Question 1

Management must periodically assess the reasonableness of the allowance for uncollectibles if it uses the

Accepted Answer

A) direct write-off method. 
B) percent of sales method only. 
C) percent of gross receivables method only. 
D) percent of sales or the percent of gross receivables methoD. 
A) direct write-off method. 
B) percent of sales method only. 
C) percent of gross receivables method only. 
D) percent of sales or the percent of gross receivables methoD.

Question 2

When receivables are bundled together and transferred to another organization that issues securities collateralized by the transferred receivables,the arrangement is

Accepted Answer

A) collateralization. 
B) discounting. 
C) factoring. 
D) securitization. 
A) collateralization. 
B) discounting. 
C) factoring. 
D) securitization.

Question 3

IFRS only explicitly covers troubled debt restructurings from the lender's perspective.

Accepted Answer

A) True 
 B)False

Question 4

Receivables growth could exceed sales growth because the firm allows its customers more time to pay.

Accepted Answer

A) True 
 B)False

Question 5

In a transaction where the transferor surrenders control over its receivables,the transaction is treated as a collateralized borrowing and any gain or loss is recognized in earnings.

Accepted Answer

A) True 
 B)False

Question 6

Subprime loans can be securitized as part of a general portfolio of loans.

Accepted Answer

A) True 
 B)False

Question 7

Jensen Homes purchased $160,000 of scaffolding from Lewisburg Builders Supply on January 2,2015.Jensen paid $30,000 in cash and signed a three-year 10% note for the remaining $130,000 of the purchase price.The note specifies that payments of $26,000 plus interest be made each year on the anniversary date of the loan.Jensen made the required January 2,2014 payment,but was unable to make the second payment on January 2,2015 because of a downturn in the construction industry.At this time Jensen owed Lewisburg Builders Supply $104,000 plus $10,400 interest that had been accrued by both companies on December 31,2014.Rather than write off the note,Lewisburg Builders Supply agreed to restructure the loan as follows: one payment of $95,000 on January 2,2016 would satisfy the restructured note.The present value of $1 to be received n periods in the future = 1 ÷ (1 + r)n where r is the rate of interest per period.
Required:
Prepare the journal entries made by each company on January 2,2015 to record the restructuring of the note.

Accepted Answer

@#IMG-DLM& Feedback:The lender records the restruc

Question 8

When a company factors its receivables with recourse,the company cannot be required to pay the factor if a customer's account proves uncollectible.

Accepted Answer

A) True 
 B)False

Question 9

A restructuring of debt constitutes a troubled debt restructuring if the creditor,for legal or economic reasons related to the debtor's financial difficulties,grants a concession to the debtor that it would otherwise not consider.

Accepted Answer

A) True 
 B)False

Question 10

If a note receivable is discounted with recourse and the customer defaults at final payment,the seller

Accepted Answer

A) has no obligation to the bank. 
B) must repay the full amount of the note plus interest to the bank. 
C) must refund the proceeds of the discounting to the bank. 
D) must repay the principal only to the bank. 
A) has no obligation to the bank. 
B) must repay the full amount of the note plus interest to the bank. 
C) must refund the proceeds of the discounting to the bank. 
D) must repay the principal only to the bank.

Question 11

For the month of December 2014 the records of Seal Corporation show the following information:
$$\begin{array} { l r } 
\text { Cash received on accounts receivable } & \$ 57,000 \
\text { Cash sales } & 47,000 \
\text { Accounts receivable, December } 1,2014 & 70,000 \
\text { Accounts receivable, December } 31,2014 & 65,000 \
\text { Accounts receivable written off as uncollectible } & 2,500 \
\text { Sales returns \& allowances } & 1,850
\end{array}$$ 
Required:
Determine the net sales for the month of December 2014.

Accepted Answer

Find the amount of gross sales by determ

Question 12

Interest must be imputed when the stated rate is lower than the prevailing borrowing rate at the time of the transaction.

Accepted Answer

A) True 
 B)False

Question 13

Perez Company sold equipment to Gomez,receiving in exchange a note that called for three equal annual principal payments of $100,000 plus annual interest payments of $4,000.Because the market rate of interest for companies with Gomez' credit standing was 6% at the time of the sale,Perez correctly recorded the note at its present value of $277,993.After receiving the first payment,Perez learns that the market rate of interest on loans of this type has fallen to 5%.Assume that there is an active market for these types of notes.The present value of $1 to be received n periods in the future = 1 ÷ (1 + r)n where r is the rate of interest per period.
Required:
a.Prepare the journal entry Perez should make to adjust the carrying value of the note to its fair value.
b.At what amount would this note appear on Perez Company's December 31,2012 balance sheet?

Accepted Answer

a. @#IMG-DLM& 
b.$193,379
Feedback:Present value o

Question 14

The general accounting for accounts and notes receivable under IFRS

Accepted Answer

A) presumes off-balance sheet treatment when these assets are sold. 
B) has yet to be determined by the IASB. 
C) is different than U.S.GAAP in that IFRS does not allow the fair value option. 
D) is similar to the accounting under U.S.GAAP. 
A) presumes off-balance sheet treatment when these assets are sold. 
B) has yet to be determined by the IASB. 
C) is different than U.S.GAAP in that IFRS does not allow the fair value option. 
D) is similar to the accounting under U.S.GAAP.

Question 15

When a company accepts credit cards (e.g.,VISA or MasterCard)it engages in a form of factoring.

Accepted Answer

A) True 
 B)False

Question 16

Factoring without recourse means that the company must buy back any bad receivables from the factor.

Accepted Answer

A) True 
 B)False

Question 17

Readers of financial statements must scrutinize the note disclosures,and the financing activities section of the cash flow statement,for evidence of dispositions of receivables that may be masking overly aggressive revenue recognition policies or bad receivables management.

Accepted Answer

A) True 
 B)False

Question 18

Factoring can either be with,or without,recourse.

Accepted Answer

A) True 
 B)False

Question 19

Ignoring estimated future returns and allowances has a trivial effect on income when the amount of actual returns and allowances does not vary greatly from year to year.

Accepted Answer

A) True 
 B)False

Question 20

When establishing credit policies,companies choose what they believe is a profit-minimizing balance between the expected cost of credit sales and benefits of increased credit sales.

Accepted Answer

A) True 
 B)False

Management must periodically assess the reasonableness of the allowance for uncollectibles if it uses the

When receivables are bundled together and transferred to another organization that issues securities collateralized by the transferred receivables,the arrangement is

IFRS only explicitly covers troubled debt restructurings from the lender's perspective.

Receivables growth could exceed sales growth because the firm allows its customers more time to pay.

In a transaction where the transferor surrenders control over its receivables,the transaction is treated as a collateralized borrowing and any gain or loss is recognized in earnings.

Subprime loans can be securitized as part of a general portfolio of loans.

When a company factors its receivables with recourse,the company cannot be required to pay the factor if a customer's account proves uncollectible.

A restructuring of debt constitutes a troubled debt restructuring if the creditor,for legal or economic reasons related to the debtor's financial difficulties,grants a concession to the debtor that it would otherwise not consider.

If a note receivable is discounted with recourse and the customer defaults at final payment,the seller

Interest must be imputed when the stated rate is lower than the prevailing borrowing rate at the time of the transaction.

The general accounting for accounts and notes receivable under IFRS

When a company accepts credit cards (e.g.,VISA or MasterCard)it engages in a form of factoring.

Factoring without recourse means that the company must buy back any bad receivables from the factor.

Readers of financial statements must scrutinize the note disclosures,and the financing activities section of the cash flow statement,for evidence of dispositions of receivables that may be masking overly aggressive revenue recognition policies or bad receivables management.

Factoring can either be with,or without,recourse.

Ignoring estimated future returns and allowances has a trivial effect on income when the amount of actual returns and allowances does not vary greatly from year to year.

When establishing credit policies,companies choose what they believe is a profit-minimizing balance between the expected cost of credit sales and benefits of increased credit sales.

The Economic and Institutional Setting for Financial Reporting

Accrual Accounting and Income Determination

Additional Topics in Income Determination

Structure of the Balance Sheet and Statement of Cash Flows

Essentials of Financial Statement Analysis

The Role of Financial Information in Valuation and Credit Risk Assessment

The Role of Financial Information in Contracting

Inventories

Long-Lived Assets

Financial Instruments As Liabilities

Financial Reporting for Leases

Income Tax Reporting

Pensions and Postretirement Benefits

Financial Reporting for Owners Equity

Intercorporate Equity Investments

Statement of Cash Flows

Filters

Exam 8: Receivables

Management must periodically assess the reasonableness of the allowance for uncollectibles if it uses the

When receivables are bundled together and transferred to another organization that issues securities collateralized by the transferred receivables,the arrangement is

IFRS only explicitly covers troubled debt restructurings from the lender's perspective.

Receivables growth could exceed sales growth because the firm allows its customers more time to pay.

In a transaction where the transferor surrenders control over its receivables,the transaction is treated as a collateralized borrowing and any gain or loss is recognized in earnings.

Subprime loans can be securitized as part of a general portfolio of loans.

When a company factors its receivables with recourse,the company cannot be required to pay the factor if a customer's account proves uncollectible.

A restructuring of debt constitutes a troubled debt restructuring if the creditor,for legal or economic reasons related to the debtor's financial difficulties,grants a concession to the debtor that it would otherwise not consider.

If a note receivable is discounted with recourse and the customer defaults at final payment,the seller

Interest must be imputed when the stated rate is lower than the prevailing borrowing rate at the time of the transaction.

The general accounting for accounts and notes receivable under IFRS

When a company accepts credit cards (e.g.,VISA or MasterCard)it engages in a form of factoring.

Factoring without recourse means that the company must buy back any bad receivables from the factor.

Readers of financial statements must scrutinize the note disclosures,and the financing activities section of the cash flow statement,for evidence of dispositions of receivables that may be masking overly aggressive revenue recognition policies or bad receivables management.

Factoring can either be with,or without,recourse.

Ignoring estimated future returns and allowances has a trivial effect on income when the amount of actual returns and allowances does not vary greatly from year to year.

When establishing credit policies,companies choose what they believe is a profit-minimizing balance between the expected cost of credit sales and benefits of increased credit sales.

The Economic and Institutional Setting for Financial Reporting

Accrual Accounting and Income Determination

Additional Topics in Income Determination

Structure of the Balance Sheet and Statement of Cash Flows

Essentials of Financial Statement Analysis

The Role of Financial Information in Valuation and Credit Risk Assessment

The Role of Financial Information in Contracting

Inventories

Long-Lived Assets

Financial Instruments As Liabilities

Financial Reporting for Leases

Income Tax Reporting

Pensions and Postretirement Benefits

Financial Reporting for Owners Equity

Intercorporate Equity Investments

Statement of Cash Flows

Filters