1908 - ACCOUNTS RECEIVABLE PDF

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HTU CPA In-House Review (HCIR)Financial Accounting and ReportingACCOUNTS RECEIVABLE April G. Trade receivables are classified as current assets if these are reasonably expected to be collected. a. Within one year b. Within the normal operating cycle c. Within one year o within the operating cycle, w...

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HTU CPA In-House Review (HCIR) Financial Accounting and Reporting ACCOUNTS RECEIVABLE 1.

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7.

April G.

Trade receivables are classified as current assets if these are reasonably expected to be collected. a.

Within one year

b.

Within the normal operating cycle

c.

Within one year o within the operating cycle, whichever is shorter

d.

Within one year or within the operating cycle, whichever is longer.

Nontrade receivables are classified as current assets only if these are reasonably expected to be realized in cash a.

Within one year or within the operating cycle whichever is shorter.

b.

Within one year or within the operating cycle, whichever is longer.

c.

Within the normal operating cycle.

d.

Within one year, the length of the operating cycle notwithstanding.

Which statement is true in relation to presentation of receivables in the statement of financial position? a.

Trade receivables and nontrade receivables must be shown separately

b.

Nontrade receivables are presented as noncurrent

c.

Trade accounts receivables and trade notes receivables must be presented separately

d.

D. trade receivables and nontrade receivables which are currently collectible may be presented as one line item called “trade and other receivables”

Credits balances in accounts receivable are classified as a.

Current liabilities

b.

Part of accounts payable

c.

Long term liabilities

d.

Deduction from accounts receivable

Receivables from subsidiaries are classified as a.

Current assets

b.

Noncurrent assets

c.

Either as current or noncurrent depending on the expectation of realizing them within one year or over one year

d.

Partly current and partly noncurrent

Where the operating cycle extends beyond one year because of normal credits terms as in the case of installment sales of household appliances a.

It is proper to classify the entire receivables as current assets with disclosure of the amount not realizable within one yea, if material.

b.

The entire receivables are shown as noncurrent assets.

c.

The portion due in one year is shown as current and the balance as noncurrent.

d.

The receivables are not recognized

In the case of long-term installments receivable as in real estate installment sales where a major portion is collected beyond the normal operating cycle. a.

The entire receivables are shown as current without disclosure of the amount not current due.

b.

The entire receivables are shown as noncurrent.

c.

Only the portion currently due is shown as current and the balances as noncurrent.

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d. 8.

9.

The entire receivables are shown as current with disclosure of the amount not currently due.

Which method of recording bad debt loss is consistent with accrual accounting? a.

Allowances method

b.

Direct writeoff method

c.

Percent of sales method

d.

Percent of accounts receivable method

A method of estimating bad debt that focuses on the income statement rather than the statement of financial position is the allowances method based on a.

Direct writeoff

b.

Aging the trade accounts receivables

c.

Credit sales

d.

The balances in the trade accounts receivables

10. A method of estimating uncollectible accounts that emphasize asset valuation rather than income measurement is the allowance method based on a.

Aging of accounts receivable

b.

Direct writeoff

c.

Gross sales

d.

Credit sales less returns and allowances

11. The advantage of relating the bad debt experiences to accounts receivable is that this approach. a.

Gives a reasonably accurate measurement of receivables in the statement of financial position.

b.

Relates bad debt expense to the period sale.

c.

Is the only generally accepted method for measuring accounts receivable.

d.

Makes estimates of uncollectible accounts unnecessary

12. When a specific customer account receivable is written off as uncollectible, what will be the effect on net income under the allowance and direct writeoff method? a.

No effect under both allowance method and direct writeoff method

b.

Decrease under both allowances method and direct writeoff method

c.

No effect under allowance method and decrease under direct writeoff method

d.

Decrease under allowances method and no effect under direct writeoff method

13. When the allowances method of recognizing uncollectible accounts is used, the entry to record the writeoff of a specific account would a.

Decrease both accounts receivable and the allowance for uncollectible accounts.

b.

Decrease accounts receivable receivables and increase the allowance for uncollectible amounts.

c.

Increase the allowances for uncollectible accounts and decrease net income.

d.

Decrease both accounts receivable and net income.

14. When an entity uses the allowances the allowances method for recognizing uncollectible accounts, the entry to record the writeoff of a specific uncollectible account a.

Affects neither net income nor working capital

b.

Affects neither net income nor accounts receivable

c.

Affects both net income nor accounts receivable

d.

Affects both net income nor working capital

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15. When the allowances method of recognizing bad debt expense is used, the entries at the time of collection of an account previously written off would a.

Decrease the allowance for doubtful accounts

b.

Increase net income

c.

Have no effect on the allowance for doubtful accounts

d.

Have no effect on net income

16. An entity uses the allowance method to recognize doubtful accounts expense. What is the effect of a collection of an account previously written off? a.

No effect on both allowance method to recognize doubtful accounts expenses.

b.

No effect on allowance for doubtful accounts and decrease in doubtful accounts expense

c.

Increase in allowance for doubtful accounts and no effect on doubtful accounts expense

d.

Increase in allowance for doubtful accounts and decrease in doubtful accounts expense

17. When an accounts receivable aging schedule is prepared, a series of computations is made to determine the estimated uncollectible accounts. The resulting amount from this aging schedule a.

when added to the total accounts written off during the year is the desired credit balance of the allowance for doubtful accounts at year-end

b.

is the amount of doubtful accounts written off during the year

c.

is the amount that should be added to the beginning allowances for doubtful accounts to get the doubtful accounts expense for the year.

d.

Is the amount of desired credit balance of the allowances for doubtful accounts to be reported at year –end.

18. Which method of determining bad debt expense does not match expense and revenue? a.

Charging bad debts with a percentage of sales under the allowance method

b.

Charging bad debt with a percentage of accounts receivable under the allowance method

c.

Charging bad debts with an amount derived from aging the accounts receivable under the allowance method

d.

Charging bad debts as accounts are written off as uncollectible

19. Which method of determining bad debt expense most closely matches expense to revenue? a.

Charging bad debts only as accounts are written off as uncollectible

b.

Charging bad debts with a percentage of sales for that period.

c.

Estimating the allowances for doubtful accounts as a percentage of accounts receivable.

d.

Estimating the allowance for doubtful accounts by aging the accounts receivable.

20. Which concept relates to the allowances method in accounting for uncollectible accounts receivable? a.

Bad debt expense is an estimate based on historical and prospective information.

b.

Bad debt expense is the actual amount determined to be uncollectible.

c.

Bad debt expense is an estimate based only on aging of accounts receivable.

d.

Bad debt expense is management determination of which accounts are considered doubtful.

21. Why is the allowance method preferred over the direct writeoff method of accounting for bad debts? a. The allowance method is used for tax purposes. b. Estimates are used. c. Determining worthless accounts under direct writeoff method is difficult to do. d. Improved matching of bad debt expense with revenue is achieved. 22. Which of the following is not acceptable in estimating uncollectible accounts receivable? a.

The estimate of uncollectible accounts is based on a percentage of sales for the period....