Credit sales are recorded as: Correct Answer: Debit Accounts Receivable, credit Service
Revenue
Identify the likely disadvantage(s) of extending credit to
customers: Correct Answer: Delay or failure to collect cash
Identify the condition(s) that must exist for a sale and
the related rece...
Purdue MGMT 200 Exam 2 Review
Credit sales are recorded as: Correct Answer: Debit Accounts Receivable, credit Service
Revenue
Identify the likely disadvantage(s) of extending credit to
customers: Correct Answer: Delay or failure to collect cash
Identify the condition(s) that must exist for a sale and
the related receivable to be recognized: Correct Answer: Collection of cash is probable & Goods
or services have been provided to the customer
The Sales Returns account is an expense account: Correct Answer: False (Sales Returns is a
contra revenue account)
Which of the following items are classified as
receivables? (3) Correct Answer: Tax refund claims, . Amounts owed by customers, Amounts
loaned and expected to be collected
Which of the following computations would be used to
compute Net Revenue? Correct Answer: Total Revenue - Sales Discounts - Sales
Allowances
Trade discounts represent a discount offered to the
purchasers for quick payment. Correct Answer: False (Trade discounts represent a reduction in
the listed price of a product or service)
T/F: The Sales Discounts account is an example of a contra
revenue account.: Correct Answer: True
When customers purchase products on account,
Knomark, Inc. offers them a 2% reduction in the
amount owed if they pay within 10 days. This is an
example of a: Correct Answer: Sales discount
A sales allowance is recorded as a debit to Accounts
Receivable and a credit to Sales Allowances: Correct Answer: False (A sales allowance is
recorded as a debit to Sales
Allowances and a credit to Accounts Receivable)
T/F: When a company sells a $100 service with a 20% trade
discount, $80 of revenue is recognized: Correct Answer: True
T/F: If a company has total revenues of $100,000, sales
discounts of $3,000, sales returns of $4,000, and sales
, allowances of $2,000, the income statement will report
net revenues of $91,000: Correct Answer: True
LePage's Inc. shipped the wrong color of paint to a
customer. The customer agreed to keep the paint upon
being offered a 15% price reduction. The price
reduction is an example of a: Correct Answer: Sales Allowance
T/F: The net realizable value of accounts receivable is the
full amount owed by customers: Correct Answer: False (Net realizable value is the net amount
of
cash we expect to collect.)
The purpose of recording an allowance for
uncollectible accounts is to: Correct Answer: Report accounts receivable at net realizable
value
One advantage of the allowance method for
accounting for uncollectible accounts is that the
company reports: Correct Answer: Bad debt expense in the same period as the
credit sale
The account "Allowance for Uncollectible Accounts" is
classified as a(n): Correct Answer: . Contra asset to accounts receivable in the
balance sheet
The normal balance of the account "Allowance for
Uncollectible Accounts" is a _______ because _______.: Correct Answer: Credit; it is a contra
account to Accounts
Receivable (a debit account)
At the end of 2018, Murray State Lenders had a balance in its
Allowance for Uncollectible Accounts of $4,500 (credit) before any
adjustment. The company estimated its future uncollectible
accounts to be $12,000 using the percentage‐of‐receivables
method. Murray State's adjustment on December 31, 2018, to
record its estimated uncollectible accounts included a: Correct Answer: Debit to Bad Debt
Expense of $7,500; credit to
Allowance for Uncollectible Accounts of $7,500
Which of the following is true about the aging
method? Correct Answer: Older accounts are less likely to be
collected.
Under the allowance method, when a company writes
off an account receivable as an actual bad debt, it
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