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Under IFRS, the term provision:


A) Refers to expense.
B) Usually refers to a liability whose amount or timing is uncertain.
C) Means establishing a provision for bad debts.
D) Means establishing a contra-asset account.
E) Means establishing an asset account.

F) B) and D)
G) B) and C)

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Prepare general journal entries for the following transactions of Norman Company, assuming they use the allowance method to account for uncollectible accounts. Prepare general journal entries for the following transactions of Norman Company, assuming they use the allowance method to account for uncollectible accounts.

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Lemming makes an $18,750, 120-day, 8% cash loan to Notions Co. on November 1. Lemming's end-of-period adjusting entry on December 31 should be:


A) Debit Cash for $250; credit Notes Receivable $250.
B) Debit Interest Revenue $500; credit Notes Receivable $500.
C) Debit Interest Receivable $250; credit Interest Revenue $250.
D) Debit Interest Receivable $500; credit Interest Revenue $500.
E) Debit Notes Receivable $500; credit Interest Revenue $500.

F) B) and C)
G) C) and E)

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Driver Company expects that $17,500 of its $437,500 Accounts Receivable balance is uncollectible. The Allowance for Doubtful Accounts before adjustment has a debit balance of $2,400. The amount of the adjusting entry needed by Driver is:


A) $17,500
B) $19,900
C) $15,100
D) $420,000
E) $422,400

F) C) and D)
G) A) and B)

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The maturity date of a note refers to the date the note must be repaid.

A) True
B) False

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Brinker accepts all major bank credit cards, including First Savings Bank's, which assesses a 2.5% charge on sales for using its card. On May 26, Brinker had $4,800 in First Savings Bank Card credit sales. What entry should Brinker make on May 26 to record the deposit?


A) Debit Accounts Receivable $4,800; credit Sales $4,800.
B) Debit Cash $4,680; debit Credit Card Expense $120; credit Sales $4,800.
C) Debit Cash $4,800; credit Sales $4,800.
D) Debit Cash $4,920; credit Credit Card Expense $120; credit Sales $4,800.
E) Debit Accounts Receivable $4,680; debit Credit Card Expense $120; credit Sales $4,800.

F) C) and D)
G) None of the above

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Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. Jasper's entry to record the transaction should be:


A) Debit Notes Receivable for $25,000; credit Cash $25,000.
B) Debit Accounts Receivable $25,000; credit Notes Receivable $25,000.
C) Debit Cash $25,000; credit Notes Receivable for $25,000.
D) Debit Notes Payable $25,000; credit Accounts Payable $25,000.
E) Debit Notes Receivable $25,000; credit Sales $25,000.

F) None of the above
G) A) and C)

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All of the following statements regarding recognition of receivables under U.S. GAAP and IFRS are true except:


A) U.S.GAAP and IFRS have similar asset criteria that apply to recognition of receivables.
B) Receivables that arise from revenue-generating activities are subject to broadly similar criteria for U.S.GAAP and IFRS.
C) The realization principle under GAAP implies an arm's length transaction occurs.
D) Under U.S.GAAP, provision refers to a liability whose amount or timing is uncertain.
E) Differences arise mainly from industry-specific guidance under U.S.GAAP.

F) B) and E)
G) A) and E)

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The _________________________ method of computing uncollectible accounts uses income statement relationships to estimate bad debts and is based on the idea that a given percent of a company's credit sales for a period are uncollectible.

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On November 1, Orpheum Company accepted a $10,000, 90-day, 8% note from a customer to settle a past-due account. What entry should be made on November 1 to record the note acceptance?


A) Debit Note Receivable $10,000; credit Cash $10,000.
B) Debit Note Receivable $10,000; credit Accounts Receivable $10,000.
C) Debit Note Receivable $10,000; credit Sales $10,000.
D) Debit Cash $10,000; credit Sales $10,000.
E) Debit Sales $10,000; credit Accounts Receivable $10,000.

F) All of the above
G) B) and D)

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Installment Accounts Receivable are classified as non-current assets if the installment period is more than one year, even if the seller regularly offers customers such terms.

A) True
B) False

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The percent of sales method of estimating bad debts focuses more on the realizable value of accounts receivable than on matching.

A) True
B) False

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BizCom's customer, Redding, paid off an $8,300 balance on its account receivable. BizCom should record the transaction as a debit to Accounts Receivable-Redding and a credit to Cash.

A) True
B) False

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The accounts receivable turnover is calculated by:


A) Dividing net sales by average accounts receivable.
B) Dividing net sales by average accounts receivable and multiplying by 365.
C) Dividing average accounts receivable by net sales.
D) Dividing average accounts receivable by net sales and multiplying by 365.
E) Dividing net income by average accounts receivable.

F) B) and C)
G) A) and B)

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A company had the following items and amounts in its unadjusted trial balance as of December 31 of the current year: A company had the following items and amounts in its unadjusted trial balance as of December 31 of the current year: Prepare the adjusting entry to estimate bad debts assuming bad debts are estimated to be 2.5% of credit sales. Prepare the adjusting entry to estimate bad debts assuming bad debts are estimated to be 2.5% of credit sales.

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The following selected amounts are reported on the year-end unadjusted trial balance report for a company that uses the percent of sales method to determine its bad debts expense. The following selected amounts are reported on the year-end unadjusted trial balance report for a company that uses the percent of sales method to determine its bad debts expense. All sales are made on credit. Based on past experience, the company estimates 1% of credit sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense? A) Debit Bad Debts Expense $19,750; credit Allowance for Doubtful Accounts $19,750. B) Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225. C) Debit Bad Debts Expense $22,250; credit Allowance for Doubtful Accounts $22,250. D) Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350. E) Debit Bad Debts Expense $21,000; credit Allowance for Doubtful Accounts $21,000. All sales are made on credit. Based on past experience, the company estimates 1% of credit sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?


A) Debit Bad Debts Expense $19,750; credit Allowance for Doubtful Accounts $19,750.
B) Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225.
C) Debit Bad Debts Expense $22,250; credit Allowance for Doubtful Accounts $22,250.
D) Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350.
E) Debit Bad Debts Expense $21,000; credit Allowance for Doubtful Accounts $21,000.

F) A) and D)
G) C) and D)

Correct Answer

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Credit sales are recorded by crediting an Accounts Receivable.

A) True
B) False

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The ____________________ of a note is the day the principle plus interest of a note must be repaid.

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MacKenzie Company sold $180 of merchandise to a customer who used a Regional Bank credit card. Regional Bank deducts a 4% service charge for sales on its credit cards. MacKenzie electronically remits the credit card sales receipts to the credit card company and receives payment in approximately 5 days. The journal entry to record the collection from the credit card company would be:


A) Debit Cash of $172.80 and credit Accounts Receivable-Regional $172.80.
B) Debit Cash of $180; credit Credit Card Expense $7.20 and credit Accounts Receivable $172.80.
C) Debit Accounts Receivable-Regional $172.80; debit Credit Card Expense $7.20 and credit Sales $180.
D) Debit Cash $172.80; debit Credit Card Expense $7.20 and credit Sales $180.
E) Debit Cash $172.80 and credit Sales $172.80.

F) A) and B)
G) A) and C)

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The person who signs a note receivable and promises to pay the principal and interest is the:


A) Maker.
B) Payee.
C) Holder.
D) Receiver.
E) Owner.

F) A) and E)
G) A) and D)

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