1. A company uses the income statement approach to determine the bad debt expense for the year. Credit sales are $10 million. Management believes that bad debts will be 0.5% of credit sales. The current credit balance in the Allowance for Doubtful Accounts account is $60,000, and the balance in Bad Debt Expense is zero. The journal entry to account for bad debts for the period includes a:

Select one:

a. Credit to Bad Debt expense of $50,000

b. Debit to Allowance for Doubtful Accounts of $10,000

c. Credit to Allowance for Doubtful Accounts of $50,000

d. Debit to Allowance for Doubtful Accounts of $60,000

2. According to IFRS, this refers to the principle that revenue can only be recorded (recognized) when goods are sold or when services are performed.

Select one:

a. Revenue Recognition

b. Accrual

c. Matching Principle

d. Expense Recognition

3. What is the journal entry for bad debt expense under the allowance method?

Select one:

a. Debit Allowance for Doubtful Accounts, Credit Bad Debt Expense

b. Debit Allowance for Doubtful Accounts; Credit Accounts Receivable

c. Debit Accounts Receivable, Credit Allowance for Doubtful Accounts

d. Debit Bad Debt Expense, Credit Allowance for Doubtful Accounts

4. Under ASPE, companies are allowed to use the percentage-of-completion method as well as the completed-contract method. The formula to compute percentage-of-completion method is:

Select one:

a. Total Estimated Project Costs less Actual Costs Incurred in Current Year

b. Actual Costs Incurred in Current Year divided by Total Estimated Project Costs

c. Total Estimated Project Costs divided by Actual Costs Incurred in Current Year

d. Actual Costs Incurred in Current Year plus Total Estimated Project Costs

5. Dave Inc. wants to dispose of $70,000 of its receivables by factoring them to a bank in exchange for cash. If Dave Inc. received $65,800 through this transaction, how much was the factoring expense?

Select one:

a. $0

b. $4,200

c. $65,800

d. $2,400

6. What is the responsibility of the management in the accounts receivable of a company?

Select one:

a. Management must ensure that no accounts receivable should be recognized as bad debts at the end of the financial year.

b. Management must ensure that accounts receivable is increasing every year

c. Management must ensure that accounts receivable is properly managed and any estimates for bad debt are recorded as accurately as possible.

d. Management should see to it that accounts receivable should have a zero balance at the end of the financial year.

7. Which of the following reports can be generated based on accounts receivable information?

Select one:

a. Past customers not active for last 12 months

b. All choices available

c. Overdue accounts

d. Current active customers

8. When preparing an accounts receivable aging schedule, the value resulting from the calculations:

Select one:

a. Is the amount of desired credit balance of the Allowance for Doubtful Accounts to be reported at year-end.

b. Is the desired credit balance in the Allowance for Doubtful Accounts at year-end when added to the total accounts written off during the year.

c. Is the amount that should be added to the beginning Allowance for Doubtful Accounts to get the bad debt expense for the year.

d. Is the amount of Bad Debt Expense for the year.

9. Which of the following scenarios might occur after anticipating bad debt by setting up an Allowance for Doubtful Accounts?

Select one:

a. The customer informs the company to expect payment and pays the outstanding amount.

b. The customer is unable to pay the debt when it is due, but will be able to pay it in the future.

c. All the available choices

d. A customer is unable to pay the debt.

10. Company A has net credit sales of $1 million, and average accounts receivable of $250,000. The days sales outstanding is

Select one:

a. 1,460 days

b. 0.25 days

c. 92 days

d. 4 days