ACG 2021 Practice Test Questions and Correct Answers
8 views 0 purchase
Course
ACG 2021
Institution
ACG 2021
Which of the following are considered disadvantages of allowing customers to purchase goods on credit? A delay in cash collections Bad debt costs Increased wage costs to determine if customers are creditworthy Increased wage costs resulting from the collection process
Which of the following descri...
ACG 2021 Practice Test Questions and
Correct Answers
Which of the following are considered disadvantages of allowing customers to purchase
goods on credit? ✅A delay in cash collections
Bad debt costs
Increased wage costs to determine if customers are creditworthy
Increased wage costs resulting from the collection process
Which of the following describe a note receivable? ✅More formal way of extending
credit
Specified interest rate
Specified maturity date
Stronger legal claim
Which of the following statements about credit sales are true? ✅Accounts receivable
arise from credit sales.
Accounts receivable should be reported at net realizable value.
Revenue is reported when the company fulfills its promise to transfer control of a good
or service to a customer.
Which of the following are the steps followed by the allowance method? ✅Record the
estimated bad debts in the period credit sales occur using an end-of-period adjustment.
Write-off specific customer balances when they are known to be uncollectible.
Match the description provided with the appropriate account name. ✅1. Credited in the
adjustment to record estimated bad debts. Allowance for Doubtful Accounts
2. Increased by a debit. Bad Debt Expense
3. A permanent account. Allowance for Doubtful Accounts
4. Its balance carries forward from one accounting period to the next. Allowance for
Doubtful Accounts
Bellows Company uses the allowance method to account for uncollectible accounts.
After making a concerted effort, Bellows' management determined that it will not be able
to collect the $1,200 owed to it by its customer Acme Inc.
Prepare the appropriate journal entry to record the receivable write-off. ✅Allowance for
Doubtful Accounts 1200
Accounts Receivable 1200
Madison Inc. reported sales of $1,000,000, a debit balance in Accounts Receivable of
$80,000, and a credit balance of $5,000 in the Allowance for Doubtful Accounts.
Management anticipates bad debt losses of 1% of credit sales.
, Prepare the end-of-period adjusting entry to record bad debt expense. ✅Debit Bad
Debt Expense 10,000
Allowance for Doubtful Accounts 10,000
At its December 31 year-end, Accounts Receivable totaled $86,600, aged as follows:
(1) 1-30 days old, $71,000; (2) 31-90 days old, $12,000; and (3) more than 90 days old,
$3,600. Experience has shown that for each age group, the estimated uncollectible is
(1) 12%, (2) 24%, and (3) 48%, respectively. What is the balance to which the
Allowance for Doubtful Accounts will need to be adjusted at the end of the period?
✅13,128
Broadway Company reported a balance in Accounts Receivable of $50,000 and a zero
balance in the Allowance for Doubtful Accounts. The company's aging of accounts
receivable determined $12,200 to be uncollectible.
Prepare the end-of-period adjusting entry to record bad debt expense. ✅Debit: Bad
Debt Expense 12,200
Credit: Allowance for Doubtful Accounts 12,200
Knelling Company reported a balance in Accounts Receivable of $50,000 and a credit
balance of $3,000 in the Allowance for Doubtful Accounts. The company's aging of
accounts receivable determined $12,000 to be uncollectible. ✅Debit: Bad Debt
Expense 9,000
Credit: Allowance for Doubtful Accounts9,000
What is the formula for calculating interest on a note receivable? ✅Interest = Principal
× Interest Rate × Time
What accounts are included in the entry to accrue interest earned but not yet received?
✅Interest Receivable
Interest Revenue
On July 1, Year 1, the Barley Company loaned $50,000 to the Jackson Co. The note
has a stated interest rate of 10% and will mature on June 30, Year 2. All payments for
principal and interest will be received at maturity. How much interest revenue will Barley
report on its income statement for the year ended December 31, Year 1? ✅2,500
Which of the following is the term used to describe the process of selling and collecting?
✅Receivables turnover
Which of the following statements about the receivables turnover ratio is true? ✅A
higher receivables turnover ratio means faster (better) turnover.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller twishfrancis. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $8.99. You're not tied to anything after your purchase.
