Robert Half Assessment Test Accounts Payable and Receivable 4 — Questions and Answers
Question 1: A company writes off a customer's $2,000 receivable using the allowance method. Which journal entry is correct?
- Debit Bad Debt Expense $2,000, Credit Accounts Receivable $2,000
- Debit Allowance for Doubtful Accounts $2,000, Credit Accounts Receivable $2,000 (Correct answer)
- Debit Accounts Receivable $2,000, Credit Allowance for Doubtful Accounts $2,000
- Debit Cash $2,000, Credit Accounts Receivable $2,000
Correct answer: Debit Allowance for Doubtful Accounts $2,000, Credit Accounts Receivable $2,000
Under the allowance method, the write-off eliminates the receivable and reduces the previously established allowance—no additional expense is recorded at write-off.
Question 2: Which term describes the practice of selling a company's accounts receivable to a third party at a discount?
- Factoring (Correct answer)
- Pledging
- Discounting payables
- Securitization swap
Correct answer: Factoring
Factoring is the sale of receivables to a factor (financing company) at a discount, providing immediate cash in exchange for transferring collection responsibility.
Question 3: During an AP reconciliation, you notice an invoice was posted twice for the same vendor. What is the BEST corrective action?
- Void one of the duplicate invoice entries and adjust the vendor's balance accordingly (Correct answer)
- Pay both invoices and request a refund later
- Leave both entries and note it in the reconciliation memo
- Write off one entry as a miscellaneous expense
Correct answer: Void one of the duplicate invoice entries and adjust the vendor's balance accordingly
The correct action is to void the duplicate entry to remove the erroneous liability and ensure the vendor's balance accurately reflects only what is owed.
Question 4: What is the Days Payable Outstanding (DPO) formula?
- (Accounts Payable / Cost of Goods Sold) × 365 (Correct answer)
- (Cost of Goods Sold / Accounts Payable) × 365
- (Accounts Receivable / Revenue) × 365
- (Revenue / Accounts Payable) × 365
Correct answer: (Accounts Payable / Cost of Goods Sold) × 365
DPO measures how many days on average a company takes to pay its vendors: (AP / COGS) × 365.
Question 5: A customer previously written off pays $500. Using the allowance method, what is the FIRST step to record this recovery?
- Debit Cash, Credit Bad Debt Expense directly
- Reinstate the receivable by debiting Accounts Receivable and crediting Allowance for Doubtful Accounts (Correct answer)
- Debit Cash, Credit Revenue
- Credit Accounts Payable for the recovered amount
Correct answer: Reinstate the receivable by debiting Accounts Receivable and crediting Allowance for Doubtful Accounts
The recovery first requires reinstating the receivable (reversing the write-off), then recording the cash receipt to close the reinstated balance.
Question 6: What is the key difference between a purchase order and a vendor invoice?
- A purchase order is issued by the vendor; an invoice is issued by the buyer
- A purchase order is issued by the buyer to authorize a purchase; an invoice is the vendor's demand for payment (Correct answer)
- Both are issued by the vendor but at different times
- A purchase order records payment; an invoice records the order
Correct answer: A purchase order is issued by the buyer to authorize a purchase; an invoice is the vendor's demand for payment
The buyer issues a purchase order to authorize a transaction; the vendor then sends an invoice billing the buyer for goods or services delivered.
Question 7: Which metric measures how efficiently a company collects its receivables?
- Days Payable Outstanding (DPO)
- Current Ratio
- Days Sales Outstanding (DSO) (Correct answer)
- Gross Margin Percentage
Correct answer: Days Sales Outstanding (DSO)
DSO (Days Sales Outstanding) calculates the average number of days it takes a company to collect payment after a sale, reflecting AR collection efficiency.
Robert Half Assessment Test Accounts Payable and Receivable 4
A company writes off a customer's $2,000 receivable using the allowance method.
Which journal entry is correct?