EXERCISES ON RECEIVABLES

1. When a sale is made with the credit terms of 2/10, net 30, the "10" refers to the __________ period.
2. On June 1, $800 of goods are sold with credit terms of 1/10, n/30. How much should the seller expect to receive if the buyer pays on
June 8? $720 $784 $792 $800
3. On June 1, $800 of goods are sold with credit terms of 1/10, n/30. On June 3 the customer returned $100 of the goods. How much
should the seller expect to receive if the buyer pays on June 8? $692 $693 $700 $792
4. With credit terms of 2/10, n/30, the annual interest rate for paying in 10 days instead of 30 days is closest to
2% 24% 30% 36%
5. When the Allowance for Doubtful Accounts appears on a company's financial statements, its balance will be a __________ balance.
Debit Credit
6. On which financial statement would you expect to find Allowance for Doubtful Accounts?
Balance Sheet Income Statement
7. Which method of reporting losses on accounts receivable is to be used for financial reporting?
Allowance Direct Write-off
8. The seller of goods that is offering credit terms of net 30 days will likely be one of its customer's __________ creditors until it
receives payment. Secured Unsecured
9. After several years of operations, a company's Bad Debts Expense for a given year is likely to be the same as its balance in Allowance
for Doubtful Accounts. True False
10. A company estimates that $20,000 of its $500,000 of accounts receivable will be uncollectible. Its Allowance for Doubtful Accounts
presently has a credit balance of $8,000. The adjusting entry will include a __________ to the Allowance for Doubtful Accounts.
Debit Of $12,000 Credit Of $12,000 Debit Of $28,000 Credit Of $28,000
11. A company estimates that $20,000 of its $500,000 of accounts receivable will be uncollectible. Its Allowance for Doubtful Accounts
presently has a credit balance of $18,000. The adjusting entry will include a __________ to Bad Debts Expense.
Debit Of $2,000 Credit Of $2,000 Debit Of $38,000 Credit Of $38,000
12. A company estimates that $20,000 of its $500,000 of accounts receivable will be uncollectible. Its Allowance for Doubtful Accounts
presently has a debit balance of $3,000. The adjusting entry will include a __________ to Allowance for Doubtful Accounts.
Debit Of $3,000 Credit Of $3,000 Debit Of $17,000 Credit Of $17,000 Debit Of $23,000 Credit Of $23,000
Use the following information for questions 13-17:
A company is expecting thousands of credit sales transactions each week with terms of net 30 days. The company uses the
allowance method and it prepares weekly financial statements. It believes that 0.001 of its credit sales will be uncollectible. The
company's credit sales for its first week of operations are $500,000. The credit sales for its second week are $600,000.
13. The company's bad debts expense for its first week of operations will be $ __________.
14. The balance in Allowance for Doubtful Accounts at the end of the first week will likely be $ __________.
15. The company's bad debts expense for its second week of operations will be $ __________.
16. The amount of accounts receivable that you expect will be written off by the end of the company's second week of operations is $
__________.
17. The balance in Allowance for Doubtful Accounts at the end of the second week of operations will likely be $__________

Use the following information for questions 18-25:

A company's Allowance for Doubtful Accounts has a credit balance of $25,000. It learns that one of its accounts receivable
amounting to $1,800 is worthless and needs to be written off.
18. Which account should be debited for $1,800 when writing off the account?
Allowance For Doubtful Accounts Accounts Receivable Bad Debts Expense

19. Which account should be credited for $1,800 when writing off the account?
Allowance For Doubtful Accounts Accounts Receivable Bad Debts Expense

20. Assuming that after the account is written off, the supplier receives full payment from the customer. Which account will not be
involved in the accounting entries made at the time when the payment is received?
Allowance For Doubtful Accounts Accounts Receivable Bad Debts Expense

21. Under the direct write off method, which account is debited when a company writes off one of its accounts receivable?
Allowance For Doubtful Accounts Accounts Receivable Bad Debts Expense

22. Sorting a company's accounts receivable into classifications such as current, 1-30 days past due, and 31-60 days past due is known as
the __________ of accounts receivables.

23. A company's accounts receivable minus its allowance for doubtful accounts equals the net __________ value of the accounts
receivable.
.