Question 1

The accounts receivable turnover indicates how often accounts receivable are received and collected during the period.

Accepted Answer

A) True 
 B)False

Question 2

A company borrowed $10,000 by signing a six-month promissory note at 5% interest.The amount of interest to be paid at maturity is $25.

Accepted Answer

A) True 
 B)False

Question 3

________ is the charge for using borrowed money until its due date.

Accepted Answer

The answer of ________ is the charge for using borrowed...

Question 4

The period of a note is the time from the note's (contract)date to its maturity date.

Accepted Answer

A) True 
 B)False

Question 5

Bonita Company estimates uncollectible accounts using the allowance method at December 31.It prepared the following aging of receivables analysis.
 $$\begin{array} { | l | r | r | r | r | r | r | } 
\hline & & &  { \text { Days } } &{ \text { Past } } & \text { Due } & \
\hline & \text { Total } & \text { Current } & { 1 \text { to } 30 } & 31 \text { to } 60 & 61 \text { to } 90 & \text { Over } 90 \
\hline \text { Accounts receivable } & \$ 110,000 & 68,000 & 17,000 & 10,000 & 8,000 & 7,000 \
\hline \text { Percent uncollectible } & & 1 \% & 2 \% & 5 \% & 8 \% & 13 \% \
\hline
\end{array}$$ 
a.Estimate the balance of the Allowance for Doubtful Accounts using the aging of accounts receivable method.
b.Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a.Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $550 credit.
c.Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a.Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $300 debit.

Accepted Answer

\[\begin{array} { | l | l | l | l | l |

Question 6

The formula for computing interest on a note is: Principal of the note × Annual interest rate × Time expressed in fraction of year.

Accepted Answer

A) True 
 B)False

Question 7

A company has net sales of $1,200,000 and average accounts receivable of $400,000.What is its accounts receivable turnover for the period?

Accepted Answer

A)  0.33 
B)  5.00 
C)  20.0 
D)  73.0 
E)  3.0 
A)  0.33 
B)  5.00 
C)  20.0 
D)  73.0 
E)  3.0

Question 8

Match each of the following terms with the appropriate definitions.
-The accounting principle that requires financial statements (including the notes)to report all relevant information about operations and financial condition.

Accepted Answer

A) Factoring accounts receivable 
B) Allowance method 
C) Accounts receivable turnover 
D) Principal of a note 
E) Materiality constraint
F)Installment accounts receivable
G)Pledging accounts receivable
H)Direct write-off method
I)Dishonoring a note
J)Full disclosure principle 
A) Factoring accounts receivable 
B) Allowance method 
C) Accounts receivable turnover 
D) Principal of a note 
E) Materiality constraint
F)Installment accounts receivable
G)Pledging accounts receivable
H)Direct write-off method
I)Dishonoring a note
J)Full disclosure principle

Question 9

All of the following statements regarding recognition of receivables under U.S.GAAP and IFRS are true except:

Accepted Answer

A)  U.S. GAAP and IFRS have similar asset criteria that apply to recognition of receivables. 
B)  Receivables that arise from revenue-generating activities are subject to broadly similar criteria for U.S. GAAP and IFRS. 
C)  The realization principle under GAAP implies an arm's length transaction occurs. 
D)  Under U.S. GAAP, provision refers to a liability whose amount or timing is uncertain. 
E)  Differences arise mainly from industry-specific guidance under U.S. GAAP. 
A)  U.S. GAAP and IFRS have similar asset criteria that apply to recognition of receivables. 
B)  Receivables that arise from revenue-generating activities are subject to broadly similar criteria for U.S. GAAP and IFRS. 
C)  The realization principle under GAAP implies an arm's length transaction occurs. 
D)  Under U.S. GAAP, provision refers to a liability whose amount or timing is uncertain. 
E)  Differences arise mainly from industry-specific guidance under U.S. GAAP.

Question 10

Match each of the following terms with the appropriate definitions.
-The party to whom the promissory note is payable.

Accepted Answer

A) Expense recognition (matching) principle 
B) Realizable value 
C) Interest 
D) Bad debts 
E) Accounts receivable
F)Aging of accounts receivable
G)Allowance for doubtful accounts
H)Promissory note
I)Payee of a note
J)Maker of a note 
A) Expense recognition (matching) principle 
B) Realizable value 
C) Interest 
D) Bad debts 
E) Accounts receivable
F)Aging of accounts receivable
G)Allowance for doubtful accounts
H)Promissory note
I)Payee of a note
J)Maker of a note

Question 11

Kenai Company sold $600 of merchandise to a customer who used a National Bank credit card.National Bank deducts a 3% service charge for sales on its credit cards.Kenai electronically remits the credit card sales receipts to the credit card company and receives payment immediately.The journal entry to record the collection from the credit card company would be:

Accepted Answer

A)  Debit Cash of $618 and credit Accounts Receivable-National $618. 
B)  Debit Cash of $618; credit Credit Card Expense $18 and credit Sales $600. 
C)  Debit Accounts Receivable-National $582; debit Credit Card Expense $18 and credit Sales $600. 
D)  Debit Cash $582; debit Credit Card Expense $18 and credit Sales $600. 
E)  Debit Cash $582 and credit Sales $582. 
A)  Debit Cash of $618 and credit Accounts Receivable-National $618. 
B)  Debit Cash of $618; credit Credit Card Expense $18 and credit Sales $600. 
C)  Debit Accounts Receivable-National $582; debit Credit Card Expense $18 and credit Sales $600. 
D)  Debit Cash $582; debit Credit Card Expense $18 and credit Sales $600. 
E)  Debit Cash $582 and credit Sales $582.

Question 12

Woods Co.uses a perpetual inventory system,and accepts the World Express credit card from its customers.World Express charges a 3.5% service fee and all credit card receipts deposited are credited to the company account on the day of deposit.On February 28,Woods sold $24,000 worth of merchandise to customers (that had cost $14,400)using the World Express charge card.Prepare the journal entries to record February 28 sales.

Accepted Answer

\[\begin{array} { l l l } 
\text { Feb.

Question 13

A company reports the following results in its financial statements:
 $$\begin{array} { l l l l } 
& \text { Year } 3 & \text { Year } 2 & \text { Year } 1 \
\text { Net Sales } & \$ 2,500,000 & \$ 2,100,000 & \$ 1,900,000 \
\text { Accounts receivable, Ending Balance } & 172,000 & 167,000 & 165,000
\end{array}$$
 
Calculate the company accounts receivable turnover for Year 2 and Year 3.Compare these two results and give a possible explanation for any significant change.

Accepted Answer

Year 2: Accounts receivable turnover:
$2

Question 14

Uniform Supply accepted a $4,800,90-day,10% note from Tracy Janitorial on October 17.If the note is dishonored,but Uniform Supply intends to continue collection efforts,what entry should Uniform Supply make on January 15 of the next year? (Assume no reversing entries are made.)(Use 360 days a year.)

Accepted Answer

A)  Debit Notes Receivable $4,800; debit Interest Receivable $120; credit Sales $4,920. 
B)  Debit Cash $4,920; credit Notes Receivable $4,920. 
C)  Debit Cash $4,920; credit Interest Revenue $100; credit Interest Receivable $20, credit Notes Receivable $4,800. 
D)  Debit Cash $4,920; credit Interest Revenue $20; credit Interest Receivable $100, credit Notes Receivable $4,800. 
E)  Debit Accounts Receivable $4,920; credit Interest Revenue $20; credit Interest Receivable $100, credit Notes Receivable $4,800. 
A)  Debit Notes Receivable $4,800; debit Interest Receivable $120; credit Sales $4,920. 
B)  Debit Cash $4,920; credit Notes Receivable $4,920. 
C)  Debit Cash $4,920; credit Interest Revenue $100; credit Interest Receivable $20, credit Notes Receivable $4,800. 
D)  Debit Cash $4,920; credit Interest Revenue $20; credit Interest Receivable $100, credit Notes Receivable $4,800. 
E)  Debit Accounts Receivable $4,920; credit Interest Revenue $20; credit Interest Receivable $100, credit Notes Receivable $4,800.

Question 15

When posting a dishonored note to a customer's account,an explanation is included so as not to misinterpret the debit as a sale on account.

Accepted Answer

A) True 
 B)False

Question 16

The materiality constraint,as applied to bad debts:

Accepted Answer

A)  Permits the use of the direct write-off method when bad debts expenses are relatively small. 
B)  Requires use of the allowance method for bad debts. 
C)  Requires use of the direct write-off method. 
D)  Requires that bad debts not be written off. 
E)  Requires that expenses be reported in the same period as the sales they helped produce. 
A)  Permits the use of the direct write-off method when bad debts expenses are relatively small. 
B)  Requires use of the allowance method for bad debts. 
C)  Requires use of the direct write-off method. 
D)  Requires that bad debts not be written off. 
E)  Requires that expenses be reported in the same period as the sales they helped produce.

Question 17

The maturity date of a note receivable:

Accepted Answer

A)  Is the day of the credit sale. 
B)  Is the day the note was signed. 
C)  Is the day the note is due to be repaid. 
D)  Is the date of the first payment. 
E)  Is the last day of the month. 
A)  Is the day of the credit sale. 
B)  Is the day the note was signed. 
C)  Is the day the note is due to be repaid. 
D)  Is the date of the first payment. 
E)  Is the last day of the month.

Question 18

Match each of the following terms with the appropriate definitions.
-A process of classifying accounts receivable by how long it is past its due date for the purpose of estimating the amount of uncollectible accounts.

Accepted Answer

A) Expense recognition (matching) principle 
B) Realizable value 
C) Interest 
D) Bad debts 
E) Accounts receivable
F)Aging of accounts receivable
G)Allowance for doubtful accounts
H)Promissory note
I)Payee of a note
J)Maker of a note 
A) Expense recognition (matching) principle 
B) Realizable value 
C) Interest 
D) Bad debts 
E) Accounts receivable
F)Aging of accounts receivable
G)Allowance for doubtful accounts
H)Promissory note
I)Payee of a note
J)Maker of a note

Question 19

The unadjusted trial balance at year-end for a company that uses the percent of receivables method to determine its bad debts expense reports the following selected amounts:
$\begin{array}{|l|r|r|}
\hline\text { Accounts receivable } & \$ 435,000 & \text { Debit } \
\hline \text { Allowance for Doubtful Accounts } & 1,250 & \text { Credit } \
\hline \text { Net Sales } & 2,100,000 & \text { Credit }\
\hline
\end{array}$

All sales are made on credit.Based on past experience,the company estimates 3.5% of ending account receivable to be uncollectible.What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Accepted Answer

A)  Debit Bad Debts Expense $13,975; credit Allowance for Doubtful Accounts $13,975. 
B)  Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225. 
C)  Debit Bad Debts Expense $16,475; credit Allowance for Doubtful Accounts $16,475. 
D)  Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350. 
E)  Debit Bad Debts Expense $17,350; credit Allowance for Doubtful Accounts $17,350. 
A)  Debit Bad Debts Expense $13,975; credit Allowance for Doubtful Accounts $13,975. 
B)  Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225. 
C)  Debit Bad Debts Expense $16,475; credit Allowance for Doubtful Accounts $16,475. 
D)  Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350. 
E)  Debit Bad Debts Expense $17,350; credit Allowance for Doubtful Accounts $17,350.

Question 20

A company has $90,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts.Experience suggests that 4% of outstanding receivables are uncollectible.The current balance (before adjustments)in the allowance for doubtful accounts is an $800 debit.The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for:

Accepted Answer

A)  $3,600 
B)  $3,568 
C)  $3,632 
D)  $2,800 
E)  $4,400 
A)  $3,600 
B)  $3,568 
C)  $3,632 
D)  $2,800 
E)  $4,400

The accounts receivable turnover indicates how often accounts receivable are received and collected during the period.

A company borrowed $10,000 by signing a six-month promissory note at 5% interest.The amount of interest to be paid at maturity is $25.

________ is the charge for using borrowed money until its due date.

The period of a note is the time from the note's (contract)date to its maturity date.

The formula for computing interest on a note is: Principal of the note × Annual interest rate × Time expressed in fraction of year.

A company has net sales of $1,200,000 and average accounts receivable of $400,000.What is its accounts receivable turnover for the period?

Match each of the following terms with the appropriate definitions. -The accounting principle that requires financial statements (including the notes)to report all relevant information about operations and financial condition.

All of the following statements regarding recognition of receivables under U.S.GAAP and IFRS are true except:

Match each of the following terms with the appropriate definitions. -The party to whom the promissory note is payable.

Uniform Supply accepted a $4,800,90-day,10% note from Tracy Janitorial on October 17.If the note is dishonored,but Uniform Supply intends to continue collection efforts,what entry should Uniform Supply make on January 15 of the next year? (Assume no reversing entries are made.)(Use 360 days a year.)

When posting a dishonored note to a customer's account,an explanation is included so as not to misinterpret the debit as a sale on account.

The materiality constraint,as applied to bad debts:

The maturity date of a note receivable:

Match each of the following terms with the appropriate definitions. -A process of classifying accounts receivable by how long it is past its due date for the purpose of estimating the amount of uncollectible accounts.

Accounting in Business

Analyzing for Business Transactions

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

Time Value of Money

Investments

Partnership Accounting

Filters

Exam 7: Accounting for Receivables

The accounts receivable turnover indicates how often accounts receivable are received and collected during the period.

A company borrowed $10,000 by signing a six-month promissory note at 5% interest.The amount of interest to be paid at maturity is $25.

________ is the charge for using borrowed money until its due date.

The period of a note is the time from the note's (contract)date to its maturity date.

The formula for computing interest on a note is: Principal of the note × Annual interest rate × Time expressed in fraction of year.

A company has net sales of $1,200,000 and average accounts receivable of $400,000.What is its accounts receivable turnover for the period?

Match each of the following terms with the appropriate definitions. -The accounting principle that requires financial statements (including the notes)to report all relevant information about operations and financial condition.

All of the following statements regarding recognition of receivables under U.S.GAAP and IFRS are true except:

Match each of the following terms with the appropriate definitions. -The party to whom the promissory note is payable.

When posting a dishonored note to a customer's account,an explanation is included so as not to misinterpret the debit as a sale on account.

The materiality constraint,as applied to bad debts:

The maturity date of a note receivable:

Match each of the following terms with the appropriate definitions. -A process of classifying accounts receivable by how long it is past its due date for the purpose of estimating the amount of uncollectible accounts.

Accounting in Business

Analyzing for Business Transactions

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

Time Value of Money

Investments

Partnership Accounting

Filters