Question 1

When an account is written off using the allowance method the

Accepted Answer

A)  cash realizable value of total accounts receivable will increase. 
B)  cash realizable value of total accounts receivable will decrease. 
C)  allowance account will increase. 
D)  cash realizable value of total accounts receivable will stay the same. 
A)  cash realizable value of total accounts receivable will increase. 
B)  cash realizable value of total accounts receivable will decrease. 
C)  allowance account will increase. 
D)  cash realizable value of total accounts receivable will stay the same.

Question 2

Bad Debt Expense is reported on the income statement as

Accepted Answer

A)  part of cost of goods sold. 
B)  reducing gross profit. 
C)  an operating expense. 
D)  a contra-revenue account. 
A)  part of cost of goods sold. 
B)  reducing gross profit. 
C)  an operating expense. 
D)  a contra-revenue account.

Question 3

Short-term notes receivables

Accepted Answer

A)  have a related allowance account called Allowance for Doubtful Notes Receivable. 
B)  are reported at their gross realizable value. 
C)  use the same estimations and computations as accounts receivable to determine cash realizable value. 
D)  present the same valuation problems as long-term notes receivables. 
A)  have a related allowance account called Allowance for Doubtful Notes Receivable. 
B)  are reported at their gross realizable value. 
C)  use the same estimations and computations as accounts receivable to determine cash realizable value. 
D)  present the same valuation problems as long-term notes receivables.

Question 4

Allowance for Doubtful Accounts is debited under the direct write-off method when an account is determined to be uncollectible.

Accepted Answer

A) True 
 B)False

Question 5

Which receivables accounting and reporting issue is essentially the same for IFRS and GAAP?

Accepted Answer

A)  The use of allowance accounts and the allowance method. 
B)  How to record discounts. 
C)  How to record factoring. 
D)  All of these are essentially the same for IFRS and GAAP. 
A)  The use of allowance accounts and the allowance method. 
B)  How to record discounts. 
C)  How to record factoring. 
D)  All of these are essentially the same for IFRS and GAAP.

Question 6

A company has net credit sales of $750000 for the year and it estimates that uncollectible accounts will be 3% of sales. If Allowance for Doubtful Accounts has a credit balance of $3000 prior to adjustment its balance after adjustment will be a credit of

Accepted Answer

A)  $19500. 
B)  $22500. 
C)  $22560. 
D)  $25500. 
A)  $19500. 
B)  $22500. 
C)  $22560. 
D)  $25500.

Question 7

Accounts receivable are the result of cash and credit sales.

Accepted Answer

A) True 
 B)False

Question 8

Para Float Company often requires customers to sign promissory notes for major credit purchases. Journalize the following transactions for Para Float Company.
Feb. 12 Accepted a $30000 4% 60-day note from Yancy Blair for a 24-foot motorboat built to his specifications.
April 14 Received notification from Yancy Blair that he was unable to honor his promissory note but that he expects to pay the amount owed in May.
May 26 Received a check from Yancy Blair for the total amount owed.
June 10 Received notification by the bank that Yancy Blair check was being returned "NSF" and that Mr. Blair had declared personal bankruptcy.

Accepted Answer

The answer of Para Float Company often requires customers to...

Question 9

Lynn Company has accounts receivable of $54000 in its general ledger at July 31: During August the following transactions occurred.
Aug. 1 Added 1% finance charges to $15000 of credit card balances for not paying within the 30 day grace period.
15 Sold $28000 of accounts receivable to Coal Factors Inc. who charge a 3% commission.
28 Collected $6000 from Lynn credit card customers including $300 of finance charges previously billed.
Instructions
(a) Journalize the transactions.
(b) Indicate the statement presentation of interest revenue and service charges.

Accepted Answer

(a)
 (b) Service Charge Expens

Question 10

Which use the term impairment to indicate that a receivable may not be collected?

Accepted Answer

A)  Neither IFRS nor GAAP. 
B)  Both IFRS and GAAP. 
C)  IFRS but not GAAP. 
D)  GAAP but not IFRS. 
A)  Neither IFRS nor GAAP. 
B)  Both IFRS and GAAP. 
C)  IFRS but not GAAP. 
D)  GAAP but not IFRS.

Question 11

The sale of receivables by a business

Accepted Answer

A)  indicates that the business is in financial difficulty. 
B)  is generally the major revenue item on its income statement. 
C)  is an indication that the business is owned by a factor. 
D)  can be a quick way to generate cash for operating needs. 
A)  indicates that the business is in financial difficulty. 
B)  is generally the major revenue item on its income statement. 
C)  is an indication that the business is owned by a factor. 
D)  can be a quick way to generate cash for operating needs.

Question 12

The accounts receivable turnover is computed by dividing total sales by the average net receivables during the year.

Accepted Answer

A) True 
 B)False

Question 13

Major advantages of credit cards to the retailer include all of the following except the

Accepted Answer

A)  issuer does the credit investigation of customers. 
B)  issuer undertakes the collection process. 
C)  retailer receives more cash from the credit card issuer. 
D)  All of these are advantages. 
A)  issuer does the credit investigation of customers. 
B)  issuer undertakes the collection process. 
C)  retailer receives more cash from the credit card issuer. 
D)  All of these are advantages.

Question 14

Maine Corporation's unadjusted trial balance includes the following balances (assume normal balances): $\begin{array}{lr}
\text { Accounts Receivable } & \$ 850,000 \
\text { Allowance for Doubtful Accounts } & 18,000
\end{array}$
 Bad debts are estimated to be 5% of outstanding receivables. What amount of bad debt expense will the company record?

Accepted Answer

A)  $18000 
B)  $24500 
C)  $41600 
D)  $42500 
A)  $18000 
B)  $24500 
C)  $41600 
D)  $42500

Question 15

The retailer considers Visa and MasterCard sales as

Accepted Answer

A)  cash sales. 
B)  promissory sales. 
C)  credit sales. 
D)  contingent sales. 
A)  cash sales. 
B)  promissory sales. 
C)  credit sales. 
D)  contingent sales.

Question 16

When calculating interest on a promissory note with the maturity date stated in terms of days the

Accepted Answer

A)  maker pays more interest if 365 days are used instead of 360. 
B)  maker pays the same interest regardless if 365 or 360 days are used. 
C)  payee receives more interest if 360 days are used instead of 365. 
D)  payee receives less interest if 360 days are used instead of 365. 
A)  maker pays more interest if 365 days are used instead of 360. 
B)  maker pays the same interest regardless if 365 or 360 days are used. 
C)  payee receives more interest if 360 days are used instead of 365. 
D)  payee receives less interest if 360 days are used instead of 365.

Question 17

Three accounting issues associated with accounts receivable are

Accepted Answer

A)  depreciating returns and valuing. 
B)  depreciating valuing and collecting. 
C)  recognizing valuing and disposing. 
D)  accrual bad debts and disposing. 
A)  depreciating returns and valuing. 
B)  depreciating valuing and collecting. 
C)  recognizing valuing and disposing. 
D)  accrual bad debts and disposing.

Question 18

A company regularly sells its receivables to a factor who assesses a 2% service charge on the amount of receivables purchased. Which of the following statements is true for the seller of the receivables?

Accepted Answer

A)  The loss section of the income statement will increase each time receivables are sold. 
B)  The credit to Accounts Receivable is less than the debit to Cash when the accounts are sold. 
C)  Selling expenses will increase each time accounts are sold. 
D)  The other expense section of the income statement will increase each time accounts are sold. 
A)  The loss section of the income statement will increase each time receivables are sold. 
B)  The credit to Accounts Receivable is less than the debit to Cash when the accounts are sold. 
C)  Selling expenses will increase each time accounts are sold. 
D)  The other expense section of the income statement will increase each time accounts are sold.

Question 19

Match the items below by entering the appropriate code letter in the space provided.

Accepted Answer

1. C 6. A
2. J 7. F

Question 20

IFRS and GAAP accounting are the same for each of the following except for the

Accepted Answer

A)  recording of receivables. 
B)  recognition of sales returns and allowances. 
C)  recording of a factoring transaction. 
D)  recognition of sales discounts. 
A)  recording of receivables. 
B)  recognition of sales returns and allowances. 
C)  recording of a factoring transaction. 
D)  recognition of sales discounts.

Exam 9: Accounting for Receivables

When an account is written off using the allowance method the

Bad Debt Expense is reported on the income statement as

Short-term notes receivables

Allowance for Doubtful Accounts is debited under the direct write-off method when an account is determined to be uncollectible.

Which receivables accounting and reporting issue is essentially the same for IFRS and GAAP?

A company has net credit sales of $750000 for the year and it estimates that uncollectible accounts will be 3% of sales. If Allowance for Doubtful Accounts has a credit balance of $3000 prior to adjustment its balance after adjustment will be a credit of

Accounts receivable are the result of cash and credit sales.

Which use the term impairment to indicate that a receivable may not be collected?

The sale of receivables by a business

The accounts receivable turnover is computed by dividing total sales by the average net receivables during the year.

Major advantages of credit cards to the retailer include all of the following except the

Maine Corporation's unadjusted trial balance includes the following balances (assume normal balances): Accounts Receivable \ 850,000 Allowance for Doubtful Accounts 18,000 Bad debts are estimated to be 5% of outstanding receivables. What amount of bad debt expense will the company record?

The retailer considers Visa and MasterCard sales as

When calculating interest on a promissory note with the maturity date stated in terms of days the

Three accounting issues associated with accounts receivable are

A company regularly sells its receivables to a factor who assesses a 2% service charge on the amount of receivables purchased. Which of the following statements is true for the seller of the receivables?

Match the items below by entering the appropriate code letter in the space provided.

IFRS and GAAP accounting are the same for each of the following except for the

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Accounting Information Systems

Fraud, Internal Control, and Cash

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Incremental Analysis and Capital Budgeting

Time Value of Money

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