Question 1

The percentage of receivables basis of estimating expected uncollectible accounts emphasizes income statement relationships.

Accepted Answer

A) True 
 B)False

Question 2

Kessler Co., makes a credit card sale to a customer for $600. The credit card sale has a grace period of 30 days and then an interest charge of 1.5% per month is added to the balance. If the unpaid balance on the above sale is $360 at the end of the grace period, the interest charge is

Accepted Answer

A)  $9.00. 
B)  $6.00. 
C)  $3.60. 
D)  $5.40. 
A)  $9.00. 
B)  $6.00. 
C)  $3.60. 
D)  $5.40.

Question 3

The _________________ basis of estimating uncollectibles normally results in the best approximation of _______________ value and therefore emphasizes balance sheet relationships.

Accepted Answer

percentage

Question 4

Match the items below by entering the appropriate code letter in the space provided.
A. Aging of receivables
B. Direct write-off method 
C. Promissory note 
D. Trade receivables
E. Percentage of sales basis
 F. Percentage of receivables basis
G. Factoring
H. Dishonored note
 I. Average collection period
 J. Credit card sales
1. A written promise to pay a specified amount on demand or at a definite time.
2. Sales that involve the customer, the retailer, and the credit card issuer.
3. Emphasizes the matching of costs and revenues in the same period.
4. Amounts owed by customers from the sale of goods and services.
5. A note which is not paid in full at maturity.
6. Analysis of customer account balances by length of time they have been unpaid.
7. Emphasizes expected cash realizable value of accounts receivable.
8. Generally not acceptable for financial reporting purposes.
9. The amount of time that a receivable is outstanding.
10. Sale of accounts receivable to a factor.

Accepted Answer

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

Question 5

Trade receivables occur when two companies trade or exchange notes receivables.

Accepted Answer

A) True 
 B)False

Question 6

Prepare the necessary journal entries for the following transactions for Mahoney Co.
May 25 Mahoney Co. received a $25,000, 2-month, 6% note from Kohler Company in settlement of an account receivable.
July 25 Mahoney Co. received payment on the Kohler note.

Accepted Answer

The answer of Prepare the necessary journal entries for the...

Question 7

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 8

When credit sales are made, _________________ Expense is considered a normal and necessary risk of doing business on a credit basis.

Accepted Answer

The answer of When credit sales are made, _________________ Expense...

Question 9

When counting the exact number of days to determine the maturity date of a note, the date of issue is included but the due date is omitted.

Accepted Answer

A) True 
 B)False

Question 10

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 11

A major advantage of national credit cards to retailers is that there is no charge to the retailer by the credit card companies for their services.

Accepted Answer

A) True 
 B)False

Question 12

Generally accepted accounting principles require that the direct write-off method be used for financial reporting purposes if it is also used for tax purposes.

Accepted Answer

A) True 
 B)False

Question 13

Using the allowance method, the uncollectible accounts for the year is estimated to be $28,000. If the balance for the Allowance for Doubtful Accounts is a $7,000 debit before adjustment, what is the amount of bad debts expense for the period?

Accepted Answer

A)  $7,000 
B)  $21,000 
C)  $28,000 
D)  $35,000 
A)  $7,000 
B)  $21,000 
C)  $28,000 
D)  $35,000

Question 14

The account Allowance for Doubtful Accounts is closed out at the end of the year.

Accepted Answer

A) True 
 B)False

Question 15

Determine the interest on the following notes:
(a) $2,000 at 6% for 90 days.
(b) $900 at 9% for 5 months.
(c) $3,000 at 8% for 60 days
(d) $1,600 at 7% for 6 months

Accepted Answer

(a) $30.00 ($2,000 × .06 × 90/

Question 16

Claims for which formal instruments of credit are issued as proof of the debt are

Accepted Answer

A)  accounts receivable. 
B)  interest receivable. 
C)  notes receivable. 
D)  other receivables. 
A)  accounts receivable. 
B)  interest receivable. 
C)  notes receivable. 
D)  other receivables.

Question 17

Rainey Company has the following accounts in its general ledger at July 31: Accounts Receivable $40,000 and Allowance for Doubtful Accounts $2,500. During August, the following transactions occurred.
Oct. 15 Sold $20,000 of accounts receivable to Good Factors, Inc. who assesses a 3% finance charge.
25 Made sales of $900 on VISA credit cards. The credit card service charge is 2%.
Instructions
Journalize the transactions.

Accepted Answer

The answer of Rainey Company has the following accounts in...

Question 18

Using the percentage of receivables method for recording bad debts expense, estimated uncollectible accounts are $10,000. If the balance of the Allowance for Doubtful Accounts is $2,000 debit before adjustment, what is the balance after adjustment?

Accepted Answer

A)  $10,000 
B)  $12,000 
C)  $8,000 
D)  $2,000 
A)  $10,000 
B)  $12,000 
C)  $8,000 
D)  $2,000

Question 19

Klosterman Corporation's unadjusted trial balance includes the following balances (assume normal balances):   Bad debts are estimated to be 6% of outstanding receivables. What amount of bad debts expense will the company record?

Accepted Answer

A)  $44,760 
B)  $30,560 
C)  $29,708 
D)  $45,612 
A)  $44,760 
B)  $30,560 
C)  $29,708 
D)  $45,612

Question 20

On November 1, Kinder Company received a $6,000, 10%, three-month note receivable. The cash to be received by Kinder Company when the note becomes due is:

Accepted Answer

A)  $6,000. 
B)  $6,100. 
C)  $6,150. 
D)  $6,600. 
A)  $6,000. 
B)  $6,100. 
C)  $6,150. 
D)  $6,600.

Exam 9: Accounting for Receivables

The percentage of receivables basis of estimating expected uncollectible accounts emphasizes income statement relationships.

Kessler Co., makes a credit card sale to a customer for $600. The credit card sale has a grace period of 30 days and then an interest charge of 1.5% per month is added to the balance. If the unpaid balance on the above sale is $360 at the end of the grace period, the interest charge is

The _________________ basis of estimating uncollectibles normally results in the best approximation of _______________ value and therefore emphasizes balance sheet relationships.

Trade receivables occur when two companies trade or exchange notes receivables.

Prepare the necessary journal entries for the following transactions for Mahoney Co. May 25 Mahoney Co. received a $25,000, 2-month, 6% note from Kohler Company in settlement of an account receivable. July 25 Mahoney Co. received payment on the Kohler note.

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

When credit sales are made, _________________ Expense is considered a normal and necessary risk of doing business on a credit basis.

When counting the exact number of days to determine the maturity date of a note, the date of issue is included but the due date is omitted.

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?

A major advantage of national credit cards to retailers is that there is no charge to the retailer by the credit card companies for their services.

Generally accepted accounting principles require that the direct write-off method be used for financial reporting purposes if it is also used for tax purposes.

Using the allowance method, the uncollectible accounts for the year is estimated to be $28,000. If the balance for the Allowance for Doubtful Accounts is a $7,000 debit before adjustment, what is the amount of bad debts expense for the period?

The account Allowance for Doubtful Accounts is closed out at the end of the year.

Determine the interest on the following notes: (a) $2,000 at 6% for 90 days. (b) $900 at 9% for 5 months. (c) $3,000 at 8% for 60 days (d) $1,600 at 7% for 6 months

Claims for which formal instruments of credit are issued as proof of the debt are

Using the percentage of receivables method for recording bad debts expense, estimated uncollectible accounts are $10,000. If the balance of the Allowance for Doubtful Accounts is $2,000 debit before adjustment, what is the balance after adjustment?

Klosterman Corporation's unadjusted trial balance includes the following balances (assume normal balances): Bad debts are estimated to be 6% of outstanding receivables. What amount of bad debts expense will the company record?

On November 1, Kinder Company received a $6,000, 10%, three-month note receivable. The cash to be received by Kinder Company when the note becomes due is:

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 Analysis: the Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Filters

The ___ basis of estimating uncollectibles normally results in the best approximation of _ value and therefore emphasizes balance sheet relationships.