Question 1

A company pledges their receivables so they may

Accepted Answer

A) Collect a pledge fee. 
B) Borrow money. 
C) Charge a factoring fee. 
D) Increase sales. 
E) Recognize a sale. 
A) Collect a pledge fee. 
B) Borrow money. 
C) Charge a factoring fee. 
D) Increase sales. 
E) Recognize a sale.

Question 2

The accounts receivable turnover is calculated by dividing average accounts receivable by net sales.

Accepted Answer

A) True 
 B)False

Question 3

Frederick Company borrows $63,000 from First City Bank and pledges its receivables as security.Which of the following is true regarding this transaction:

Accepted Answer

A) First City Bank is the factor in this transaction. 
B) Frederick Company's financial statements must disclose the pledging of receivables. 
C) Frederick Company no longer has the risk of bad debts. 
D) First City Bank takes ownership of the receivables at the time of the pledge. 
E) No journal entry is required for this event. 
A) First City Bank is the factor in this transaction. 
B) Frederick Company's financial statements must disclose the pledging of receivables. 
C) Frederick Company no longer has the risk of bad debts. 
D) First City Bank takes ownership of the receivables at the time of the pledge. 
E) No journal entry is required for this event.

Question 4

A company borrowed $10,000 by signing a 180-day promissory note at 9%.The total to be paid at maturity of the note is: (Use 360 days a year.)

Accepted Answer

A) $10,450 
B) $10,900 
C) $10,075 
D) $11,800 
E) $10,300 
A) $10,450 
B) $10,900 
C) $10,075 
D) $11,800 
E) $10,300

Question 5

White Company allows customers to make purchases on credit.The terms of all credit sales are 2/10,n/30,and all sales are recorded at the gross price.Other customers can use a bank credit card where the bank deducts a 4% service charge for credit card sales and credits the bank account of White immediately when credit card receipts are deposited.White uses the perpetual inventory method.Prepare journal entries to record the following selected transactions and events.

Accepted Answer

The answer of White Company allows customers to make purchases...

Question 6

On October 12 of the current year,a company determined that a customer's account receivable was uncollectible and that the account should be written off.Assuming the allowance method is used to account for bad debts,what effect will this write-off have on the company's net income and total assets?

Accepted Answer

A) Decrease in net income; no effect on total assets. 
B) No effect on net income; no effect on total assets. 
C) Decrease in net income; decrease in total assets. 
D) Increase in net income; no effect on total assets. 
E) No effect on net income; decrease in total assets. 
A) Decrease in net income; no effect on total assets. 
B) No effect on net income; no effect on total assets. 
C) Decrease in net income; decrease in total assets. 
D) Increase in net income; no effect on total assets. 
E) No effect on net income; decrease in total assets.

Question 7

Orman Co.sold $80,000 of accounts receivable to First Savings and incurred a 3% factoring fee.Prepare the journal entry for Orman Co.to record the sale.

Accepted Answer

The answer of Orman Co.sold $80,000 of accounts receivable to...

Question 8

Gideon Company uses the allowance method of accounting for uncollectible accounts.On May 3,the Gideon Company wrote off the $2,000 uncollectible account of its customer,A.Hopkins.On July 10,Gideon received a check for the full amount of $2,000 from Hopkins.On July 10,the entry or entries Gideon makes to record the recovery of the bad debt is:

Accepted Answer

A)    
B)    
C)    
D)    
E)    
A)    
B)    
C)    
D)    
E)

Question 9

The realizable value refers to the accounts receivable amount expected to be received.

Accepted Answer

A) True 
 B)False

Question 10

The quality of receivables refers to:

Accepted Answer

A) The creditworthiness of sellers. 
B) The method of collection. 
C) The likelihood of collection without loss. 
D) Sales turnover. 
E) The interest rate. 
A) The creditworthiness of sellers. 
B) The method of collection. 
C) The likelihood of collection without loss. 
D) Sales turnover. 
E) The interest rate.

Question 11

A high accounts receivable turnover in comparison with competitors suggests that the firm should tighten its credit policy.

Accepted Answer

A) True 
 B)False

Question 12

A note that the maker does not pay at maturity is called a dishonored note.

Accepted Answer

A) True 
 B)False

Question 13

The ________ of a note is the day the principle plus interest of a note must be repaid.

Accepted Answer

The answer of The ________ of a note is the...

Question 14

On February 1,a customer's account balance of $2,300 was deemed to be uncollectible.What entry should be recorded on February 1 to record the write-off assuming the company uses the allowance method?

Accepted Answer

A) Debit Bad Debts Expense $2,300; credit Accounts Receivable $2,300. 
B) Debit Allowance for Doubtful Accounts $2,300; credit Bad Debts Expense $2,300. 
C) Debit Allowance for Doubtful Accounts $2,300; credit Accounts Receivable $2,300. 
D) Debit Bad Debts Expense $2,300; credit Allowance for Doubtful Accounts $2,300. 
E) Debit Accounts Receivable $250; credit Allowance for Doubtful Accounts $2,300. 
A) Debit Bad Debts Expense $2,300; credit Accounts Receivable $2,300. 
B) Debit Allowance for Doubtful Accounts $2,300; credit Bad Debts Expense $2,300. 
C) Debit Allowance for Doubtful Accounts $2,300; credit Accounts Receivable $2,300. 
D) Debit Bad Debts Expense $2,300; credit Allowance for Doubtful Accounts $2,300. 
E) Debit Accounts Receivable $250; credit Allowance for Doubtful Accounts $2,300.

Question 15

At the end of the current year,using the aging of receivable method,management estimated that $15,750 of the accounts receivable balance would be uncollectible.Prior to any year-end adjustments,the Allowance for Doubtful Accounts had a debit balance of $375.What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Accepted Answer

A)    
B)    
C)    
D)    
E)    
A)    
B)    
C)    
D)    
E)

Question 16

Explain how to record the receipt (acceptance)of a note receivable.

Accepted Answer

The receipt of a note receivable is reco

Question 17

No attempt is made to estimate bad debts expense under the allowance method of accounting for uncollectible accounts receivable.

Accepted Answer

A) True 
 B)False

Question 18

The percent of sales method of estimating bad debts focuses more on the realizable value of accounts receivable than on expense recognition.

Accepted Answer

A) True 
 B)False

Question 19

Majesty Productions accepted a $7,200,120-day,6% note from Swartz Studio on March 1.On the date the note matures,Swartz is unable to pay,but Majesty intends to continue collection efforts.What entry should Majesty record on the maturity date for this dishonored note?

Accepted Answer

A) Debit Accounts Receivable $7,200; credit Notes Receivable $7,200. 
B) Debit Accounts Receivable $7,200; credit Allowance for Doubtful Accounts $7,200. 
C) Debit Bad Debt Expense $7,344; credit Notes Receivable $7,344. 
D) Debit Accounts Receivable $7,344; credit Interest Revenue $144; credit Notes Receivable $7,200. 
E) Debit Accounts Receivable $7,056; debit Interest Revenue $144; credit Notes Receivable $7,200. 
A) Debit Accounts Receivable $7,200; credit Notes Receivable $7,200. 
B) Debit Accounts Receivable $7,200; credit Allowance for Doubtful Accounts $7,200. 
C) Debit Bad Debt Expense $7,344; credit Notes Receivable $7,344. 
D) Debit Accounts Receivable $7,344; credit Interest Revenue $144; credit Notes Receivable $7,200. 
E) Debit Accounts Receivable $7,056; debit Interest Revenue $144; credit Notes Receivable $7,200.

Question 20

After adjustment,the balance in the Allowance for Doubtful Accounts has the effect of reducing Accounts Receivable to its estimated realizable value.

Accepted Answer

A) True 
 B)False

Exam 7: Accounting for Receivables

A company pledges their receivables so they may

The accounts receivable turnover is calculated by dividing average accounts receivable by net sales.

Frederick Company borrows $63,000 from First City Bank and pledges its receivables as security.Which of the following is true regarding this transaction:

A company borrowed $10,000 by signing a 180-day promissory note at 9%.The total to be paid at maturity of the note is: (Use 360 days a year.)

On October 12 of the current year,a company determined that a customer's account receivable was uncollectible and that the account should be written off.Assuming the allowance method is used to account for bad debts,what effect will this write-off have on the company's net income and total assets?

Orman Co.sold $80,000 of accounts receivable to First Savings and incurred a 3% factoring fee.Prepare the journal entry for Orman Co.to record the sale.

The realizable value refers to the accounts receivable amount expected to be received.

The quality of receivables refers to:

A high accounts receivable turnover in comparison with competitors suggests that the firm should tighten its credit policy.

A note that the maker does not pay at maturity is called a dishonored note.

The ________ of a note is the day the principle plus interest of a note must be repaid.

On February 1,a customer's account balance of $2,300 was deemed to be uncollectible.What entry should be recorded on February 1 to record the write-off assuming the company uses the allowance method?

Explain how to record the receipt (acceptance)of a note receivable.

No attempt is made to estimate bad debts expense under the allowance method of accounting for uncollectible accounts receivable.

The percent of sales method of estimating bad debts focuses more on the realizable value of accounts receivable than on expense recognition.

Majesty Productions accepted a $7,200,120-day,6% note from Swartz Studio on March 1.On the date the note matures,Swartz is unable to pay,but Majesty intends to continue collection efforts.What entry should Majesty record on the maturity date for this dishonored note?

After adjustment,the balance in the Allowance for Doubtful Accounts has the effect of reducing Accounts Receivable to its estimated realizable value.

Accounting in Business

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Adjusting Accounts for Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash,fraud,and Internal Controls

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

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Capital Budgeting and Investment Analysis

Time Value of Money

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