Question 1

The realizable value refers to the expected proceeds from converting an asset into cash.

Accepted Answer

A) True 
 B)False

Question 2

A company had net sales of $600,000, total sales of $750,000, and an average accounts receivable of $75,000. Its accounts receivable turnover equals:

Accepted Answer

A)  7.75 
B)  10.00 
C)  8.00 
D)  .13 
E)  .80 
A)  7.75 
B)  10.00 
C)  8.00 
D)  .13 
E)  .80

Question 3

The person that borrows money and signs a promissory note is called the maker.

Accepted Answer

A) True 
 B)False

Question 4

The maturity date of a note refers to the date the note must be repaid.

Accepted Answer

A) True 
 B)False

Question 5

On July 9, Mifflin Company receives an $8,500, 90-day, 8% note from customer Payton Summers as payment on account.
- What entry should be made on July 9 to record receipt of the note?

Accepted Answer

A)  Debit Notes Receivable $8,670; credit Sales $8,670. 
B)  Debit Notes Receivable $8,500; credit Accounts Receivable $8,500. 
C)  Debit Notes Receivable $8,725; credit Interest Revenue $225; credit Accounts Receivable $8,500. 
D)  Debit Accounts Receivable $8,500; credit Sales $8,500. 
E)  Debit Notes Receivable $8,500; credit Sales $8,500. 
A)  Debit Notes Receivable $8,670; credit Sales $8,670. 
B)  Debit Notes Receivable $8,500; credit Accounts Receivable $8,500. 
C)  Debit Notes Receivable $8,725; credit Interest Revenue $225; credit Accounts Receivable $8,500. 
D)  Debit Accounts Receivable $8,500; credit Sales $8,500. 
E)  Debit Notes Receivable $8,500; credit Sales $8,500.

Question 6

MacKenzie Company sold $180 of merchandise to a customer who used a Regional Bank credit card. Regional Bank deducts a 4% service charge for sales on its credit cards. MacKenzie electronically remits the credit card sales receipts to the credit card company and receives payment immediately. The journal entry to record this sale transaction would be:

Accepted Answer

A)  Debit Cash of $180 and credit Accounts Receivable-Regional $180. 
B)  Debit Cash $172.80 and credit Sales $172.80. 
C)  Debit Accounts Receivable-Regional $172.80; debit Credit Card Expense $7.20 and credit Sales $180. 
D)  Debit Cash of $180 and credit Sales $180. 
E)  Debit Cash $172.80; debit Credit Card Expense $7.20 and credit Sales $180. 
A)  Debit Cash of $180 and credit Accounts Receivable-Regional $180. 
B)  Debit Cash $172.80 and credit Sales $172.80. 
C)  Debit Accounts Receivable-Regional $172.80; debit Credit Card Expense $7.20 and credit Sales $180. 
D)  Debit Cash of $180 and credit Sales $180. 
E)  Debit Cash $172.80; debit Credit Card Expense $7.20 and credit Sales $180.

Question 7

The quality of receivables refers to:

Accepted Answer

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

Question 8

Notes receivable are classified as current liabilities regardless of the time to maturity.

Accepted Answer

A) True 
 B)False

Question 9

When using the allowance method of accounting for uncollectible accounts, the entry to record the estimated bad debts expense is a debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts.

Accepted Answer

A) True 
 B)False

Question 10

The account receivable turnover measures:

Accepted Answer

A)  How long it takes to sell accounts receivable to a factor. 
B)  How long it takes to sell merchandise inventory. 
C)  The relation of cash sales to credit sales. 
D)  How often, on average, receivables are received and collected during the period. 
E)  All of the options are correct. 
A)  How long it takes to sell accounts receivable to a factor. 
B)  How long it takes to sell merchandise inventory. 
C)  The relation of cash sales to credit sales. 
D)  How often, on average, receivables are received and collected during the period. 
E)  All of the options are correct.

Question 11

On July 31, Orwell Co. has $448,800 of accounts receivable. Required:
1. Prepare journal entries to record the following selected August transactions. The company uses the perpetual inventory system.
2. Also prepare any footnotes to the August 31 financial statements that result from these transactions.
3. Calculate the balance in the Accounts Receivable account as of August 10.
Aug 3 Sold $250,000 of merchandise (that cost $122,000) to customers on credit.
Aug 5 Sold $300,000 of accounts receivable to Cash Solutions. Cash Solutions charges a 7% factoring fee.
Aug 8 Received $165,200 from customers in payment on their accounts.
Aug 9 Borrowed $50,000 cash from State Bank, pledging $65,000 of accounts receivable as security for the loan. The note is a 90-day, 9% note.

Accepted Answer

1.
 @#IMG-DLM& 2. Orwell should include

Question 12

As long as a company accurately records total credit sales information, it is not necessary to have separate accounts for specific customers.

Accepted Answer

A) True 
 B)False

Question 13

On July 9, Mifflin Company receives an $8,500, 90-day, 8% note from customer Payton Summers as payment on account. Compute the amount due at maturity for the note. (Use 360 days a year.)

Accepted Answer

A)  $8,670 
B)  $8,613 
C)  $8,628 
D)  $8,500 
E)  $8,192 
A)  $8,670 
B)  $8,613 
C)  $8,628 
D)  $8,500 
E)  $8,192

Question 14

Describe the differences in how the direct write-off method and the allowance method are applied in accounting for uncollectible accounts receivables.

Accepted Answer

The direct write-off method records the

Question 15

Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. Jasper's entry to record the transaction should be:

Accepted Answer

A)  Debit Notes Receivable $25,000; credit Sales $25,000. 
B)  Debit Accounts Receivable $25,000; credit Notes Receivable $25,000. 
C)  Debit Notes Payable $25,000; credit Accounts Payable $25,000. 
D)  Debit Notes Receivable for $25,000; credit Cash $25,000. 
E)  Debit Cash $25,000; credit Notes Receivable for $25,000. 
A)  Debit Notes Receivable $25,000; credit Sales $25,000. 
B)  Debit Accounts Receivable $25,000; credit Notes Receivable $25,000. 
C)  Debit Notes Payable $25,000; credit Accounts Payable $25,000. 
D)  Debit Notes Receivable for $25,000; credit Cash $25,000. 
E)  Debit Cash $25,000; credit Notes Receivable for $25,000.

Question 16

Installment accounts receivable is another name for aging of accounts receivable.

Accepted Answer

A) True 
 B)False

Question 17

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

Question 18

The quality of receivables refers to the likelihood of collection without loss.

Accepted Answer

A) True 
 B)False

Question 19

On July 9, Mifflin Company receives an $8,500, 90-day, 8% note from customer Payton Summers as payment on account.
- What entry should be made on the maturity date assuming the maker pays in full, and no adjusting entries have been made related to the note? (Use 360 days a year.)

Accepted Answer

A)  Debit Cash $8,670; credit Interest Revenue $170; credit Notes Receivable $8,500. 
B)  Debit Cash $8,613; credit Interest Revenue $113; credit Notes Receivable $8,500. 
C)  Debit Cash $8,500; credit Notes Receivable $8,500. 
D)  Debit Notes Receivable $8,500; debit Interest Receivable $170; credit Sales $8,670. 
E)  Debit Cash $8,628; credit Interest Revenue $128; credit Notes Receivable $8,500. 
A)  Debit Cash $8,670; credit Interest Revenue $170; credit Notes Receivable $8,500. 
B)  Debit Cash $8,613; credit Interest Revenue $113; credit Notes Receivable $8,500. 
C)  Debit Cash $8,500; credit Notes Receivable $8,500. 
D)  Debit Notes Receivable $8,500; debit Interest Receivable $170; credit Sales $8,670. 
E)  Debit Cash $8,628; credit Interest Revenue $128; credit Notes Receivable $8,500.

Question 20

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

Exam 9: Accounting for Receivables

The realizable value refers to the expected proceeds from converting an asset into cash.

A company had net sales of $600,000, total sales of $750,000, and an average accounts receivable of $75,000. Its accounts receivable turnover equals:

The person that borrows money and signs a promissory note is called the maker.

The maturity date of a note refers to the date the note must be repaid.

On July 9, Mifflin Company receives an $8,500, 90-day, 8% note from customer Payton Summers as payment on account. - What entry should be made on July 9 to record receipt of the note?

The quality of receivables refers to:

Notes receivable are classified as current liabilities regardless of the time to maturity.

When using the allowance method of accounting for uncollectible accounts, the entry to record the estimated bad debts expense is a debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts.

The account receivable turnover measures:

As long as a company accurately records total credit sales information, it is not necessary to have separate accounts for specific customers.

On July 9, Mifflin Company receives an $8,500, 90-day, 8% note from customer Payton Summers as payment on account. Compute the amount due at maturity for the note. (Use 360 days a year.)

Describe the differences in how the direct write-off method and the allowance method are applied in accounting for uncollectible accounts receivables.

Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. Jasper's entry to record the transaction should be:

Installment accounts receivable is another name for aging of accounts receivable.

The quality of receivables refers to the likelihood of collection without loss.

On July 9, Mifflin Company receives an $8,500, 90-day, 8% note from customer Payton Summers as payment on account. - What entry should be made on the maturity date assuming the maker pays in full, and no adjusting entries have been made related to the note? (Use 360 days a year.)

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

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Present and Future Values in Accounting

Activity-Based Costing

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