 In this presentation, we will take a look at multiple choice questions related to receivables. First question. Failure to pay the amount due at maturity of a note is A. Line B. Bad debt C. Dishonoring a note D. Discontinuing a note or E. Describing a note. Failure to pay the amount due at maturity of a note is A. Line B. Bad debt. It's not really bad debt. That's when someone is going to pay us for a counts receivable typically. That could be a reasonable type of answer. But that usually deals with a counts receivable more than the notes receivable. So I'm going to cross that out for now. Well, I'm going to cross it out for good. The next one says C. Dishonoring of a note. That sounds similar to line. We have a dishonoring of a note. So I'll keep that now. D says discontinuing a note and E says describing a note. So all three of these sound very similar which means that maybe they're trying to play on the fact that these three are similar in sounding and so that might lead us to think well maybe it's one of those three because they use words that are really similar trying to kind of trick us on those three. So if we read through this one more time and try to use the process of elimination if we didn't quite know what this was we could say well the failure to pay the amount due at maturity of a note is A says dishonoring and I mean A says line and that doesn't sound like as technical and it doesn't line up to these three that sound very you know it kind of looks the similar nature. C says dishonoring which is kind of similar to line but has this D sound that's similar to these other two D says discontinuing and E says describing a note. So I would think that because these three are similar it might be one of those three and because C sounds similar to A that might be them trying to confuse us on on those two. I might be overthinking this but that might be one way to go through a process of elimination say well C sounds like the best option it sounds like a line which is similar to A and it's using the same terminology as these other ones that look similar to the same type of word. So I'm going to say it's dishonoring that's going to be the right answer to. So dishonoring the note basically means that we promised to pay it and we dishonored our promise we said we wrote a formal note we said we're going to pay it and we didn't pay it therefore dishonored it. Answer C full question and answer one more time failure to pay the amount due at maturity of a note is C dishonoring a note. Next question which is not true about the allowance for doubtful accounts A it is a contra asset account B it is used to estimate accounts receivable accounts receivable that are not collectible C it is debited when uncollectible accounts are written off D accounts receivable less the allowance for doubtful accounts shows net receivables or E it is an equity account. So one more time process of elimination which is not true about the allowance for doubtful accounts A it's a contra account now the allowance account is a contra account because what we're doing is we're trying to value the receivables decide how much we think is uncollectible based on an estimate then make a contra account which will kind of counteract that receivable. So that's true B says it and therefore not the correct answer B says it is used to estimate accounts receivable that are not collectible and that's in essence what the allowance for doubtful account is we're trying to value the receivables see what's not collectible so that's not it because it's correct and then C says it is debited when uncollectible accounts are written off now to figure that one you might want to actually write the journal if we're going to write off an account we don't know the dollar amount but we could still write it off and say the debit and the credit if we wrote off an account we'd say accounts receivable an asset it's going down with a credit so accounts receivable would go down I'm just going to put a hundred dollars in the credit just for to make up a number and then the debit would go under the allowance method to the allowance account to the allowance not the bad debt expense so it would be a debit here to the allowance so it would be debited when uncollected that sounds right which means it's not the correct answer and then D says accounts receivable less the allowance for doubtful accounts shows net receivables and that in essence is true we're saying the receivables is what people owe us the allowance represents what we think will not be paid based on an estimate the difference between those two is the net of what we think we will be paid or the net receivable so we're left with E which says it is an equity account and that's not true it's a contra asset accounts an asset account with that's contra to the norm meaning it has a credit balance rather than a debit balance so answers E once again question and answer is which is not true about the allowance for doubtful accounts E it is an equity account next question a company or bank that purchases another company's accounts receivable is called a a finance or B AR or accounts receivable purchaser C factor D receivable security bank E pledge E so once again we'll go through the process of elimination a company or bank that purchases another company's accounts receivable is called a and this is one of those terms I mean we're not going to spend a whole lot of time to when you go to this this type of material talking about these is just a terminology term that we would just have to know in order to get this right or not there's no real theory involved here we're just saying what is the term for a company or bank that purchases the accounts receivable of another and so one financer and it's not they're not really financing the accounts receivable we know that term to finance something and it's not really to purchase the receivable B AR purchaser and that describes what's happening so that could be possible C says factor and we may not know exactly what that is so we can leave that there D says receivable bank security bank it's a receivable security bank that sounds kind of generic so it's probably not that one I'm gonna say that sounds and then he says a pledge E which could possibly be it so this is one of those that you really would just have to kind of know the definition to you might be able to eliminate a few of these and so the answer is actually going to be a factor and so that's one again you just have to kind of know the terminology on that one so the question is an answer being a company or bank that purchases another company's accounts receivable is called a C factor