Credit sales are recorded as: correct answers Debit Accounts Receivable, credit Service
Revenue
Identify the likely disadvantage(s) of extending credit to
customers: correct answers Delay or failure to collect cash
Identify the condition(s) that must exist for a sale and
the related receiv...
Purdue MGMT 200 Exam 2 Review || ANSWERS RATED
100% CORRECT
Credit sales are recorded as: correct answers Debit Accounts Receivable, credit Service
Revenue
Identify the likely disadvantage(s) of extending credit to
customers: correct answers Delay or failure to collect cash
Identify the condition(s) that must exist for a sale and
the related receivable to be recognized: correct answers Collection of cash is probable &
Goods or services have been provided to the customer
The Sales Returns account is an expense account: correct answers False (Sales Returns is a
contra revenue account)
Which of the following items are classified as
receivables? (3) correct answers 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 answers Total Revenue - Sales Discounts - Sales
Allowances
Trade discounts represent a discount offered to the
purchasers for quick payment. correct answers 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 answers 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 answers Sales discount
A sales allowance is recorded as a debit to Accounts
Receivable and a credit to Sales Allowances: correct answers 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 answers 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 answers 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 answers Sales Allowance
T/F: The net realizable value of accounts receivable is the
full amount owed by customers: correct answers 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 answers Report accounts receivable at net realizable
value
One advantage of the allowance method for
accounting for uncollectible accounts is that the
company reports: correct answers Bad debt expense in the same period as the
credit sale
The account "Allowance for Uncollectible Accounts" is
classified as a(n): correct answers . Contra asset to accounts receivable in the
balance sheet
The normal balance of the account "Allowance for
Uncollectible Accounts" is a _______ because _______.: correct answers 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 answers 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 answers 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
reduces total assets. correct answers False (Writing off an account receivable has no effect on
total assets)
Under the allowance method, when a company writes
off an account receivable as an actual bad debt, it
records an expense correct answers False (Writing off an account receivable has no
effect on expenses)
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