Multiple Choice Questions:

1. A customer charges a treadmill at Annie's Sport Shop. The price is $4,000 and the financing charge is 9% per annum if the bill is not paid in 30 days. The customer fails to pay the bill within 30 days and a finance charge is added to the customer's account.

a. $20

b. $30

c. $120

d. $360

2. Which of the following practices by a credit card company results in lower interest charges to the cardholder?

a. The card company states interest as a monthly percentage rather than an annual percentage

b. The card company allows a grace period before interest is accrued.

c. The card company allows cardholders to skip payments on their cards.

d. The card company calculates finance charges from the date of purchase to the date the amount is paid.

3. When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when

a. a sale is made

b. an account becomes bad and is written off.

c. management estimates the amount of uncollectibles.

d. a customer's account becomes past-due.

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 sales method of estimating bad debts is used.