Deck 8: Accounts Receivable and Further Record-Keeping

Question 1

Wrigley Ltd uses subsidiary ledgers for debtors and creditors. At 1 July 2018 debtors owed $7 000 and creditors were owed $4 000. Transactions for year ended 30 June 2019 were as follows: What was the balance of the creditors control account at 30 June 2019?

A) $11 500
B) $6 500
C) $6 000
D) $5 500

Answer 1

D

Question 2

At year end Dodgy Ltd had a balance in Accounts receivable of $40 000 and an Allowance for doubtful debts of $2 000. It was decided to write off as irrecoverable the debt of Houdini Ltd totalling $3 500. It was further decided that the Allowance for doubtful debts should stand at 10 per cent of Accounts receivable. What was the journal entry needed to write off the debt of Houdini Ltd as irrecoverable?

A) DR Allowance for doubtful debts $3 500
CR Accounts receivable $3 500
B) DR Bad debts expense $3 500
CR Allowance for doubtful debts $3 500
C) DR Bad debts expense $3 500
CR Accounts receivable $3 500
D) None of the above

Answer 2

A

Question 3

Gum Ltd maintains subsidiary ledgers for debtors and creditors. At 1 July 2018, debtors owed $4 000, and creditors were owed $7 200. Transactions for year ended 30 June 2019 were as follows: What was the balance of the debtors' control account at 30 June 2019?

A) $3 000
B) $7 000
C) $10 000
D) $14 000

Answer 3

B

Question 4

Griffin Ltd made a sale of $800 to a customer on terms of 2/10, n/30 on 1 July. The account was paid on 8 July. Griffin Ltd would make which of the following postings to the ledger on 8 July?

A) DR Discount expense $16
B) DR Accounts receivable $800
C) CR Discount revenue $16
D) CR Discount expense $16

Question 5

At 30 June 2019 Shifty Ltd had a balance of Accounts receivable of $90 000 and an Allowance for doubtful debts of $4 000. It was further decided that the Allowance for doubtful debts should stand at 5 per cent of Accounts receivable. What was the journal entry needed to adjust the allowance account?

A) DR Bad debts expense $500
CR Accounts receivable $500
B) DR Bad debts expense $500
CR Allowance for doubtful debts $500
C) DR Allowance for doubtful debts $500
CR Accounts receivable $500
D) None of the above

Question 6

The Allowance for doubtful debts account would appear in the balance sheet under:

A) current assets.
B) current liabilities.
C) shareholders' equity.
D) property, plant and equipment.

Question 7

Gum Ltd maintains subsidiary ledgers for debtors and creditors. At 1 July 2018, debtors owed $4 000, and creditors were owed $7 200. Transactions for year ended 30 June 2019 were as follows: What was the balance of the creditors' control account at 30 June 2019?

A) $5 200
B) $5 500
C) $6 000
D) $9 200

Question 8

The trial balance of Anderson Ltd included the following balances: On 1 October 2019, an account for $1 600 was determined to be uncollectable. The journal entry to be made on that date would include a debit to:

A) Bad debts expense.
B) Accounts receivable.
C) Allowance for doubtful debts.
D) None of the above.

Question 9

Management uses the ageing approach method to calculate the allowance for doubtful debts. An analysis of the ageing of accounts receivable shows a substantial increase in the accounts receivable in the over-90-days category. Management does not adjust the allowance for doubtful debts at year-end. As a result:

A) assets are overstated, and net income is overstated.
B) assets are overstated, and net income is understated.
C) assets are understated, and net income is overstated.
D) assets are understated, and net income is understated.

Question 10

Blue Shoes Ltd has gone bankrupt and will not pay $10 000 to XYZ. XYZ has accounts receivable of $12 million and an allowance for doubtful debts of $500 000. XYZ does not adjust its accounts for the $10 000 that will not be paid by Blue Shoes Ltd. Which of the following remarks is true about the financial statements?

A) There is an understatement of net profit.
B) There is an overstatement of total assets and net profit.
C) There is an understatement of total assets and net profit.
D) There is no effect on total liabilities, assets or net profit.

Question 11

'Accounts receivable' is a credit column in the:

A) sales journal.
B) purchase journal.
C) cash receipts journal.
D) cash payments journal.

Question 12

Which of these items is the source document for the purchase journal?

A) Purchase order
B) Invoice from supplier
C) Duplicate of invoice sent to customer
D) Copy of receipt sent to customer

Question 13

S Ltd has the following balance sheet information on 28 February 2019: On 28 February 2019, the company receives notification from R Ltd that it has filed for bankruptcy. The controller of S Ltd decides to write off R Ltd's account for $10 600. Which of the following statements is TRUE?

A) Net income and net accounts receivable will decrease.
B) Net income will decrease but no change will occur in net accounts receivable.
C) No change will occur in net income but net accounts receivable will decrease.
D) Neither net income nor net accounts receivable will decrease.

Question 14

The trial balance of Wentworth Ltd included the following balances: It was decided to increase the allowance account by $3 000. The journal entry to be made on that date would include a debit to:

A) Bad debts expense.
B) Accounts receivable.
C) Allowance for doubtful debts.
D) None of the above.

Question 15

Wrigley Ltd uses subsidiary ledgers for debtors and creditors. At 1 July 2018 debtors owed $7 000 and creditors were owed $4 000. Transactions for year ended 30 June 2019 were as follows: What was the balance of the debtors' control account at 30 June 2019?

A) $8 300
B) $9 000
C) $9 700
D) $21 300

Question 16

Which of these items is the source document for the sales journal?

A) Purchase order
B) Invoice from supplier
C) Duplicate of invoice sent to customer
D) Copy of receipt sent to customer

Question 17

At year end Dodgy Ltd had a balance in Accounts receivable of $40 000 and an Allowance for doubtful debts of $2 000. It was decided to write off as irrecoverable the debt of Houdini Ltd totalling $3 500. It was further decided that the Allowance for doubtful debts should stand at 10 per cent of Accounts receivable. What was the journal entry needed to bring the Allowance for doubtful debts to the required level after writing off the debt of Houdini Ltd?

A) DR Bad debts expense $4 000
CR Allowance for doubtful debts $4 000
B) DR Bad debts expense $5 150
CR Allowance for doubtful debts $5 150
C) DR Bad debts expense $5 500
CR Allowance for doubtful debts $5 500
D) DR Allowance for doubtful debts $3 500
CR Accounts receivable $3 500

Question 18

The general ledger account representing the subsidiary ledger is known as a control account because:

A) inclusion of both control accounts and subsidiary ledger accounts in the general ledger improves control.
B) the accuracy of the detailed accounts in the subsidiary ledger can be checked against the aggregate data and the balance contained in it.
C) subsidiary ledgers eliminate the need to record totals in the general ledger.
D) it includes all transactions in the subsidiary ledger.

Question 19

Which of the following is NOT a purpose served by special journals?

A) They reduce the number of postings to the general ledger.
B) They eliminate the general journal.
C) They provide details of sales transactions together.
D) They make it easier to find errors.