Question 1

It is a bad business practice to accept a note receivable in exchange for an overdue account receivable.

Accepted Answer

A) True 
 B)False

Question 2

During the current year, TechCom concluded that a customer's $4,400 account receivable was uncollectible and that the account should be written off. What effect will this write-off have on TechCom's current year net income and balance sheet assuming the allowance method is used to account for bad debts?

Accepted Answer

A)  No effect on net income or on total assets 
B)  Decrease in net income; no effect on total assets 
C)  Decrease in net income; decrease in total assets 
D)  Increase in net income; no effect on total assets 
E)  No effect on net income; decrease in total assets 
A)  No effect on net income or on total assets 
B)  Decrease in net income; no effect on total assets 
C)  Decrease in net income; decrease in total assets 
D)  Increase in net income; no effect on total assets 
E)  No effect on net income; decrease in total assets

Question 3

The materiality principle is justification for using the direct-write-off method.

Accepted Answer

A) True 
 B)False

Question 4

Explain how the materiality principle can be used to justify the direct write-off method.

Accepted Answer

Materiality allows other principles to b

Question 5

Companies must follow both the matching principle and the materiality principle when considering the use of the direct write-off method.

Accepted Answer

A) True 
 B)False

Question 6

Z-Mart had net sales of $31,500 and accounts receivable of $2,700. To one decimal, Z-Mart's days' sales uncollected was

Accepted Answer

A)  11.7 
B)  23.3 
C)  28 
D)  31.3 
E)  46.6 
A)  11.7 
B)  23.3 
C)  28 
D)  31.3 
E)  46.6

Question 7

Which accounting principle requires reporting expenses in the same period as the sales they helped to produce?

Accepted Answer

A)  Materiality 
B)  Going concern 
C)  Matching 
D)  Cost 
E)  Business entity 
A)  Materiality 
B)  Going concern 
C)  Matching 
D)  Cost 
E)  Business entity

Question 8

Firms maintain their own credit cards

Accepted Answer

A)  To earn interest on any balances not paid within a specified period 
B)  To avoid the fees charged by credit card companies such as VISA 
C)  In order to speed up receipt of cash from the sale 
D)  To grant credit to approved customers 
E)  All of these 
A)  To earn interest on any balances not paid within a specified period 
B)  To avoid the fees charged by credit card companies such as VISA 
C)  In order to speed up receipt of cash from the sale 
D)  To grant credit to approved customers 
E)  All of these

Question 9

When a note is discounted to a bank without recourse, the bank assumes the risk of a bad debt loss and the original payee doesn't have a contingent liability.

Accepted Answer

A) True 
 B)False

Question 10

Describe accounts receivable and how they are recorded into the accounting system.

Accepted Answer

Accounts receivable arise from sales to

Question 11

Explain how to record the receipt of a note receivable.

Accepted Answer

A note is recorded by entering

Question 12

TechCom has sales of $350,000 and estimates that 0.5% of its sales are uncollectible. The amount of bad debt expense is $17,500.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following entries would be made to write off an uncollectible account receivable using the direct write-off method?

Accepted Answer

A)  Dr. Allowance for doubtful accounts | Cr. Accounts receivable 
B)  Dr. Accounts receivable | Cr. Bad debt expense 
C)  Dr. Bad debt expense | Cr. Accounts receivable 
D)  Dr. Sales | Cr. Accounts receivable 
E)  Dr. Sales | Cr. Allowance for doubtful accounts 
A)  Dr. Allowance for doubtful accounts | Cr. Accounts receivable 
B)  Dr. Accounts receivable | Cr. Bad debt expense 
C)  Dr. Bad debt expense | Cr. Accounts receivable 
D)  Dr. Sales | Cr. Accounts receivable 
E)  Dr. Sales | Cr. Allowance for doubtful accounts

Question 14

All the following are characteristics of notes receivable except, notes receivable

Accepted Answer

A)  Are usually evidenced by a more formal agreement called a promissory note 
B)  Generally require the maker to pay interest on the receivable 
C)  Are generally for a longer period than a regular accounts receivable 
D)  Are used by most businesses for very large amounts and are therefore almost always shown separately on the financial statements 
E)  The maker is the person who promises to pay the note at maturity 
A)  Are usually evidenced by a more formal agreement called a promissory note 
B)  Generally require the maker to pay interest on the receivable 
C)  Are generally for a longer period than a regular accounts receivable 
D)  Are used by most businesses for very large amounts and are therefore almost always shown separately on the financial statements 
E)  The maker is the person who promises to pay the note at maturity

Question 15

How can a company convert its receivables to cash?

Accepted Answer

A company's receivables are normally con

Question 16

Filler Company uses the allowance method to account for bad debts. In the first year of operations (2019), Filler sold $640,000 of merchandise on credit, including a $3,500 sale to Bubba Long. On December 31, 2019, it provided an addition to its allowance for doubtful accounts equal to 1.8% of its credit sales. On June 1, 2020, Filler wrote off as uncollectible the $3,500 account of Bubba Long; and on December 25, 2020 Bubba Long unexpectedly paid his account in full. Prepare the journal entries that Filler Company should make:
(a) On December 31, 2019, to increase the allowance for doubtful accounts.
(b) On June 1, 2020, to write off the bad debt.
(c) On December 25, 2020, to record the unexpected collection from Bubba Long.

Accepted Answer

The answer of Filler Company uses the allowance method to...

Question 17

Phuong Vo borrowed $5,000 and signed a 3-month promissory note at 10%. The total interest on the note is $125.

Accepted Answer

A) True 
 B)False

Question 18

The accounting principle that requires financial statements to report all contingent liabilities is called

Accepted Answer

A)  Relevance 
B)  Evaluation 
C)  Full disclosure 
D)  Materiality 
E)  Matching 
A)  Relevance 
B)  Evaluation 
C)  Full disclosure 
D)  Materiality 
E)  Matching

Question 19

The formula for computing interest on a note receivable is principal multiplied by interest rate multiplied by time.

Accepted Answer

A) True 
 B)False

Question 20

TechCom had net sales of $315,000 and average accounts receivable of $75,600. Its competitor, ZCom, had net sales of $299,000 and average accounts receivable of $81,350. Calculate the accounts receivable turnover ratio for both companies. Which company is doing a better job of managing its accounts receivable (all other things assumed to be equal)?

Accepted Answer

TechCom = 4.2, ZCom = 3.7. Tec

It is a bad business practice to accept a note receivable in exchange for an overdue account receivable.

The materiality principle is justification for using the direct-write-off method.

Explain how the materiality principle can be used to justify the direct write-off method.

Companies must follow both the matching principle and the materiality principle when considering the use of the direct write-off method.

Z-Mart had net sales of $31,500 and accounts receivable of $2,700. To one decimal, Z-Mart's days' sales uncollected was

Which accounting principle requires reporting expenses in the same period as the sales they helped to produce?

Firms maintain their own credit cards

When a note is discounted to a bank without recourse, the bank assumes the risk of a bad debt loss and the original payee doesn't have a contingent liability.

Describe accounts receivable and how they are recorded into the accounting system.

Explain how to record the receipt of a note receivable.

TechCom has sales of $350,000 and estimates that 0.5% of its sales are uncollectible. The amount of bad debt expense is $17,500.

Which of the following entries would be made to write off an uncollectible account receivable using the direct write-off method?

All the following are characteristics of notes receivable except, notes receivable

How can a company convert its receivables to cash?

Phuong Vo borrowed $5,000 and signed a 3-month promissory note at 10%. The total interest on the note is $125.

The accounting principle that requires financial statements to report all contingent liabilities is called

The formula for computing interest on a note receivable is principal multiplied by interest rate multiplied by time.

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

It is a bad business practice to accept a note receivable in exchange for an overdue account receivable.

The materiality principle is justification for using the direct-write-off method.

Explain how the materiality principle can be used to justify the direct write-off method.

Companies must follow both the matching principle and the materiality principle when considering the use of the direct write-off method.

Z-Mart had net sales of $31,500 and accounts receivable of $2,700. To one decimal, Z-Mart's days' sales uncollected was

Which accounting principle requires reporting expenses in the same period as the sales they helped to produce?

Firms maintain their own credit cards

When a note is discounted to a bank without recourse, the bank assumes the risk of a bad debt loss and the original payee doesn't have a contingent liability.

Describe accounts receivable and how they are recorded into the accounting system.

Explain how to record the receipt of a note receivable.

TechCom has sales of $350,000 and estimates that 0.5% of its sales are uncollectible. The amount of bad debt expense is $17,500.

Which of the following entries would be made to write off an uncollectible account receivable using the direct write-off method?

All the following are characteristics of notes receivable except, notes receivable

How can a company convert its receivables to cash?

Phuong Vo borrowed $5,000 and signed a 3-month promissory note at 10%. The total interest on the note is $125.

The accounting principle that requires financial statements to report all contingent liabilities is called

The formula for computing interest on a note receivable is principal multiplied by interest rate multiplied by time.

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