ACCT-5110 Revision Exam 3 Questions
And Answers Graded A+.
Accounts Receivable - Answer Nonwritten promise to pay in the future
Note Receivable - Answer unconditional written agreement that gives the holder the right to collect a
certain sum of money on a specific date
nontrade receivables - Answer transaction not directly related to sale of product/service to customer
What are trade receivables valued and reported at? - Answer Net realizable value (NRV)
What is the net method in Cash (sales) Discounts? - Answer record net income price at time of sale
(assuming that the discount will be taken). If discount is not taken & have to pay greater amount than
originally recorded, recognized as a Cr. to sales rev.
will need a AJE
What is the gross method in Cash (sales) Discounts? - Answer record total invoice price at time of sale
(assume that the discount will not be taken). If discount is taken & pays lower amount than originally,
change in transaction price will be recognized as Dr. to sales rev. (Could be Sales discount taken, contra-
sales rev)
What method for sales discount does GAAP prefer? - Answer Net method, but companies could use
either
Sales return - Answer defected goods that the customers return the goods to the seller (periodic and
perpetual (COGS as happens))
Sales allowance - Answer customer keeps the defected good & allowed a reduction in purchase price
(periodic and perpetual (COGS as happens))
, Bad debt - Answer loss contingency that is probable & reasonably estimated and are expensed
What can bad debts be estimated on - Answer Based on sales or A/R
Bad debts based on relationship to sales - Answer I/S approach
% of net credit sales
Bad debts based on relationship to A/R - Answer B/S approach
% of outstanding A/R
Aging of A/R
How would a journal entry for write-off of a uncollectable account? - Answer Debt - allowance for bad
debt
Credit - A/R
(has no effect on NRV of A/R reported on B/S)
How do you reverse a write-off? - Answer 1) Dr - A/R and Cr - allowance for bad debt
2) Dr - Cash and Cr - A/R
What write off method is generally not allow by GAAP - Answer Direct Write off method
What are the 2 S-T N/R - Answer Interest bearing and non-interest bearing
Interest bearing N/R - Answer amount borrowed (principal) listed at face value, & interest charged is
stated as a specific rate applied to face value
Non-interest bearing N/R - Answer (notes without stated interest value) maturity value (amount to be
collected, included implicit interest & principal) is listed as face value
What type of account is Discount on N/R? - Answer Contra-N/R
And Answers Graded A+.
Accounts Receivable - Answer Nonwritten promise to pay in the future
Note Receivable - Answer unconditional written agreement that gives the holder the right to collect a
certain sum of money on a specific date
nontrade receivables - Answer transaction not directly related to sale of product/service to customer
What are trade receivables valued and reported at? - Answer Net realizable value (NRV)
What is the net method in Cash (sales) Discounts? - Answer record net income price at time of sale
(assuming that the discount will be taken). If discount is not taken & have to pay greater amount than
originally recorded, recognized as a Cr. to sales rev.
will need a AJE
What is the gross method in Cash (sales) Discounts? - Answer record total invoice price at time of sale
(assume that the discount will not be taken). If discount is taken & pays lower amount than originally,
change in transaction price will be recognized as Dr. to sales rev. (Could be Sales discount taken, contra-
sales rev)
What method for sales discount does GAAP prefer? - Answer Net method, but companies could use
either
Sales return - Answer defected goods that the customers return the goods to the seller (periodic and
perpetual (COGS as happens))
Sales allowance - Answer customer keeps the defected good & allowed a reduction in purchase price
(periodic and perpetual (COGS as happens))
, Bad debt - Answer loss contingency that is probable & reasonably estimated and are expensed
What can bad debts be estimated on - Answer Based on sales or A/R
Bad debts based on relationship to sales - Answer I/S approach
% of net credit sales
Bad debts based on relationship to A/R - Answer B/S approach
% of outstanding A/R
Aging of A/R
How would a journal entry for write-off of a uncollectable account? - Answer Debt - allowance for bad
debt
Credit - A/R
(has no effect on NRV of A/R reported on B/S)
How do you reverse a write-off? - Answer 1) Dr - A/R and Cr - allowance for bad debt
2) Dr - Cash and Cr - A/R
What write off method is generally not allow by GAAP - Answer Direct Write off method
What are the 2 S-T N/R - Answer Interest bearing and non-interest bearing
Interest bearing N/R - Answer amount borrowed (principal) listed at face value, & interest charged is
stated as a specific rate applied to face value
Non-interest bearing N/R - Answer (notes without stated interest value) maturity value (amount to be
collected, included implicit interest & principal) is listed as face value
What type of account is Discount on N/R? - Answer Contra-N/R
