TRUE/FALSE QUESTIONS

Notes Receivable and Accounts Receivable can also be called trade receivables. T/F

Generally accepted accounting principles do not normally allow the use of the direct write-off method of accounting for uncollectible accounts. T/F

The direct write-off method records Bad Debt Expense in the year the specific account receivable is determined to be uncollectible. T/F

Although Allowance for Doubtful Accounts normally has a credit balance, it may have either a debit or a credit balance before adjusting entries are recorded at the end of the accounting period. T/F

Allowance for Doubtful Accounts is a liability account. T/F

The party promising to pay a note at maturity is the maker T/F

If the maker of a note fails to pay the debt on the due date, the note is said to be dishonored. T/F

Multiple choice

A 60-day, 12% note for $7,000, dated April 15, is received from a customer on account. The face value of the note is

$7,140

b. $6,860

c. $7,840

d. $7,000

A $6,000, 60-day, 12% note recorded on November 21 is not paid by the maker at maturity. The journal entry to recognize this event is

The maturity value of a $40,000, 9%, 40-day note receivable dated July 3 is

Current assets are usually listed in order

Accounts Receivable Turnover measures

a. the number of days of accounts receivable outstanding.

b. the efficiency of the accounts payable function.

c. the fair market value of accounts receivable.

d. how frequently during the year the accounts receivable are converted to cash.

The direct write-off method of accounting for uncollectible accounts

a. emphasizes balance sheet relationships.

b. emphasizes the matching of expenses with revenues.

c. is often used by small companies and companies with few receivables.

d. emphasizes cash realizable value.