Question 1

The credit department should have no access to cash.

Accepted Answer

A) True 
 B)False  True

Question 2

State the effect on net income of each of the following independent transactions. State your answer as: increase, decrease, or no effect.
 $$\begin{array} { | c | c | } 
\hline { \text { Transaction } } & \begin{array} { c } 
\text { Effect on Net } \
\text { Income }
\end{array} \
\hline \text { 1. Prepare adjusting entry for uncollectible } & \
\text { accounts. } & \
\hline \text { 2. Write-off a customer's account. } & \
\hline \text { 3. Reinstate a customer's account and } & \
\text { collect the balance due. } & \
\hline
\end{array}$$

Accepted Answer

$$\begin{array} { | c | c | } 
\hline { \text { Transaction } } & \begin{array} { c } 
\text { Effect on Net } \
\text { Income }
\end{array} \
\hline \text { 1. Prepare adjusting entry for uncollectible } & \
\text { accounts. } & \text { Decrease } \
\hline \text { 2. Write-off a customer's account. } & \text { No effect } \
\hline \begin{array} { l } 
\text { 3. Reinstate a customer's account and } \
\text { collect the balance due. }
\end{array} & \text { No effect } \
\hline
\end{array}$$

Question 3

Table 9-1
Ringo Company had the following information relating to net credit sales for 2019:
 $$\begin{array} { | c | r | c | } 
\hline \text { Accounts receivable, Jan. 1, 2019 } & \$ 18,000 & \text { Dr. } \
\hline \text { Allowance for doubtful accounts, } & & \
\text { Dec. 31, 2019, prior to adjustment } & 600 & \mathrm { Cr } . \
\hline \text { Net credit sales during 2019 } & 95,000 & \
\hline \text { Collections on account during 2019 } & 87,000 & \
\hline \text { Cash sales during } 2019 & 27,000 & \
\hline
\end{array}$$
-Referring to Table 9-1, if uncollectible accounts are determined by the aging of receivables to be $3,450, the amount of net accounts receivable after adjusting entries for 2019 would be:

Accepted Answer

A) $13,950. 
B) $15,150. 
C) $17,400. 
D) $22,550. 
A) $13,950. 
B) $15,150. 
C) $17,400. 
D) $22,550. D

Question 4

The current credit balance in allowance for doubtful accounts is $150. Management estimates that 2.5% of net credit sales of $105,000 will be uncollectible. Based on the foregoing data, what is the bad-debt expense balance on the income statement?

Accepted Answer

A) $2,775 
B) $2,475 
C) $2,650 
D) $2,625 
A) $2,775 
B) $2,475 
C) $2,650 
D) $2,625

Question 5

When a note matures, the payee should record:

Accepted Answer

A) unearned revenue. 
B) interest revenue. 
C) interest expense. 
D) note expense. 
A) unearned revenue. 
B) interest revenue. 
C) interest expense. 
D) note expense.

Question 6

Bradson Merchandising, which has a December 31 year end, and uses a periodic inventory system, completed the following transactions during 2018 and 2019: 2018
Oct. 1 Sold merchandise to Bravo Links, terms n / 60 , \$ 4,000.
Oct. 3 Negotiated with Bravo Links to exchange the account receiv able for a 120 -day, $10 \%$ note for $\$ 4,000$.
Dec. 31 Accrued interest on the Bravo Links note.

2019
Feb. 1 Collected in full from Bravo Links Prepare the necessary journal entries to record the above transactions.

Accepted Answer

General Journal
 @#IMG-DLM& *

Question 7

Table 9-5
The Ritchie Company gathered the following information pertaining to its year ended December 31, 2019, prior to any adjustments:
 $$\begin{array} { | l | r | r | } 
\hline \text { Net credit sales for the year } & \$ 780,000 & \
\hline \text { Accounts receivable, Dec. } 31,2019 & 170,000 & \
\hline \text { Allowance for doubtful accounts, } & & \
\text { December } 31,2019 & 3,200 & \mathrm { Cr } . \
\hline & & \
\hline
\end{array}$$ Aging of accounts receivable at December 31, 2019:
 $$\begin{array} { | l | r | } 
\hline 1 - 30 \text { days } & \$ 95,000 \
\hline 31 - 60 \text { days } & 38,000 \
\hline 61 - 90 \text { days } & 23,000 \
\hline \text { Over } 90 \text { days } & 14,000 \
\hline \text { Total } & \$ 170,000 \
\hline
\end{array}$$
-Referring to Table 9-5, assume Ritchie uses the percent-of-sales method for estimating uncollectible accounts. Ritchie estimates that uncollectible accounts will be 1.75% of net credit sales. The adjusting entry to record bad-debt expense for the year is:

Accepted Answer

A)  $\begin{array} { | c | r | r | } 
\hline \text { Bad-Debt Expense } & 13,650 & \
\hline \text { Accounts Receivable } & & 13,650 \
\hline
\end{array}$ 
B)  $\begin{array} { | c | r | r | } 
\hline \text { Bad-Debt Expense } & 10,450 & \
\hline \text { Accounts Receivable } & & 10,450 \
\hline
\end{array}$ 
C)  $\begin{array} { | c | r | r | } 
\hline \text { Bad-Debt Expense } & 16,850 & \
\hline \text { Allow. for Doubtful Accts. } & & 16,850 \
\hline
\end{array}$ 
D)  $\begin{array} { | c | r | r | } 
\hline \text { Bad-Debt Expense } & 13,650 & \
\hline \text { Allow. for Doubtful Accts. } & & 13,650 \
\hline
\end{array}$ 
A)  $\begin{array} { | c | r | r | } 
\hline \text { Bad-Debt Expense } & 13,650 & \
\hline \text { Accounts Receivable } & & 13,650 \
\hline
\end{array}$ 
B)  $\begin{array} { | c | r | r | } 
\hline \text { Bad-Debt Expense } & 10,450 & \
\hline \text { Accounts Receivable } & & 10,450 \
\hline
\end{array}$ 
C)  $\begin{array} { | c | r | r | } 
\hline \text { Bad-Debt Expense } & 16,850 & \
\hline \text { Allow. for Doubtful Accts. } & & 16,850 \
\hline
\end{array}$ 
D)  $\begin{array} { | c | r | r | } 
\hline \text { Bad-Debt Expense } & 13,650 & \
\hline \text { Allow. for Doubtful Accts. } & & 13,650 \
\hline
\end{array}$

Question 8

On December 31, 2019, Rainbow Appliances has $275,000 in accounts receivable and an allowance account with a debit balance of $320. Current period net credit sales were $780,000, and cash sales were $68,000.
a)Rainbow Appliances performs an aging schedule, and the results are summarized below, along with the appropriate percentages that Rainbow applies to the categories shown. $$\begin{array}{l}
\begin{array} { l c c } 
&&\text { Percentage }\
\text { Days Outstanding } & \text { Amount } & \text { Uncollectible } \
\text { Not yet due } & \$ 150,000 & 1 \% \
31 - 60 \text { days past due } & 50,000 & 5 \% \
61 - 90 \text { days past due } & 40,000 & 10 \% \
91 - 120 \text { days past due } & 25,000 & 25 \% \
\text { Over } 120 \text { days past due } & 10,000 & 50 \%
\end{array}
\end{array}$$ Assuming Rainbow uses the aging approach of accounting for uncollectible accounts, prepare the adjusting entry required at the end of the accounting period.
b)Assume now Rainbow uses the percent-of-sales method of accounting for uncollectible accounts. If historical data indicate that approximately 3% of net credit sales are uncollectible, what is the amount of bad-debt expense and what is the balance in the allowance for doubtful accounts after adjustment?

Accepted Answer

a)
General Journal

Question 9

Receivables are classified as current assets when they are due within two years.

Accepted Answer

A) True 
 B)False

Question 10

Mandy Smith's account was written off last year. She owed City Company $5,000. Using the allowance method, the journal entry to receive the cash after her account has been reinstated involves:

Accepted Answer

A) a debit to cash and a credit to Smith's account receivable. 
B) a debit to allowance for doubtful accounts and a credit to Smith's account receivable. 
C) a debit to cash and a credit to bad-debt expense. 
D) a debit to Smith's account receivable and a credit to allowance for doubtful accounts. 
A) a debit to cash and a credit to Smith's account receivable. 
B) a debit to allowance for doubtful accounts and a credit to Smith's account receivable. 
C) a debit to cash and a credit to bad-debt expense. 
D) a debit to Smith's account receivable and a credit to allowance for doubtful accounts.

Question 11

Table 9-11 Mark's Sales
At the beginning of 2019, Mark's sales had the following ledger balances:
 $$\begin{array} { | c | c | c | c | c | } 
\hline \text { Date } & \text { Accounts Receivable } & \text { Debit } & \text { Credit } & \text { Balance } \
\hline & & & & 24,000 \text { Dr. } \
\hline & & & & \
\hline
\end{array}$$ $$\begin{array} { | c | c | c | c | c | } 
\hline \text { Date } & \begin{array} { c } 
\text { Allowance for } \
\text { Doubtful Accounts }
\end{array} & \text { Debit } & \text { Credit } & \text { Balance } \
\hline & & & & 1,000 \mathrm { Cr } \text {. } \
\hline & & & & \
\hline
\end{array}$$ $$\begin{array} { | l | l | l | l | l | } 
\hline \text { Date } & \text { Bad Debts Expense } & \text { Debit } & \text { Credit } & \text { Balance } \
\hline & & & & \
\hline & & & & \
\hline
\end{array}$$ During the year there were $450,000 of credit sales, $460,000 of collections, and $3,700
of write-offs.
-Refer to Table 9-11. At the end of the year, Mark's adjusted for uncollectible account expense using the percent-of-sales method, and applied a rate, based on past history, of 1.2%. At the end of the year, what was the balance in the accounts receivable?

Accepted Answer

A) $10,300 
B) $3,700 
C) $14,000 
D) $21,300 
A) $10,300 
B) $3,700 
C) $14,000 
D) $21,300

Question 12

The acid-test ratio would include in the numerator:

Accepted Answer

A) cash, short-term investments, and prepaid expenses. 
B) inventory, cash, and short-term investments. 
C) cash, short-term investments, and net current receivables. 
D) cash, inventory, and prepaid expenses. 
A) cash, short-term investments, and prepaid expenses. 
B) inventory, cash, and short-term investments. 
C) cash, short-term investments, and net current receivables. 
D) cash, inventory, and prepaid expenses.

Question 13

When using the allowance method, the entry to write off an accounts receivable has no effect on income.

Accepted Answer

A) True 
 B)False

Question 14

The person or business to whom the signer of a promissory note promises a future payment is called the:

Accepted Answer

A) principal of the note. 
B) drawer of the note. 
C) maker of the note. 
D) payee of the note. 
A) principal of the note. 
B) drawer of the note. 
C) maker of the note. 
D) payee of the note.

Question 15

Allowance for doubtful accounts has a credit balance of $900 at the end of the current year (prior to adjustment). An analysis of the aged accounts in the customers' ledger indicates uncollectible accounts of $16,000. The adjusting entry would require a debit to:

Accepted Answer

A) bad-debt expense for $15,100. 
B) bad-debt expense for $16,900. 
C) allowance for doubtful accounts for $15,100. 
D) allowance for doubtful accounts for $16,900. 
A) bad-debt expense for $15,100. 
B) bad-debt expense for $16,900. 
C) allowance for doubtful accounts for $15,100. 
D) allowance for doubtful accounts for $16,900.

Question 16

Based on liquidity, which item would appear after accounts receivable in the Current Asset section of the Balance Sheet?

Accepted Answer

A) inventory 
B) cash 
C) short-term (marketable)investments 
D) Property, Plant, and Equipment 
A) inventory 
B) cash 
C) short-term (marketable)investments 
D) Property, Plant, and Equipment

Question 17

Under the allowance method, the entry to write off an account that has been deemed uncollectible has an impact on the net income of the firm.

Accepted Answer

A) True 
 B)False

Question 18

Under the direct write-off method, the entry to record an uncollectible account has the following effect on the financial statements:

Accepted Answer

A) increases expenses and decreases liabilities. 
B) decreases assets and increases owner's equity. 
C) decreases net income and decreases assets. 
D) increases expenses and increases assets. 
A) increases expenses and decreases liabilities. 
B) decreases assets and increases owner's equity. 
C) decreases net income and decreases assets. 
D) increases expenses and increases assets.

Question 19

Table 9-11 Mark's Sales
At the beginning of 2019, Mark's sales had the following ledger balances:
 $$\begin{array} { | c | c | c | c | c | } 
\hline \text { Date } & \text { Accounts Receivable } & \text { Debit } & \text { Credit } & \text { Balance } \
\hline & & & & 24,000 \text { Dr. } \
\hline & & & & \
\hline
\end{array}$$ $$\begin{array} { | c | c | c | c | c | } 
\hline \text { Date } & \begin{array} { c } 
\text { Allowance for } \
\text { Doubtful Accounts }
\end{array} & \text { Debit } & \text { Credit } & \text { Balance } \
\hline & & & & 1,000 \mathrm { Cr } \text {. } \
\hline & & & & \
\hline
\end{array}$$ $$\begin{array} { | l | l | l | l | l | } 
\hline \text { Date } & \text { Bad Debts Expense } & \text { Debit } & \text { Credit } & \text { Balance } \
\hline & & & & \
\hline & & & & \
\hline
\end{array}$$ During the year there were $450,000 of credit sales, $460,000 of collections, and $3,700
of write-offs.
-Refer to Table 9-11. At the end of the year, Mark's adjusted for uncollectible account expense using the percent-of-sales method, and applied a rate, based on past history, of 1.2%. At the end of the year, what was the balance in the allowance account?

Accepted Answer

A) $2,300 
B) $1,700 
C) $6,400 
D) $2,700 
A) $2,300 
B) $1,700 
C) $6,400 
D) $2,700

Question 20

A company has $50,000 in cash, $85,000 in short-term investments, $120,000 in net current receivables, and $145,000 in inventory. The total current liabilities of the firm are $275,000. The acid-test ratio of the company is:

Accepted Answer

A) 0.93. 
B) 0.64. 
C) 1.45. 
D) 1.76. 
A) 0.93. 
B) 0.64. 
C) 1.45. 
D) 1.76.

The credit department should have no access to cash.

The current credit balance in allowance for doubtful accounts is $150. Management estimates that 2.5% of net credit sales of $105,000 will be uncollectible. Based on the foregoing data, what is the bad-debt expense balance on the income statement?

When a note matures, the payee should record:

Receivables are classified as current assets when they are due within two years.

Mandy Smith's account was written off last year. She owed City Company $5,000. Using the allowance method, the journal entry to receive the cash after her account has been reinstated involves:

The acid-test ratio would include in the numerator:

When using the allowance method, the entry to write off an accounts receivable has no effect on income.

The person or business to whom the signer of a promissory note promises a future payment is called the:

Allowance for doubtful accounts has a credit balance of $900 at the end of the current year (prior to adjustment). An analysis of the aged accounts in the customers' ledger indicates uncollectible accounts of $16,000. The adjusting entry would require a debit to:

Based on liquidity, which item would appear after accounts receivable in the Current Asset section of the Balance Sheet?

Under the allowance method, the entry to write off an account that has been deemed uncollectible has an impact on the net income of the firm.

Under the direct write-off method, the entry to record an uncollectible account has the following effect on the financial statements:

A company has $50,000 in cash, $85,000 in short-term investments, $120,000 in net current receivables, and $145,000 in inventory. The total current liabilities of the firm are $275,000. The acid-test ratio of the company is:

Accounting and the Business Environment

Recording Business Transactions

Measuring Business Income: The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations and the Accounting Cycle

Accounting for Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Property, Plant, and Equipment; Goodwill; and Intangibles

Current Liabilities and Payroll

Filters

Exam 9: Receivables

The credit department should have no access to cash.

The current credit balance in allowance for doubtful accounts is $150. Management estimates that 2.5% of net credit sales of $105,000 will be uncollectible. Based on the foregoing data, what is the bad-debt expense balance on the income statement?

When a note matures, the payee should record:

Receivables are classified as current assets when they are due within two years.

Mandy Smith's account was written off last year. She owed City Company $5,000. Using the allowance method, the journal entry to receive the cash after her account has been reinstated involves:

The acid-test ratio would include in the numerator:

When using the allowance method, the entry to write off an accounts receivable has no effect on income.

The person or business to whom the signer of a promissory note promises a future payment is called the:

Allowance for doubtful accounts has a credit balance of $900 at the end of the current year (prior to adjustment). An analysis of the aged accounts in the customers' ledger indicates uncollectible accounts of $16,000. The adjusting entry would require a debit to:

Based on liquidity, which item would appear after accounts receivable in the Current Asset section of the Balance Sheet?

Under the allowance method, the entry to write off an account that has been deemed uncollectible has an impact on the net income of the firm.

Under the direct write-off method, the entry to record an uncollectible account has the following effect on the financial statements:

A company has $50,000 in cash, $85,000 in short-term investments, $120,000 in net current receivables, and $145,000 in inventory. The total current liabilities of the firm are $275,000. The acid-test ratio of the company is:

Accounting and the Business Environment

Recording Business Transactions

Measuring Business Income: The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations and the Accounting Cycle

Accounting for Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Property, Plant, and Equipment; Goodwill; and Intangibles

Current Liabilities and Payroll

Filters