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Solutions

Multiple Choice Questions - Solutions​

  1. The revenue recognition principle states that revenue should be recognized:

    • Answer: b) Revenue is recognized when earned (goods delivered or services performed).

  2. The allowance method for uncollectible accounts:

    • Answer: b) Allowance method estimates uncollectible accounts and creates an allowance account.

  3. Accounts Receivable Turnover is calculated as:

    • Answer: b) Accounts Receivable Turnover = Net Credit Sales ÷ Average Accounts Receivable.

  4. Which PCN account is used for Accounts Receivable - Customers?

    • Answer: b) 410000 is Accounts Receivable - Customers (Class 4).

  5. When an account receivable becomes uncollectible and is written off:

    • Answer: d) Both Allowance for Doubtful Accounts and Accounts Receivable are decreased.

  6. Notes receivable differ from accounts receivable in that notes receivable:

    • Answer: c) Notes receivable are formal written promises to pay, usually with interest.

  7. The aging of receivables method is a:

    • Answer: a) Aging of receivables is a balance sheet approach to estimating bad debts.

  8. VAT on a credit sale is recognized:

    • Answer: b) VAT is recognized when the sale is made (revenue recognized).

  9. Average Collection Period is calculated as:

    • Answer: a) Average Collection Period = 365 Days ÷ Accounts Receivable Turnover.

  10. In Luxembourg, VAT on an uncollectible account:

  • Answer: b) VAT may be recoverable on uncollectible accounts with proper documentation and following Luxembourg VAT rules.

Note: Solutions will be provided in a separate solutions manual. For now, students should work through problems and cases, then compare with instructor-provided solutions or discuss in class.