Module 5

Module 5 Quiz
Multiple Choice
1. The entry to record the return of goods from a customer would include
a. debit to Sales.
b. credit to Sales.
c. debit to Sales Returns and Allowances.
d. credit to Sales Returns and Allowances.
e. debit to Purchases Returns and Allowances.
f. credit to Purchases Returns and Allowances.
2. Joshua, Inc., offers two trade discounts for its products. A 10% discount is offered to
wholesalers, and 5% to retailers. If Joshua, Inc., sells merchandise priced at $45,000 to a
wholesaler, at what amount should the sale be recorded?
a. $49,500
b. $40,500
c. $47,250
d. $42,750
3. A sale on October 1 with terms of 20 EOM is due to be collected by
a. October 21.
b. October 31.
c. November 1.
d. November 20.
4. Buffy sold goods to Biff on December 1, 20X2, for $20,000. The invoice was marked 2/10, net
60. If Biff pays the bill on December 10, 20X2, how much will Buffy receive?
a. $20,400
b. $19,600
c. $20,000
d. $20,600
5. Brady, Inc. had credit card sales of $50,000 for the month of July. The credit card company
charges a 3% service cost for processing the sale. How much will Brady, Inc., receive when
payment is received from the credit card company?
a. $48,500
b. $50,000
c. $51,500
d. Need more information to solve
Financial Accounting Instructor Manual 1

New York Institute of Finance
6. Melissa Company uses the specific write-off method to recognize bad debts. The entry to write
off an uncollectible account would be recorded by
a. a debit to Allowance for Uncollectible Accounts and a credit to Accounts

Receivable.
b. a debit to Bad Debt Expense and a credit to Accounts Receivable.
c. a debit to Bad Debt Expense and a credit to Allowance for Uncollectible Accounts.
d. a debit to Allowance for Uncollectible Accounts and a credit to Bad Debt Expense.
7. Under the allowance method of accounting for bad debts, the journal entry to record the write-off
of a specific uncollectible account would include
a. debit Allowance for Uncollectible Accounts.

b. debit Bad Debt Expense.
c. credit Allowance for Uncollectible Accounts.
d. debit Accounts Receivable.
8. SAY Co. had $900,000 of sales during 20X2, $400,000 of which were on credit. The balances in
its Accounts Receivable and its Allowance for Uncollectible Accounts on December 31, 20X2
were $80,000 and $20,000, respectively. Past experience indicates that 5% of all credit sales will
not be collected. What is the correct amount for SAY Co. to debit to Bad Debt Expense?
a. $35,000
b. $25,000
c. $15,000
d. $20,000
9. There is a debit balance of $2,000 before adjustments in Yetmar Company’s Allowance for
Uncollectible Accounts. Based on the aging schedule prepared at the end of the accounting
period, Yetmar estimates that $40,000 of receivables are uncollectible. The amount of bad debt
expense to be recognized is
a. $42,000.
b. $40,000.
c. $38,000.
d. $ 2,000.
10. JKY, Inc., had credit sales in the current year of $5,000,000. JKY’s beginning and ending
accounts receivable for the current year were $800,000 and $1,200,000. What was JKY’s
accounts receivable turnover for the year?
a. 2.50
b. 4.17
c. 5.00
d. 6.25
11. If JKY, Inc.’s accounts receivable turnover for the current year was 10.0, what was their average
collection period?
a. 52 days
b. 50 days
c. 45 days
d. 37 days
12. Which of the following would not be considered cash?
a. Paper money and coins

b. Money orders
c. Checks
d. 60-day note receivable
Module 5 Exercise
1. JAC Company sells sports equipment on credit. It provides for uncollectible accounts using a
percentage of 6% of Accounts Receivable on December 31, 20X2 to determine the desired
balance under the allowance method. On January 1, 20X2, the following selected account
balances existed:
DR. CR.
Accounts Receivable $40,000

Allowance for Uncollectible Accounts 2,400
During 20X2, the following summary transactions occurred:
a. Sales on account were $450,000.
b. Accounts of Wingert Company, written off on September 1, 20X2, as uncollectible,

totaled $6,000.
c. Collections of customers on account were $350,000.
Required: Prepare the general journal entries to write off the accounts receivable
determined to be uncollectible during 20X2, and the adjusting entry for bad
debts as of December 31, 20X2.


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Module 5 Quiz

3. A sale on October 1 with terms of 20 EOM is due to be collected by

Financial Accounting Instructor Manual 1

a. a debit to Allowance for Uncollectible Accounts and a credit to Accounts

a. debit Allowance for Uncollectible Accounts.

12. Which of the following would not be considered cash?

a. Paper money and coins

Accounts Receivable $40,000

During 20X2, the following summary transactions occurred:

a. Sales on account were $450,000.

b. Accounts of Wingert Company, written off on September 1, 20X2, as uncollectible,

c. Collections of customers on account were $350,000.

Financial Accounting Instructor Manual 3

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