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1.

The receivable that is usually evidenced by a formal instrument of credit is a(n)


a. trade receivable.
b. note receivable.
c. accounts receivable.
d. income tax receivable.
ANS: B
2. The type of account and normal balance of Allowance for Doubtful Accounts is
a. contra asset, credit
b. asset, debit
c. liability, credit
d. expense, debit
e. expense, credit
ANS: A
3. If the direct write-off method of accounting for uncollectible receivables is used, what general ledger
account is credited to write off a customer's account as uncollectible?
a. Uncollectible Accounts Expense
b. Accounts Receivable
c. Allowance for Doubtful Accounts
d. Interest Expense
ANS: B
4. An estimate based on an analysis of receivables shows that $780 of accounts receivables are
uncollectible. The Allowance for Doubtful Accounts has a debit balance of $110. After preparing
the adjusting entry at the end of the year, the balance in the Allowance for Doubtful Accounts is
a. $110
b. $780
c. $670
d. $890
ANS: D
5. If the allowance method of accounting for uncollectible receivables is used, what general ledger
account is credited to write off a customer's account as uncollectible?
a. Uncollectible Accounts Expense
b. Accounts Receivable
c. Allowance for Doubtful Accounts
d. Interest Expense
ANS: B

6. The balance in Allowance for Doubtful Accounts must be carefully considered prior to the end of the
year adjustment when applying which method?
a. direct write-off method
b. estimate based on sales
c. estimate based on an analysis of receivables
d. both (b) and (c)
ANS: C
7. An aging of a company's accounts receivable indicates that $3,000 are estimated to be uncollectible. If
Allowance for Doubtful Accounts has a $1,200 credit balance, the adjustment to record bad debts
for the period will require a
a. debit to Bad Debt Expense for $4,200.
b. debit to Bad Debts Expense for $3,000.
c. debit to Bad Debts Expense for $1,800.
d. credit to Allowance for Doubtful Accounts for $4,000.
ANS: C
8. A 60-day, 10% note for $8,000, dated April 15, is received from a customer on account. The face
value of the note is
a. $8,600
b. $7,200
c. $8,800
d. $8,000
ANS: D
9. The journal entry to record a note received from a customer to apply on account is
a. debit Notes Receivable; credit Accounts Receivable
b. debit Accounts Receivable; credit Notes Receivable
c. debit Cash; credit Notes Receivable
d. debit Notes Receivable; credit Notes Payable
ANS: A
10. Pane Company receives a $3,000, 3-month, 6% promissory note from Dag Company in settlement of
an open accounts receivable. What entry will Pane Company make upon receiving the note?
a.
Notes Receivable
3,000
Accounts ReceivableDag Company
3,000
b.
Notes Receivable
3,045
Accounts ReceivableDag Company
3,045
c.
Notes Receivable
3,045
Accounts ReceivableDag Company
3,000
Interest Revenue
45
d.
Notes Receivable
3,000
Interest Receivable
45
Accounts ReceivableDag Company
3,000
Interest Revenue
45

ANS: A
11. A 60-day, 12% note for $10,000, dated May 1, is received from a customer on account. If the note is
discounted on May 21 at 15%, the proceeds are
a. $170
b. $9,830
c. $10,000
d. $10,030
ANS: D