Chapter 5

Question 1

Net Realizable Value (NRV)

Answer 1

An estimate of how much of the receivables a company will truly receive

Question 2

NRV Formula

Answer 2

NRV = AR - Allowance

Question 3

Allowance for Doubtful Accounts

Answer 3

An estimate of the amount of uncollectible receivables

Question 4

Allowance Method of Accounting for Uncollectible Accounts

Answer 4

Reporting accounts receivable in the financial statement at NRV

Question 5

Uncollectible Accounts Expense (Bad Debts Expense)

Answer 5

Expense associated with uncollectible accounts receivable

Question 6

Percent of Revenue Method

Answer 6

A mathematical way of estimating the amount of uncollectible accounts expense

Question 7

Contra Asset Account

Answer 7

Distinguishes the actual balance in accounts receivables from the net realizable value

Question 8

Reinstate

Answer 8

Bringing back an account receivable that was originally discarded due to a collection of cash

Question 9

Percent of Receivables Method

Answer 9

Mathematical method of portraying the amount of the allowance for doubtful accounts

Question 10

Aging of Accounts Receivable

Answer 10

Counting the days an account receivable has been unpaid for

Question 11

Promissory Note

Answer 11

A legal document representing a credit agreement between a lender and a borrower

Question 12

Items on the promissory note

Answer 12

Maker, Principal, Interest, Maturity Date, Collateral, Payee

Question 13

Accrued Interest

Answer 13

Interest revenue/expense that is recognized BEFORE cash is paid

Question 14

Adjusting Entry

Answer 14

Entry that updates account balances prior to preparing financial statements

Question 15

Accrued Interest Formula

Answer 15

Principal * Annual Interest Rate * Time Outstanding = IR
Amount owed * Interest Rate * n/12 = IR

Question 16

Specific Identification

Answer 16

Mathematical method of keeping and tracking inventory

Question 17

FiFo Method

Answer 17

Recognizing the first item in the inventory as the first item to be sold

Question 18

LiFo Method

Answer 18

Recognizing the last item in the inventory as the first item sold

Question 19

Weighted-Average Method

Answer 19

Method of organizing and tacking inventory based on the average cost per unit

Question 20

Physical Flow of Goods

Answer 20

Physical movement of goods through the business

Question 21

Inventory Cost Flow Methods

Answer 21

A transfer of the cost of goods available for sale to goods sold and inventory

Question 22

Full Disclosure

Answer 22

Show of all information on a company in the financial statement

Question 23

Consistency

Answer 23

Keep a consistent accounting method throughout accounting periods