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Accounting for Receivables Quiz Questions
Q1. A company uses the balance sheet approach to determine the required balance in the Allowance for Doubtful Accounts account. Accounts receivable is $1 million. Management believes that an allowance of 2% is required. At present, the balance in the Allowance for Doubtful Accounts account is zero. The journal entry to set up the required allowance includes a:
- Debit to Allowance for Doubtful Accounts of $20,000
- Credit to Bad Debt expense of $20,000
- Credit to Allowance for Doubtful Accounts of $1 million
- Credit to Allowance for Doubtful Accounts of $20,000
Q2. A company uses the balance sheet approach to determine the required balance in the Allowance for Doubtful Accounts account. Accounts receivables are $1 million. Management believes that an allowance of 3% is required. Currently, the bad debt expense account has a debit balance of $40,000. The journal entry to set up the required allowance includes:
- A debit to Allowance for Doubtful Accounts of $10,000
- A credit to Allowance for Doubtful Accounts of $30,000.
- An amount which cannot be determined from the information given.
- A credit to Allowance for Doubtful Accounts of $40,000.
Q3. A customer informs you on April 30 that their company, is unable to pay its outstanding account balance of $10,000. Record the transaction assuming that the company uses direct write-off method.
- Debit Bad Debt Expense $10,000, Credit Allowance for Doubtful Accounts $10,000
- Debit. Allowance for Doubtful Accounts $10,000, Credit Accounts Receivable $10,000
- Debit Bad Debt Expense $10,000, Credit Accounts Receivable $10,000
- Debit Accounts Receivable $10,000, Credit Bad Debt Expense $10,000
Q4. Accounts receivables arise from:
- Selling bonds
- Providing goods and services
- Purchasing goods and services
- Selling equity
Q5. A company and its accounting department are responsible for managing accounts receivable in such a way that it is;
- Inaccurate and unethical
- Ethical
- Accurate
- Accurate and ethical
Q6. Which of the following other controls for accounts receivable might be implemented?
- Keeping separate records for each customer.
- Writing off a bad debt when all reasonable collection measures have been exhausted
- All the choices available
- Following up on large overdue accounts
Q7. Which of the following is a strategy to ensure that a company effectively manages and controls its accounts receivable?
- Cutting-edge technology
- Measuring results
- All choices available
- Commitment to efficiency
Q8. Company A has net credit sales of $1 million, and average accounts receivable of $250,000. The days sales outstanding is
- 92 days
- 1,460 days
- 0.25 days
- 4 days
Q9. The entry to convert an accounts receivable to a note receivable is:
- Debit Note Payable; Credit Accounts Receivable
- Debit Accounts Receivable; Credit Note Payable
- Debit Note Receivable; Credit Accounts Receivable
- Debit Note Receivable; Credit Note Payable
Q10. Assume a promissory note between two parties is issued on January 15, 2020. The face value of the note is $1,000 and the annual interest rate is 8%. The term of the note is 60 days. How much interest is due on March 16, 2020?
- $12.15
- $16.15
- $13.15
- $14.15
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