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Chapters 1-4 The Accounting Cycle
Chapters 5-8 Current Assets
Chapters 9-11 Long-Term Assets
Chapters 12-14 Liabilities/Equities
Chapters 15-16 Using Information
- Chapter 15: Financial Reporting and Concepts
- Chapter 16: Financial Analysis and the Statement of Cash Flows
Chapters 17-20 Managerial/Cost
Chapters 21-24 Budgeting/Decisions

Chapter 7 - Multiple Choice

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Chapter 7 – Multiple Choice

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Question 1 of 8

1. Question
Trade accounts receivable:
- arise from the sale of a company's products or services.
- are reported in the noncurrent asset section of the balance sheet.
- include deposits with utilities.
- generally comprise the minority of the total receivables balance.
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Question 2 of 8

2. Question
Lundstrom Company began making sales on credit during 20X1. The company used the direct write-off method for uncollectible accounts. A material amount of uncollectible accounts resulting from sales made during 20X1 were written off during 20X2. What was the effect of this write-off on net income for 20X1 and 20X2?
- 20X1 – Overstate
  
  20X2 – Overstate
- 20X1 – Overstate
  
  20X2 – Understate
- 20X1 – Understate
  
  20X2 – Overstate
- 20X1 – Understate
  
  20X2 – Understate
Correct

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Question 3 of 8

3. Question
Taylor Company uses the direct write-off method of recording uncollectible accounts receivable. Recently, a customer informed Taylor that he would be unable to pay $300 owed to Taylor. Taylor’s proper journal entry to reflect this event would be:
- Uncollectible Accts Expense 300
  
  Allow. for Uncollectible Accts 300
- Allow. for Uncollectible Accts 300
  
  Accounts Receivable 300
- Uncollectible Accts Expense 300
  
  Accounts Receivable 300
- Sales 300
  
  Accounts Receivable 300
Correct

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Question 4 of 8

4. Question
Malcom’s financial statements revealed uncollectible accounts expense of $8,000, accounts receivable of $140,000, and allowance for uncollectible accounts of $12,000. The net realizable value of Malcom’s accounts receivable is:
- $128,000
- $132,000
- $136,000
- $152,000
Correct

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Question 5 of 8

5. Question
Branz Company uses an aging method to account for uncollectible accounts. The aging revealed the need for a $22,000 account balance at the end of the period. The beginning-of-period balance was $10,000 and $9,000 in accounts were actually written off during the period. Which of these reflects the correct journal entry to update the allowance account based on the aging analysis?
- Accounts Receivable 21,000
  
  Allow. for Uncollectible Accts 21,000
- Uncollectible Accts Expense 21,000
  
  Accounts Receivable 21,000
- Uncollectible Accts Expense 21,000
  
  Allow. for Uncollectible Accts 21,000
- Allow. for Uncollectible Accts 21,000
  
  Accounts Receivable 21,000
Correct

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Question 6 of 8

6. Question
Lindy Company uses an allowance method to account for bad debts. Lindy estimates that 5% of the outstanding accounts receivable will be uncollectible. At the end of the year, Lindy has outstanding accounts receivable of $750,000, and a debit balance in the Allowance for Uncollectible Accounts of $9,000. Lindy should record uncollectible accounts expense of:
- $28,500
- $37,500
- $46,500
- $55,500
Correct

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Question 7 of 8

7. Question
Flynn Company uses an allowance method for recording uncollectibles. Flynn determined that $4,000 due from Mitchell will not be collected. The entry Flynn should record to write off the Mitchell account is:
- Uncollectible Accts Expense 4,000
  
  Accounts Receivable 4,000
- Sales 4,000
  
  Accounts Receivable 4,000
- Uncollectible Accts Expense 4,000
  
  Allow. for Uncollectible Accts 4,000
- Allow. for Uncollectible Accts 4,000
  
  Accounts Receivable 4,000
Correct

Incorrect
Question 8 of 8

8. Question
John Company uses an allowance method for recording uncollectible receivables. John was notified by Paul that payment on a $1,000 receivable would be forthcoming. John had previously written off the receivable from Paul. The proper journal entry for John to record to reinstate the receivable into the accounts is:
- Accounts Receivable 1,000
  
  Allow. for Uncollectible Accts 1,000
- Allow. for Uncollectible Accts 1,000
  
  Sales 1,000
- Accounts Receivable 1,000
  
  Sales 1,000
- Accounts Receivable 1,000
  
  Uncollectible Accounts Expense 1,000
Correct

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Chapters 1-4
Chapters 5-8
Chapters 9-11
Chapters 12-14
Chapters 15-16
- Chapter 15: Financial Reporting and Concepts
- Chapter 16: Financial Analysis and the Statement of Cash Flows
Chapters 17-20
Chapters 21-24
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