True/False
Indicate whether the sentence or statement is true
or false.
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1.
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The
direct charge-off method of recording losses from uncollectible accounts is an application of the
matching principle.
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2.
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The
allowance method involves anticipating losses form uncollectible accounts by recognizing an expense
for these losses before the actual accounts are charged off.
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3.
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The
adjusting entry to record the estimated loss from uncollectible accounts includes a credit to
Accounts Receivable.
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4.
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When
the estimate of the losses from uncollectible accounts is based on an age analysis of the accounts
receivable, the primary concern is proper valuation of the accounts receivable on the balance
sheet.
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5.
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When
losses from uncollectible accounts are provided for in advance, the entry to record the charge-off of
a particular customer's account includes a debit to Uncollectible Accounts Expense.
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6.
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Allowance for Doubtful Accounts may, at times, have a debit balance.
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7.
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Losses from uncollectible accounts can be estimated by analyzing sales or accounts
receivable.
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8.
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The
balance of Allowance for Doubtful Accounts is deducted from the balance of Accounts Receivable on the
balance sheet.
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9.
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When
the allowance method of recognizing losses from uncollectible accounts is used, the net value of
accounts receivable on the balance sheet will more nearly reflect the amount that will ultimately be
collected.
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10.
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The
adjusting entry to record estimated losses from uncollectible accounts consists of a debit to
Allowance for Doubtful Accounts.
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11.
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If
the estimate of loss from uncollectible accounts is based on sales, any existing balance in Allowance
for Doubtful Accounts is added to the percentage of sales to determine the amount of the
adjustment.
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12.
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The
experience of other firms in the same line of business may be used in estimating losses from
uncollectible account for a new firm.
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13.
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When
there is a partial collection of a balance previously written off, the reversal entry will be for the
entire amount of the write off.
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14.
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The
direct charge-off method of recording losses from uncollectible accounts is the preferred
method.
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15.
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Allowance for Doubtful Accounts is a liability account.
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16.
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When
losses from uncollectible accounts are recorded as they occur, Uncollectible Accounts Expense is
debited and Accounts Receivable and the customer's accounts are credited.
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Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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17.
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On
December 31, prior to adjustment, Allowance for Doubtful Accounts has a credit balance of $400.
An age analysis of the accounts receivable produces an estimate of $2,000 of probable losses from
uncollectible accounts. The adjusting entry needed to record the estimated losses from
uncollectible accounts is made for a. | $1,600. | c. | $2,400. | b. | $2,000. | d. | $400. | | | | |
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18.
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Allowances for Doubtful Accounts has a credit balance of $800 immediately before the
charge-off of a $200 account receivable. The credit balance of Allowance for Doubtful Accounts
immediately after the charge-off is a. | $600. | c. | $1,000. | b. | $800. | d. | $200. | | | | |
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19.
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A
firm using the allowance method to provide for losses from uncollectible accounts collected the cash
due from a customer whose account was previously written off. The entry to reinstate the
customer's account included a credit to a. | Sales. | c. | Uncollectible Accounts Expense. | b. | Accounts
Receivable. | d. | Allowance for
Doubtful Accounts. | | | | |
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20.
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The
adjusting entry to record estimated losses from uncollectible accounts consists of a. | a debit to
Uncollectible Accounts Expense and a credit to Accounts Receivable | b. | a debit to
Uncollectible Accounts Expense and a credit to Allowance for Doubtful
Accounts. | c. | a debit to Allowance for Doubtful Accounts and a credit to
Accounts Receivable. | d. | a debit to Accounts Receivable and a credit to Allowance for
Doubtful Accounts. | | |
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21.
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When
the allowance method of recognizing losses from uncollectible accounts is used, the entry to record
the write-off of a specific account consists of a. | a debit to Uncollectible Accounts Expense and a credit to
Accounts Receivable. | b. | a debit to Allowance for Doubtful Accounts and a credit to
Accounts Receivable. | c. | a debit to Uncollectible Accounts Expense and a credit to
Allowance for Doubtful Accounts. | d. | a debit to Accounts Receivable and a credit to Allowance for
Doubtful Accounts. | | |
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22.
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The
balance of Allowance for Doubtful Accounts is reported as a. | a liability on
the balance sheet. | b. | a deduction from Sales on the income
statement. | c. | a deduction from Accounts Receivable on the balance
sheet. | d. | an expense on the income statement. | | |
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23.
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A
firm reported sales of $400,000 during the year and has a balance of $30,000 in its Accounts
Receivable account at year-end. Prior to adjustment, Allowance for Doubtful Accounts has a
credit balance of $200. The firm estimated its losses from uncollectible accounts to be
one-half of 1 percent of sales. The entry to record the estimated losses from uncollectible
accounts will include a credit to Allowance for Doubtful Accounts for a. | $1,800. | c. | $2,200. | b. | $2,000. | d. | $4,000. | | | | |
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24.
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When
a firm uses the allowance method to provide for losses, the recovery of an account previously charged
off as uncollectible requires an entry a. | to reverse the write-off. | b. | to increase the
balance of the Sales account. | c. | to reduce the balance of Uncollectible Accounts
Expense. | d. | to decrease the balance of the Allowance Doubtful
Accounts. | | |
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25.
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On
December 31, prior to adjustment, Allowance for Doubtful Accounts has a debit balance of $600.
An age analysis of the accounts receivable produces an estimate of $2,500 of probable losses from
uncollectible accounts. The adjusting entry needed to record the estimated losses from
uncollectible accounts is made for a. | $1,900. | c. | $3,100. | b. | $2,500. | d. | $600. | | | | |
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26.
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Which
of the following methods must be used to record bad debt losses for tax purposes? a. | The allowance
method based on a percent of net credit sales. | b. | The allowance
method based on an age analysis of accounts receivable. | c. | The allowance
method based on a percent of total accounts receivable outstanding. | d. | The direct
charge-off method. | | |
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27.
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An
existing balance in Allowance for Doubtful Accounts is not considered if the estimate of loss is
based on a. | a percent of net
credit sales. | b. | an age analysis of accounts
receivable. | c. | a percent of total accounts receivable
outstanding. | d. | a percent of total sales. | | |
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28.
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A
firm reported sales of $200,000 during the year and has a balance of $10,000 in its Accounts
Receivable account at year-end. Prior to adjustments, Allowance for Doubtful Accounts has a
debit balance of $100. The firm estimates its losses from uncollectible accounts to be one-half
of 1 percent of sales. The entry to record the estimated losses from uncollectible accounts
will include a credit to Allowance for Doubtful Accounts for a. | $1,100. | c. | $900. | b. | $1,000. | d. | $2,000. | | | | |
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29.
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On
December 31, prior to adjustments, the balance of Accounts Receivable is $15,000 and Allowance for
Doubtful Accounts has a credit balance of $85. The firm estimates its losses from uncollectible
accounts to be 5% of accounts receivable at the end of the year. The adjusting entry needed to
record the estimated losses from uncollectible accounts is made for a. | $665 | c. | $835. | b. | $750. | d. | $85. | | | | |
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30.
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On
December 31, prior to adjustments, the balance of Accounts Receivable is $24,000 and Allowance for
Doubtful Accounts has a debit balance of $200. The firm estimates its losses from uncollectible
accounts to be 5% of accounts receivable at the end of the year. The adjusting entry needed to
record the estimated losses from uncollectible accounts is made for a. | $1,000. | c. | $1,400. | b. | $1,200. | d. | $200. | | | | |
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