowance for doubtful accounts c. Bad debt expense d. Retained earnings ANSWER 21-13 La 2a 3% a 4.4 Multiple choice (AICPA Aang gtI0N 21" QUE sat bad debts that foentes nthe, 1, Amethod ofan the statement 0 Financia] 5% * gaterent te rhod based on ie ip the alowam a Dine ade accounts receivable ing the imatil ectible account timating uncoll ts ear) js the allowance method based on me NY Ome a. Aging of accounts receivable b. Direct write . Gross sales a Credit sales less returns and allowances ‘The advantage of relating the bad debt experience accounts receivable is that this approach ‘a. Gives a reasonably accurate measurement of receivables in the statement of financial position. , Relates bad debt expense to the period of sale. ._ Is the only generally accepted method for measuring accounts receivable. d. Makes estimates of uncollectible accounts unnecessary. When a specific customer account recei ceivable is written off isa uuncollectible, what will be the effect on net income under the allowance and direct writeoff method? a. No effect A wrlteott a both allowance method and direct Decrease und writeoff methey Pot" Allowance method and direct ©. No effect under al under direet write wane’, method and decreas? 4, Decrease unit alk Sireot writett metnen®® Method and no effect undet 282,, Anentity uses the allow, ANC te Tore erioaly V8 is the eff, te0enine doubtful ‘ 1 account Previously written ofp “Meet of a collection of an No effect on both allow, dpb sn expenar F doubtful accounts and ». No effect on allowee” decrease in doubtful aggoyt, UbtEul accounts and Increase in allowa ts expense on doubtful accounts ex, 4g. Increase in allowance for in doubtful accounts expen ttf c When an accounts receivable api i ceries of computations ig made to cereale is prepare, a yncollectible accounts. The resulting am, line the estimated schedule 0 a, When added to the total accnun year is the desired credit balm doubtful accounts at year-end p, Is the amount of doubtful acco ¢, Is the amount that should be added sr ginni allowance for doubtful accounts to ie the ae accounts expense for the year d. Is the amount of desired credit bala: the for doubtful accounts to be roared at yen ts written off during the nce of the allowance for . uunts expense for the year When an aging approach is used for estimating uncollectible accounts a, Bad debt expense is measured indirectly and the allowance for uncollectible accounts is measured directly, : b. Bad debt expense is measured indirectly and the allowance for uncollectible accounts is measured indirectly. ¢, Bad debt expense is measured directly and the allowance for uncollectible accounts is measured directly. 4. Bad debt expense is measured directly and the allowance for uncollectible accounts is measured indirectly. (253m ? 8, Which san tur et expeee? ethod of determining the am the adjustment pe A percentage of soles . Apercentage djusted for the balance in th allowance sales not adjusted for the balance ing, . Apercentage of allowance of accounts receivable not adjusted fo, ta i 8 balance in the-allowance ee as derived from aging ail a ad for the balance in the allowance 9, A debit balance in the allowance for doubtful accounts 10. Which is not permitted in acco accounts receivable? a b e a. Should never occur. 4 Ts always the result of management not Providing , large enough allowance in order to manage earnings May occur before the year-end adjustment for uncollectible accounts. May exist even after the year-end adjustment for uncollectible accounts. unting for uncollectibje Percentage of accounts receivable b. Percentage of sales © a. Direct wri ‘iteoff method Aging of accounts receivable ANSWER 21-14 seerr eenne 6. rh 8, 9, 10. compa 284 nt iQUESTION 21. 1 15 Multiple choice (IAA) Which method of determining by d not match expense and revenue? ns bt expense does a. Charging bad debts with 4 percentage of sales under the allowance method b. Charging bad debts with a percentage of accounts receivable under the allowance method c. Charging bad debts with an amount derived from aging the accounts receivable under the allowance method | Charging bad debts as accounts are written off as uncollectible a Which method of determining bad debt expense most closely matches expense to revenue? a, Charging bad debts only as accounts are written off as uncollectible. b. Charging bad debts with a percentage of sales for that period. c. Estimating the allowance for doubtful accounts as a percentage of accounts receivable. d. Estimating the allowance for doubtful accounts by aging the accounts receivable, Which concept relates to the allowance method in accounting for uncollectible accounts receivable? a. Bad debt expense is an estimate based on historical and prospective information. b, Bad debt expense is the actual amount determined to be uncollectible. ¢. Bad debt expense is an estimate based only on aging of accounts receivable, d. Bad debt expense is management determination of which accounts are considered doubtful.jg not acceptable in estimating ing is 1 4. Which ofthe follow able? uncollectible account The estimate of uncollectible accounts is based on , a. The esti percentage of sales et b. The estimate of 4} percentage of the accounts rece! period. c. The estimate of uncollectib 2 Jlectible accounts is made byt ad. No estimate of unco eco rr accounts are written off when it is determined that the accounts cannot be collected. e period tible accounts is based on a‘ ivable at the end of 3 Je accounts is based on an 5. The estimate of uncollectible accounts receivable based on a percentage of sales a. Emphasizes measurement of the net realizable value of accounts receivable. b. Emphasizes measurement of bad debt expense. c. Emphasizes measurement of total assets. d. Is only acceptable for tax purposes. ANSWER 21-15 eeene ree oe