Exam 7: Receivables and Investments

Textbooks.com accepts VISA for payments of purchases made by students.The credit card drafts are deposited directly in a bank account.VISA charges a 2% collection fee.Credit card drafts totaling $12,000 are deposited during September.The effect on the accounting equation to record the sales and deposits will include

Comfort Shoes received a promissory note from a customer on April 1, 2014.The face amount of the note is $2,000; the terms are 12 months and 8% annual interest.At the maturity date, the customer pays for the note and interest.Comfort Shoes made the proper adjustment at the end of December for interest.The effect of recognizing the transaction on the maturity date is

Bad Debts Expense is a contra account that is used to reduce accounts receivable to its net realizable value.

For what reason would a company buy 10% of the common stock of a second company?

Securities issued by corporations as a form of ownership in the business, such as common and preferred stock, are called equity securities.

The gross accounts receivable less the allowance for doubtful accounts is known as the _________________________.

If accounts receivable turnover is faster, this means that fewer days are required to collect receivables.

The accounts receivable turnover ratio is a measure of how well a company manages its receivables.

Music Corporation The data below is for Music Corporation for 2015. -Refer to the data for Music Corporation. What is the balance of Accounts Receivable at December 31, 2015?

The accounts receivable turnover ratio is used to evaluate how well a company does in collecting its accounts receivable.

During 2014, the accounts receivable turnover rate for Cordner Company increased from 10 to 14 times per year.Which one of the following statements is the most likely explanation for the change?

The the accounts receivable turnover ratio, the quicker the each dollar of accounts receivable can be collected.

Bad Debts expense is debited and Accounts Receivable is credited at the end of the period to recognize bad debts under the allowance method.

Baggs buys $100,000 of Vista Company bonds on January 1, 2014 at face value.The bonds pay 10% interest semiannually on June 30 and December 31.If Baggs sells the bonds at 99 on July 1, 2014, there will be a loss reported on the income statement.

On January 1, 2014, the Accounts Receivable and the Allowance for Uncollectible Accounts for Darius Company carried balances of $20,000 and $550 respectively.During the year, the company reported $70,000 of credit sales.There were $400 of receivables written off as uncollectible in 2014.Cash collections of receivables amounted to $74,700.The company estimates that it will be unable to collect 5% of the year-end accounts receivable balance. The amount of bad debts expense recognized in the 2014 income statement will be:

The accounts receivable turnover ratio is computed by dividing net income by average accounts receivable.

Davis Corp.invested cash in a 9-month certificate of deposit CD) on October 1, 2015.If Davis has an accounting period which ends on December 31, 2015, when would it most likely recognize interest revenue from the CD?

An increase in accounts receivable is reported on the statement of cash flows under the indirect method as an addition.

A company that holds a promissory note from another company has an asset, called an) ____________________.

The process of assigning a note due in the future to a bank before its maturity date is called ____________________.