MGMT 200 Exam 2
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1. Credit sales are recorded as
A. Debit Cash, credit Deferred Revenue
B. Debit Service Revenue, credit Accounts
Receivable
C. Debit Cash, credit Service Revenue
D. Debit Accounts Receivable, credit Service
Revenue: D. Debit Accounts Receivable, credit Service
Revenue
2. Identify the condition(s) that must exist for a sale and
the related receivable to be recognized.
A. Collection of cash is probable
B. The company must have collected cash from at
least one previous sale to the customer
C. Goods or services have been provided to the
customer
D. Two of the other answers are conditions that
must exist: D. Two of the other answers are conditions that
must exist
3. Which of the following items are classified as
receivables?
A. Tax refund claims
B. Amounts owed by customers
C. Amounts loaned and expected to be collected
D. All of the other answers are classified as
receivables: D. All of the other answers are classified as
receivables
4. Identify the likely disadvantage(s) of extending credit to
customers
A. Delay or failure to collect cash
B. Lower profitability
C. Lower revenues
D. All of the other answers are disadvantages of
extending credit to customers: A. Delay or failure to collect cash
5. The Sales Returns account is an expense account
A. True
B. False: B. False
6. Which of the following computations would be used to
compute Net Revenue?
A. Total Revenue + Accounts Receivable - Sales
, MGMT 200 Exam 2
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Discounts - Sales Allowances
B. Net Revenue + Sales Allowances - Sales
Discounts
C. Total Revenue - Sales Discounts - Sales
Allowances
D. Net Income - Change in Accounts Receivable: C. Total Revenue - Sales
Discounts - Sales
Allowances
7. Trade discounts represent a discount offered to the
purchasers for quick payment.
A. True
B. False: B. False -- Sales Discount
8. When customers purchase products on account,
Knomark, Inc. offers them a 2% reduction in the
amount owed if they pay within 10 days. This is an
example of a:
A. Bad debt
B. Sales discount
C. Sales return
D. Sales allowances: B. Sales discount
9. When a company sells a $100 service with a 20% trade
discount, $80 of revenue is recognized.
A. True
B. False: A. True
10. A sales allowance is recorded as a debit to Accounts
Receivable and a credit to Sales Allowances.
A. True
B. False: B. False
11. The net realizable value of accounts receivable is the
full amount owed by customers
A. True
B. False: B. False
12. LePage's Inc. shipped the wrong color of paint to a
customer. The customer agreed to keep the paint upon
being offered a 15% price reduction. The price
reduction is an example of a:
A. Sales revenue
B. Sales discount
, MGMT 200 Exam 2
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C. Sales return
D. Sales allowance: D. Sales allowance
13. The purpose of recording an allowance for
uncollectible accounts is to:
A. Record the sales returns and allowances
B. Report net sales conservatively
C. Report accounts receivable at net realizable
value
D. Report accounts receivable for the total amount
of sales in the period: C. Report accounts receivable at net realizable
value
14. If a company has total revenues of $100,000, sales
discounts of $3,000, sales returns of $4,000, and sales
allowances of $2,000, the income statement will report
net revenues of $91,000.
A. True
B. False: A. True
15. One advantage of the allowance method for
accounting for uncollectible accounts is that the
company reports:
A. Bad debt expense in the same period as the
credit sale
B. Greater total sales to customers
C. Fewer returns by customers
D. Greater total cash collected from customers: A. Bad debt expense in the same
period as the
credit sale
16. The account "Allowance for Uncollectible Accounts" is
classified as a(n):
A. Liability account in the balance sheet
B. Contra revenue to credit sales in the income
statement
C. Expense in the income statement
D. Contra asset to accounts receivable in the
balance sheet: D. Contra asset to accounts receivable in the
balance sheet
17. The normal balance of the account "Allowance for
Uncollectible Accounts" is a _______ because _______.
A. Debit; it is a contra account to Revenue (a credit
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1. Credit sales are recorded as
A. Debit Cash, credit Deferred Revenue
B. Debit Service Revenue, credit Accounts
Receivable
C. Debit Cash, credit Service Revenue
D. Debit Accounts Receivable, credit Service
Revenue: D. Debit Accounts Receivable, credit Service
Revenue
2. Identify the condition(s) that must exist for a sale and
the related receivable to be recognized.
A. Collection of cash is probable
B. The company must have collected cash from at
least one previous sale to the customer
C. Goods or services have been provided to the
customer
D. Two of the other answers are conditions that
must exist: D. Two of the other answers are conditions that
must exist
3. Which of the following items are classified as
receivables?
A. Tax refund claims
B. Amounts owed by customers
C. Amounts loaned and expected to be collected
D. All of the other answers are classified as
receivables: D. All of the other answers are classified as
receivables
4. Identify the likely disadvantage(s) of extending credit to
customers
A. Delay or failure to collect cash
B. Lower profitability
C. Lower revenues
D. All of the other answers are disadvantages of
extending credit to customers: A. Delay or failure to collect cash
5. The Sales Returns account is an expense account
A. True
B. False: B. False
6. Which of the following computations would be used to
compute Net Revenue?
A. Total Revenue + Accounts Receivable - Sales
, MGMT 200 Exam 2
Study online at https://quizlet.com/_gscyxi
Discounts - Sales Allowances
B. Net Revenue + Sales Allowances - Sales
Discounts
C. Total Revenue - Sales Discounts - Sales
Allowances
D. Net Income - Change in Accounts Receivable: C. Total Revenue - Sales
Discounts - Sales
Allowances
7. Trade discounts represent a discount offered to the
purchasers for quick payment.
A. True
B. False: B. False -- Sales Discount
8. When customers purchase products on account,
Knomark, Inc. offers them a 2% reduction in the
amount owed if they pay within 10 days. This is an
example of a:
A. Bad debt
B. Sales discount
C. Sales return
D. Sales allowances: B. Sales discount
9. When a company sells a $100 service with a 20% trade
discount, $80 of revenue is recognized.
A. True
B. False: A. True
10. A sales allowance is recorded as a debit to Accounts
Receivable and a credit to Sales Allowances.
A. True
B. False: B. False
11. The net realizable value of accounts receivable is the
full amount owed by customers
A. True
B. False: B. False
12. LePage's Inc. shipped the wrong color of paint to a
customer. The customer agreed to keep the paint upon
being offered a 15% price reduction. The price
reduction is an example of a:
A. Sales revenue
B. Sales discount
, MGMT 200 Exam 2
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C. Sales return
D. Sales allowance: D. Sales allowance
13. The purpose of recording an allowance for
uncollectible accounts is to:
A. Record the sales returns and allowances
B. Report net sales conservatively
C. Report accounts receivable at net realizable
value
D. Report accounts receivable for the total amount
of sales in the period: C. Report accounts receivable at net realizable
value
14. If a company has total revenues of $100,000, sales
discounts of $3,000, sales returns of $4,000, and sales
allowances of $2,000, the income statement will report
net revenues of $91,000.
A. True
B. False: A. True
15. One advantage of the allowance method for
accounting for uncollectible accounts is that the
company reports:
A. Bad debt expense in the same period as the
credit sale
B. Greater total sales to customers
C. Fewer returns by customers
D. Greater total cash collected from customers: A. Bad debt expense in the same
period as the
credit sale
16. The account "Allowance for Uncollectible Accounts" is
classified as a(n):
A. Liability account in the balance sheet
B. Contra revenue to credit sales in the income
statement
C. Expense in the income statement
D. Contra asset to accounts receivable in the
balance sheet: D. Contra asset to accounts receivable in the
balance sheet
17. The normal balance of the account "Allowance for
Uncollectible Accounts" is a _______ because _______.
A. Debit; it is a contra account to Revenue (a credit
