Exam 7: Receivables and Investments

Wagner's Bookstore acquires a 6% $12,000 certificate of deposit on September 1.The term of the CD is six months.At that time, all principal and accrued interest will be paid in cash.Indicate the effect on the financial statements at December 31.

What are the effects on the accounting equation when a company makes the adjustment to record bad debt expense using the allowance method?

Which one of the following is not an accurate description of Allowance for Doubtful Accounts?

Accounts receivable are shown on the balance sheet at their net realizable value.

Where can the amounts needed to compute the accounts receivable turnover ratio be found?

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

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

A subsidiary is a separate legal entity that is owned or controlled by another entity.

Match the following definitions with their appropriate terms . -Maturity value

Select the term from the list below that matches each of the following six descriptions. -The party that receives payment due from a note

What are the effects on the accounting equation from the purchase of a short-term investment?

The total amount of interest calculated annually on a $7,000 promissory note payable for 3 years at 12% that is not compounded is

Match the following definitions with their appropriate terms . -Allowance for doubtful accounts

The data below is for Benton Corporation for 2016. Accounts Receivable-January 1, 2016 \ 334,000 Credit sales during 2016 850,000 Collections from credit customers during 2016 725,000 Customer accounts written off as uncollectible during 2016 12,000 Allowance for Doubtful Accounts [Credit B alance] (After write-off of uncollectible accounts) 1,700 Estimated uncollectible accounts based on an aging analysis 13,200 ​ ​ -Refer to the data for Benton Corporation. If the aging approach is used to estimate bad debts, what should the balance in the Allowance for Doubtful Accounts be after the bad debts adjustment?

The reason the allowance method of recognizing bad debts is used is primarily because it recognizes the maximum amount of write-off in each period.

On July 1, 2016, Overlin Corp.purchased $100,000 of 8% bonds at face value.Interest is paid annually on June 30.If the accounting year for Overlin ends at December 31, 2016, what will be reported with respect to the bonds on that date?

A(n) _________________________ is a written promise to repay a definite sum of money either upon demand, or at a fixed or determinable date in the future.

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

The payee of a note recognizes a note payable on the balance sheet and interest expense on its income statement.

On January 1, 2016, 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 2016.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 net realizable value of receivables appearing on the 2016 balance sheet will amount to: