Question 1

The use of an allowance for bad debts is required under the materiality principle.

Accepted Answer

A) True 
 B)False

Question 2

Copper Company had a January 1, current year, balance in Allowance for Doubtful Accounts of $8,000 credit. The following events required journal entries during the current year:
 $\begin{array}{|l|l|}
\hline \begin{array}{l}
\text { Apr. } \
15
\end{array} & \text { Gida Good's account receivable of } \$ 4,700 \text { was deemed uncollectible. } \
\hline \text { July } 1 & \text { Christopher Claw paid the full amount of his previously written-off account } \
&\text { receivable. The receivable of } \$ 5,300 \text { had been written off last year. } \
\hline Dec. &\text{Bad debt expense was estimated to be 2.0 \%  of credit sales for the year, which }\
31 &\text{were  \$ 1,475,000 }\\hline
\end{array}$

What amount of allowance for doubtful accounts should appear in the December 31, current year, balance sheet?

Accepted Answer

$8,000 - $4,700 + $5

Question 3

The accounts receivable approach uses income statement relationships to estimate bad debts.

Accepted Answer

A) True 
 B)False

Question 4

A credit sale of $2,500 to a customer would result in

Accepted Answer

A)  A credit to the Accounts Receivable account in the general ledger and a credit to the customer's account in the Accounts Receivable Ledger 
B)  A debit to the Accounts Receivable account in the general ledger and a debit to the customer's account in the Accounts Receivable Ledger 
C)  A debit to the Accounts Receivable account in the general ledger and a credit to the customer's account in the Accounts Receivable Ledger 
D)  A credit to the Accounts Receivable account in the general ledger and a debit to the customer's account in the Accounts Receivable Ledger 
E)  A credit to Sales and a credit to the customer's account in the Accounts Receivable Ledger 
A)  A credit to the Accounts Receivable account in the general ledger and a credit to the customer's account in the Accounts Receivable Ledger 
B)  A debit to the Accounts Receivable account in the general ledger and a debit to the customer's account in the Accounts Receivable Ledger 
C)  A debit to the Accounts Receivable account in the general ledger and a credit to the customer's account in the Accounts Receivable Ledger 
D)  A credit to the Accounts Receivable account in the general ledger and a debit to the customer's account in the Accounts Receivable Ledger 
E)  A credit to Sales and a credit to the customer's account in the Accounts Receivable Ledger

Question 5

Peter Corporation reported the following account balances for 2018. Peter has a January to December fiscal year:
 $$\begin{array} { | l | r | } 
\hline \text { Accounts Receivable at Jan 1, 2018 (debit) } & \$ 40,000 \
\hline \text { Allowance for Doubtful Accounts at Jarn } 1,2018 \text { (credit) } & \$ 6,000 \
\hline \text { Total credit sales during } 2018 & \$ 200,000 \
\hline \text { Total collections on accourts receivable during } 2018 & \$ 180,000 \
\hline \text { Uncollectible accounts writter off durirg } 2018 & \$ 10,000 \
\hline
\end{array}$$ Peter Corporation estimates that 2% of credit sales should be used to allow for bad debts.
-Assume that at March 14, 2021, it was determined that a balance of $7,000 needed to be written off as uncollectible. Provide the journal entry for the write-off.

Accepted Answer

The answer of Peter Corporation reported the following account balances...

Question 6

On December 31, Burrell, Inc.'s books showed accounts receivable of $385,600; sales revenue of $1,480,000 (70% were on credit); and Allowance for Doubtful Accounts of $1,600 (credit balance).
-Assume bad debts are estimated and recorded as 2% of credit sales.
(1) Show how Accounts Receivable and Allowance for Doubtful Accounts would appear on the balance sheet.
(2) Present the entry to write off a $1,800 account.
(3) Show how Accounts Receivable and Allowance for Doubtful Accounts would appear on a balance sheet immediately after writing off the account in (2) above.

Accepted Answer

The answer of On December 31, Burrell, Inc.'s books showed...

Question 7

On June 18, 2020, Woods Co. received from one of its customers, Webb Co., a 90 day, 11%, $6,000 note receivable, in exchange for contract services provided. Woods Co. has a March 31 year end. Webb Co. honoured the note at maturity. Prepare the entries for the issuance and the maturity of the note.

Accepted Answer

The answer of On June 18, 2020, Woods Co. received...

Question 8

A payee of a note usually honours a note and pays it in full.

Accepted Answer

A) True 
 B)False

Question 9

Compaq's accounts receivable turnover rate was 5.7 for this year and 5.4 for last year. Dell's turnover rate was 6.8 for this year and 7 for last year. This means that

Accepted Answer

A)  Dell has the better turnover rate for both years. 
B)  Compaq has the better turnover rate for both years. 
C)  Dell's turnover rate is improving. 
D)  Compaq's turnover rate is improving. 
E)  Dell has the better turnover rate for both years and Compaq's turnover rate is improving. 
A)  Dell has the better turnover rate for both years. 
B)  Compaq has the better turnover rate for both years. 
C)  Dell's turnover rate is improving. 
D)  Compaq's turnover rate is improving. 
E)  Dell has the better turnover rate for both years and Compaq's turnover rate is improving.

Question 10

Notes receivable are classified as current liabilities.

Accepted Answer

A) True 
 B)False

Question 11

The matching principle requires use of the direct write-off method.

Accepted Answer

A) True 
 B)False

Question 12

The matching principle requires

Accepted Answer

A)  That bad debt expenses be reported in the same accounting period as the sales they helped generate 
B)  That bad debt expenses be reported in the same accounting period as the sales they helped generate and requires the use of the allowance method of accounting for bad debts 
C)  The use of the allowance method of accounting for bad debts 
D)  That bad debt expenses be reported in the same accounting period as the sales they helped generate and requires the use of the direct write-off method for bad debts 
E)  The use of the direct write-off method for bad debts 
A)  That bad debt expenses be reported in the same accounting period as the sales they helped generate 
B)  That bad debt expenses be reported in the same accounting period as the sales they helped generate and requires the use of the allowance method of accounting for bad debts 
C)  The use of the allowance method of accounting for bad debts 
D)  That bad debt expenses be reported in the same accounting period as the sales they helped generate and requires the use of the direct write-off method for bad debts 
E)  The use of the direct write-off method for bad debts

Question 13

How are the direct write-off and allowance methods applied to accounting for uncollectible receivables?

Accepted Answer

The direct write-off method charges Bad

Question 14

The buyer who pays cash for accounts receivable is called

Accepted Answer

A)  Payor 
B)  Pledgor 
C)  Factor 
D)  Payee 
E)  Pledgee 
A)  Payor 
B)  Pledgor 
C)  Factor 
D)  Payee 
E)  Pledgee

Question 15

A high accounts receivable turnover rate in comparison with that of competitors' suggests that the firm should tighten its credit policy.

Accepted Answer

A) True 
 B)False

Question 16

Define a note receivable and describe how to calculate the interest due on a note receivable.

Accepted Answer

A note receivable is a promissory note.

Question 17

Gomez Management Services Inc. accepts an 18-month, 12%, $5,000 note receivable from a client in settlement of an outstanding accounts receivable on November 1, 2018. The client pays off the note on April 30, 2020. Gomez should recognize interest revenue in 2020 of

Accepted Answer

A)  $150 
B)  $200 
C)  $600 
D)  $900 
E)  $100 
A)  $150 
B)  $200 
C)  $600 
D)  $900 
E)  $100

Question 18

What is the purpose of the days' sales uncollected ratio?

Accepted Answer

The days' sales uncollected ratio is a l

Question 19

A promissory note

Accepted Answer

A)  Is an account receivable 
B)  Is a written promise to pay a specified amount of money at a certain date 
C)  Is a liability to the payee 
D)  Is a written promise to pay a specified amount of money at a certain date and is a liability to the payee 
E)  All of these 
A)  Is an account receivable 
B)  Is a written promise to pay a specified amount of money at a certain date 
C)  Is a liability to the payee 
D)  Is a written promise to pay a specified amount of money at a certain date and is a liability to the payee 
E)  All of these

Question 20

Mattel had net sales of $4,235 million and accounts receivable of $775 million. To one decimal, Mattel's days' sales uncollected was

Accepted Answer

A)  298 
B)  66.8 
C)  75.4 
D)  81.8 
E)  90.2 
A)  298 
B)  66.8 
C)  75.4 
D)  81.8 
E)  90.2

The use of an allowance for bad debts is required under the materiality principle.

The accounts receivable approach uses income statement relationships to estimate bad debts.

A credit sale of $2,500 to a customer would result in

On June 18, 2020, Woods Co. received from one of its customers, Webb Co., a 90 day, 11%, $6,000 note receivable, in exchange for contract services provided. Woods Co. has a March 31 year end. Webb Co. honoured the note at maturity. Prepare the entries for the issuance and the maturity of the note.

A payee of a note usually honours a note and pays it in full.

Compaq's accounts receivable turnover rate was 5.7 for this year and 5.4 for last year. Dell's turnover rate was 6.8 for this year and 7 for last year. This means that

Notes receivable are classified as current liabilities.

The matching principle requires use of the direct write-off method.

The matching principle requires

How are the direct write-off and allowance methods applied to accounting for uncollectible receivables?

The buyer who pays cash for accounts receivable is called

A high accounts receivable turnover rate in comparison with that of competitors' suggests that the firm should tighten its credit policy.

Define a note receivable and describe how to calculate the interest due on a note receivable.

Gomez Management Services Inc. accepts an 18-month, 12%, $5,000 note receivable from a client in settlement of an outstanding accounts receivable on November 1, 2018. The client pays off the note on April 30, 2020. Gomez should recognize interest revenue in 2020 of

What is the purpose of the days' sales uncollected ratio?

A promissory note

Mattel had net sales of $4,235 million and accounts receivable of $775 million. To one decimal, Mattel's days' sales uncollected was

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts for Financial Statements

Completing the Accounting Cycle and Classifying Accounts

Accounting for Merchandising Activities

Inventory Costing and Valuation

Internal Control and Cash

Property, Plant and Equipment Intangibles

Payroll Liabilities

Accounting Information Systems

Filters

Exam 8: Receivables

The use of an allowance for bad debts is required under the materiality principle.

The accounts receivable approach uses income statement relationships to estimate bad debts.

A credit sale of $2,500 to a customer would result in

On June 18, 2020, Woods Co. received from one of its customers, Webb Co., a 90 day, 11%, $6,000 note receivable, in exchange for contract services provided. Woods Co. has a March 31 year end. Webb Co. honoured the note at maturity. Prepare the entries for the issuance and the maturity of the note.

A payee of a note usually honours a note and pays it in full.

Compaq's accounts receivable turnover rate was 5.7 for this year and 5.4 for last year. Dell's turnover rate was 6.8 for this year and 7 for last year. This means that

Notes receivable are classified as current liabilities.

The matching principle requires use of the direct write-off method.

The matching principle requires

How are the direct write-off and allowance methods applied to accounting for uncollectible receivables?

The buyer who pays cash for accounts receivable is called

A high accounts receivable turnover rate in comparison with that of competitors' suggests that the firm should tighten its credit policy.

Define a note receivable and describe how to calculate the interest due on a note receivable.

Gomez Management Services Inc. accepts an 18-month, 12%, $5,000 note receivable from a client in settlement of an outstanding accounts receivable on November 1, 2018. The client pays off the note on April 30, 2020. Gomez should recognize interest revenue in 2020 of

What is the purpose of the days' sales uncollected ratio?

A promissory note

Mattel had net sales of $4,235 million and accounts receivable of $775 million. To one decimal, Mattel's days' sales uncollected was

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts for Financial Statements

Completing the Accounting Cycle and Classifying Accounts

Accounting for Merchandising Activities

Inventory Costing and Valuation

Internal Control and Cash

Property, Plant and Equipment Intangibles

Payroll Liabilities

Accounting Information Systems

Filters