Multiple Choice Questions 1 If a company uses the direct

write off #2344

Multiple Choice Questions1. If a company uses the direct write-off method of accounting for bad
debts,a. It is applying the matching principle.b. It will reduce the accounts receivable account at
the end of the accounting period for estimated uncollectible accounts.c. It will report accounts
receivable in the balance sheet at their net realizable value.d. It will record bad debt expense
only when an account is determined to be uncollectible.2. Which of the following best describes
the objective of estimating bad debt expense with the percentage of credit sales method?a. To
estimate bad debt expense based on a percentage of credit sales made during the periodb. To
estimate the amount of bad debt expense based on an aging of accounts receivablec. To
determine the amount of uncollectible accounts during a given periodd. To facilitate the use of
the direct write-off method3. Which of the following best describes the concept of the aging
method of receivables?a. Accounts receivable should be directly written off when the due date
arrives and the customers have not paid the bill.b. An accurate estimate of bad debt expense
may be arrived at by multiplying historical bad debt rates by the amount of credit sales made
during a period.c. Estimating the appropriate balance for the allowance for doubtful accounts
results in the appropriate value for net accounts receivable on the balance sheet.d. The precise
amount of bad debt expense may be arrived at by multiplying historical bad debt rates by the
amount of credit sales made during a period.4. The aging method is closely related to the:a.
Balance sheetb. Statement of retained earnings c. Statement of cash flowsd. Income
statement5. The percentage of credit sales approach is closely related to the:a. Balance sheetb.
Statement of retained earnings c. Statement of cash flowsd. Income statement6. The process
by which firms package factored receivables as financial instruments or securities and sell them
to investors is known as:a. Credit extensionb. Aging of accounts receivable c. Bundlingd.
Securitization7. Which one of the following statements is true if a company’s collection period
for accounts receivable is unacceptably long? a. The company should expand operations with
its excess cash.b. The company may need to borrow to acquire operating cash.c. The company
may offer trade discounts to lengthen the collection period.d. Cash flows from operations may
be higher than expected for the company’s sales.8. Zenephia Corp. accepted a nine-month
note receivable from a customer on October 1, 2011. If Zenephia has an accounting period
which ends on December 31, 2011, when would it most likely recognize interest income from
the note?a. On October 1, 2011b. On December 31, 2011, only c. On December 31, 2011, and
July 1, 2012d. On July 1, 2012, only9. The ‘‘principal’’ of a note receivable refers to:a. The
present value of the noteb. The amount of cash borrowed c. The financing company that is
lending the moneyd. The amount of interest due10 Net profit margin percentage is calculated
by:a. Dividing net income by (net) salesb. Dividing operating income by (net) salesc. Subtracting
operating income from (net) salesd. Subtracting net income from (net) salesView Solution:
Multiple Choice Questions 1 If a company uses the direct write off

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