Multiple Choice Questions on Account Receivables
1. The two methods of accounting for uncollectible accounts are the direct write-off method
and the
A. Accrual Method C. Bad Debt Method
B. Net Realizable Method D. Allowance Method
2. Under the direct write-off method of accounting for uncollectible accounts, Bad Debt
Expense is debited
A. when a credit sale is past due.
B. at the end of each accounting period.
C. whenever a pre-determined amount of credit sales have been made.
D. when an account is determined to be uncollectible.
3. An aging of a company's accounts receivable indicates that $6,000 are estimated to be
uncollectible. If Allowance for Doubtful Accounts has a $2,000 debit balance, the
adjustment to record bad debts for the period will require a
A. debit to Bad Debt Expense for $8,000.
B. debit to Allowance for Doubtful Accounts for $8,000.
C. debit to Bad Debt Expense for $4,000.
D. credit to Allowance for Doubtful Accounts for $4,000.
4. A debit balance in the Allowance for Doubtful Accounts
A. is the normal balance for that account.
B. indicates that actual bad debt write-offs have exceeded previous provisions for bad
debts.
C. indicates that actual bad debt write-offs have been less than what was estimated.
D. cannot occur if the percentage of receivables method of estimating bad debts is used.
5. When the allowance method of accounting for uncollectible accounts is used, Bad Debt
Expense is recorded
A. in the year after the credit sale is made.
B. in the same year as the credit sale.
C. as each credit sale is made.
D. when an account is written off as uncollectible.
6. To record estimated uncollectible accounts using the allowance method, the adjusting
entry would be a
A. debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts.
B. debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts.
C. debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable.
D. debit to Loss on Credit Sales and a credit to Accounts Receivable.
7. Using the percentage-of-receivables method for recording bad debt expense, estimated
uncollectible accounts are $45,000. If the balance of the Allowance for Doubtful
Accounts is $6,000 credit before adjustment, what is the amount of bad debt expense for
that period?
A. $45,000 C. $51,000
B. $39,000 D. $6,000
8. Using the percentage-of-receivables method for recording bad debt expense, estimated
uncollectible accounts are $45,000. If the balance of the Allowance for Doubtful
Accounts is $6,000 debit before adjustment, what is the balance after adjustment?
A. $45,000 C. $39,000
B. $51,000 D. $6,000
9. Ornate Inc. ended 20X3 with $400 in allowance for bad debts. In 20X4, Ornate wrote off
$360 in accounts receivable that appear to be uncollectible. At the end of 20X4, Ornate
recorded bad debt expense of $330. What is the balance in the allowance for doubtful
accounts at the end of 20X4?
A. $370 C. $60
B. $730 D. $690
10. Gladson Corporation accrues bad debt expense using the percentage of sales method. At
the end of the year, Gladson has $450,000 in accounts receivable and $4,000 in its
allowance for doubtful accounts before any entry is made for bad debts. Sales for the year
were $1,900,000. The percentage that Gladson has historically used to calculate bad debts
is 1 percent of sales. Which of the following is true?
A. Gladson’s bad debt expense for the year is $500.
B. The percentage of sales method is designed to achieve an accurate balance sheet
presentation of the net realizable value of accounts receivable.
C. Gladson would report an allowance for doubtful accounts of $23,000.
D. Gladson would need to make an adjustment because the $4,000 remaining balance in
the allowance for doubtful accounts indicates they estimated wrong last year.
