To ensure receivables are not overstated on the balance sheet, they are reported: at gross realizable value. at their cash (net) realizable value. before subtracting estimated uncollectible receivables. at the total estimated uncollectible amount. 2 Which of the following is the most liquid asset? Unearned revenue Long-lived assets. Receivables. Intangibles. Uouououo Receivables are often classified as: accounts, notes, long-lived. accounts, notes, other. accounts, notes, inventory. none of these answer choices are correct. All of the following are "other receivables" except: petty cash. interest receivable. income taxes refundable. advances to employees. The method of accounting for bad debt expense, which conforms to GAAP is: direct write-off method. allowance method. both the direct write-off method and the allowance method. none of these answer choices are correct. An aging schedule of accounts receivable is only prepared on the last day of the accounting period. is only meaningful to the accounting department employees. arranges the accounts by the length of time they have been unpaid. applies percentages that are determined by the FASB to the totals of each category. When the allowance method is used and an account is subsequently written off as uncollectible, the following account is debited: Bad Debts Expense. Allowance for Doubtful Accounts. Accounts Receivable. both the Allowance for Doubtful Accounts and Accounts Receivable. we u When using the allowance method, the balance in the Allowance for Doubtful Accounts: can have a debit balance before the end of period adjusting entry is made. is a contra asset account and must have a credit balance after the end of period adjusting entry is made. equals the total estimated uncollectible accounts, as determined by management at the end of the period. all of these answer choices are correct. eus Notes receivable: earn interest. give the holder a stronger legal claim on assets than accounts receivable. are negotiable instruments. all of these answer choices are correct. On May 1, Smith Company makes sales of $10,000 to Jones Company. Jones needs longer than the normal 30 days to pay and signs a 90 day 8% note. On May 1, Smith Company should credit Interest Revenue for $200. debit Notes Receivable for $10,000. debit Notes Receivable for $10,200. credit Sales Revenue for $10,200. Johnson Company reports the following for the month of June. Unit Cost Date June 1 Explanation Inventory Purchase Purchase Inventory 12 23 Units 225 525 750 280 Total Cost $1,125 3,150 5,250 30 (a) Compute the cost of the ending inventory and the cost of goods sold under (1) FIFO, (2) LIFO, and (3) average cost. (b) Which costing method gives the highest ending inventory? The highest cost of goods sold? Why? (c) How do the average-cost values for ending inventory and cost of goods sold relate to ending inventory and cost of goods sold for FIFO and LIFO? Answer: (a) FIFO Beginning inventory Purchases June 12 June 23 Cost of goods available for sale Less: Ending inventory Cost of goods sold (b) LIFO Cost of goods available for sale Less: Ending inventory Cost of goods sold (C) AVERAGE-COST
