1. This type of disposal of receivable can help a companys cash flow and working capital in the short term. This means that a company sells all or a portion of its accounts receivable to a factor, such as a bank or financial institution, in exchange for cash.

Select one:

a. Factoring

b. None of the available choices

c. Discounting

d. Pledging

2. Which of the following is/are (a) vital part of a credit policy?

Select one:

a. Credit Approval

b. Credit Information

c. All the choices available

d. Credit Terms

3. Under the allowance method, what is the first journal entry to record the collection of an accounts receivable that was previously written off?

Select one:

a. Debit Allowance for Doubtful Accounts; Credit Accounts Receivable

b. Debit Bad Debt Expense; Credit Allowance for Doubtful Accounts

c. Debit Allowance for Doubtful Accounts; Credit Bad Debt Expense

d. Debit Accounts Receivable; Credit Allowance for Doubtful Accounts

4. A company uses the balance sheet approach to determine the required balance in the Allowance for Doubtful Accounts account. Accounts receivable is $1 million. Management believes that an allowance of 5% is required. At present, the Allowance for Doubtful Accounts account has a credit balance of $60,000. The journal entry to set up the required allowance includes a:

Select one:

a. credit to Allowance for Doubtful Accounts of $10,000

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

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

d. Debit to Bad Debt expense of $50,000

5. A company uses the balance sheet approach to determine the balance required in the Allowance for Doubtful Accounts account. Accounts receivable is $1 million. Management believes that an allowance of 3% is required. At present, the Allowance for Doubtful Accounts account has a credit balance of $20,000. The journal entry to set up the required allowance includes a:

Select one:

a. credit to Allowance for Doubtful Accounts of $30,000

b. Debit to Allowance for Doubtful Accounts of $30,000

c. Debit to Bad Debt expense of $30,000

d. credit to Allowance for Doubtful Accounts of $10,000

6. Suppose a customer is able to repay the account after his account has been written-off in the amount of $5,000. Record the entry to reinstate the customers account.

Select one:

a. Debit Allowance for Doubtful Accounts $5,000, Credit Bad Debt Expense $5,000

b. Debit Accounts Receivable $5,000, Credit Bad Debt Expense $5,000

c. Debit Bad Debt Expense $5,000, Credit Accounts Receivable $5,000

d. Debit Bad Debt Expense $5,000, Credit Allowance for Doubtful Accounts $5,000

7. When sales are made using third-party credit cards, which of the following accounts does the vendor debit?

Select one:

a. Sales revenue

b. Accounts receivable

c. Accounts payable

d. Cash