Question 1

A company borrowed $16,000 by signing a 4-month promissory note at 12%. The amount of interest to be paid at maturity is $640.

Accepted Answer

A) True 
 B)False

Question 2

A company had net sales of $550,000 and an average accounts receivable of $110,000. Its accounts receivable turnover equals 5.0.

Accepted Answer

A) True 
 B)False

Question 3

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 credit. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for:

Accepted Answer

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

Question 4

Honoring a note receivable indicates that the maker has:

Accepted Answer

A)  Paid in full. 
B)  Notarized. 
C)  Guaranteed. 
D)  Cosigned. 
E)  Signed. 
A)  Paid in full. 
B)  Notarized. 
C)  Guaranteed. 
D)  Cosigned. 
E)  Signed.

Question 5

The accounts receivable turnover is calculated by dividing ________ by ________.

Accepted Answer

net sales;

Question 6

A company factored $45,000 of its accounts receivable and was charged a 4% factoring fee. The journal entry to record this transaction would include a:

Accepted Answer

A)  Debit to Cash of $45,000, a debit to Factoring Fee Expense of $1,800, and a credit to Accounts Receivable of $46,800. 
B)  Debit to Cash of $45,000 and a credit to Accounts Receivable of $45,000. 
C)  Debit to Cash of $43,200, a debit to Factoring Fee Expense of $1,800, and a credit to Accounts Receivable of $45,000. 
D)  Debit to Cash of $45,000 and a credit to Notes Payable of $45,000. 
E)  Debit to Cash of $46,800 and a credit to Accounts Receivable of $46,800. 
A)  Debit to Cash of $45,000, a debit to Factoring Fee Expense of $1,800, and a credit to Accounts Receivable of $46,800. 
B)  Debit to Cash of $45,000 and a credit to Accounts Receivable of $45,000. 
C)  Debit to Cash of $43,200, a debit to Factoring Fee Expense of $1,800, and a credit to Accounts Receivable of $45,000. 
D)  Debit to Cash of $45,000 and a credit to Notes Payable of $45,000. 
E)  Debit to Cash of $46,800 and a credit to Accounts Receivable of $46,800.

Question 7

Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. Jasper's entry to record the collection of the note and interest at maturity should be: (Use 360 days a year.)

Accepted Answer

A)  Debit Cash $25,437.50; credit Notes Receivable for $25,437.50. 
B)  Debit Cash $26,750; credit Interest Revenue $1,750, credit Notes Receivable $25,000. 
C)  Debit Cash $25,437.50; credit Interest Revenue $437.50; credit Notes Receivable $25,000. 
D)  Debit Cash for $25,000; credit Notes Receivable $25,000. 
E)  Debit Notes Payable $25,000; Debit Interest Expense $1,750; credit Cash $26,750. 
A)  Debit Cash $25,437.50; credit Notes Receivable for $25,437.50. 
B)  Debit Cash $26,750; credit Interest Revenue $1,750, credit Notes Receivable $25,000. 
C)  Debit Cash $25,437.50; credit Interest Revenue $437.50; credit Notes Receivable $25,000. 
D)  Debit Cash for $25,000; credit Notes Receivable $25,000. 
E)  Debit Notes Payable $25,000; Debit Interest Expense $1,750; credit Cash $26,750.

Question 8

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

Question 9

The expense recognition (matching) principle, as applied to bad debts, requires:

Accepted Answer

A)  The use of the direct write-off method for bad debts. 
B)  That bad debts not be written off. 
C)  That bad debts be disclosed in the financial statements. 
D)  That expenses be ignored if their effect on the financial statements is unimportant to users' business decisions. 
E)  The use of the allowance method of accounting for bad debts. 
A)  The use of the direct write-off method for bad debts. 
B)  That bad debts not be written off. 
C)  That bad debts be disclosed in the financial statements. 
D)  That expenses be ignored if their effect on the financial statements is unimportant to users' business decisions. 
E)  The use of the allowance method of accounting for bad debts.

Question 10

The notes receivable account of a business should include both the notes that have not yet matured and the dishonored notes.

Accepted Answer

A) True 
 B)False

Question 11

The expense recognition (matching) principle permits the use of the direct write-off method of accounting for uncollectible accounts when bad debts are very large in relation to a company's other financial statement items such as sales and net income.

Accepted Answer

A) True 
 B)False

Question 12

The use of the direct write-off method is allowed under the materiality constraint.

Accepted Answer

A) True 
 B)False

Question 13

A company receives a 10%, 120-day note for $1,500. The total interest due on the maturity date is: (Use 360 days a year.)

Accepted Answer

A)  $150.00. 
B)  $37.50. 
C)  $75.00. 
D)  $87.50. 
E)  $50.00. 
A)  $150.00. 
B)  $37.50. 
C)  $75.00. 
D)  $87.50. 
E)  $50.00.

Question 14

A supplementary record created to maintain a separate account for each customer is called the
________.

Accepted Answer

accounts r

Question 15

The ________ method uses both past and current receivables to estimate the allowance amount, and assumes that the longer an amount is past due, the more likely it is to be uncollectible.

Accepted Answer

aging of a

Question 16

The Links Company uses the percent of sales method of accounting for uncollectible accounts receivable. During the current year, the following transactions occurred:
Sept 7 Links Company determined that the $8,000 account receivable of the Rainier Company was uncollectible, and wrote it off.
Oct 15 Links Company determined that the $3,500 account receivable of the Olympic Company was uncollectible and wrote it off.
Nov 9 Rainier Company paid $6,000 of the amount owed to the Links
Company. Links Company does not expect further collections from the Rainier Company.
Dec 31 Links Company estimates that 1% of its $1,900,000 of credit sales would be uncollectible.
1. Prepare the general journal entries to record these transactions.
2. If the balance of the allowance for uncollectible accounts was a $4,000 credit on January 1 of the current year, determine the balance of the allowance for uncollectible accounts at December 31 of the current year. Assume that the transactions above are the only transactions affecting the allowance for uncollectible accounts during the year.

Accepted Answer

The answer of The Links Company uses the percent of...

Question 17

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

Accepted Answer

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

Question 18

The process of using accounts receivable as security for a loan is known as pledging accounts receivable.

Accepted Answer

A) True 
 B)False

Question 19

Match between columns
                        Premises:  A measure of both the quality and liquidity of accounts receivable that indicates how often, on average, receivables are received and collected during the period.
 Amounts owed by customers from credit sales for which payment is required in periodic payments over an extended period of time.
 The accounting constraint that states that an amount can be ignored if its effect on the financial statements is unimportant to its users.
 Refers to a note maker's inability or refusal to pay a note at maturity.
 A method of accounting for bad debts that matches the estimated loss from uncollectible accounts receivable against the sales they helped to produce.
 Selling all or a portion of accounts receivable to a finance company or bank.
 The accounting principle that requires financial statements (including the notes to report all relevant information about operations and financial condition.
 Committing accounts receivable as security for a loan.
 A method of accounting for bad debts that records the loss from an uncollectible account receivable immediately upon determining it is uncollectible.
 The amount that the signer of a note agrees to pay back when the note matures, not including interest.

Accepted Answer

The Answer of Allowance method and Installment accounts receivable and is...

Question 20

A company ages its accounts receivables to determine its end of period adjustment for bad debts. At the end of the current year, 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 credit 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)  $$\begin{array} { | l | l | l | } 
\hline \text { Accounts Receivable } & 16,125 & \
\hline \text { Allowance for Doubtful Accounts } & & 16,125 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Accounts Receivable } & 15,750 & \
\hline \text { Bad Debts Expense } & 375 & \
\hline \text { Sales } & & 16,125 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | l | } 
\hline \text { Bad Debts Expense } & 16,125 & \
\hline \text { Allowance for Doubtful Accounts } & & 16,125 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | l | } 
\hline \text { Bad Debts Expense } & 15,375 & \
\hline \text { Allowance for Doubtful Accounts } & & 15,375 \
\hline
\end{array}$$ 
E)  $$\begin{array} { | l | l | l | } 
\hline \text { Bad Debts Expense } & 15,750 & \
\hline \text { Allowance for Doubtful Accounts } & & 15,750 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | l | l | l | } 
\hline \text { Accounts Receivable } & 16,125 & \
\hline \text { Allowance for Doubtful Accounts } & & 16,125 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Accounts Receivable } & 15,750 & \
\hline \text { Bad Debts Expense } & 375 & \
\hline \text { Sales } & & 16,125 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | l | } 
\hline \text { Bad Debts Expense } & 16,125 & \
\hline \text { Allowance for Doubtful Accounts } & & 16,125 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | l | } 
\hline \text { Bad Debts Expense } & 15,375 & \
\hline \text { Allowance for Doubtful Accounts } & & 15,375 \
\hline
\end{array}$$ 
E)  $$\begin{array} { | l | l | l | } 
\hline \text { Bad Debts Expense } & 15,750 & \
\hline \text { Allowance for Doubtful Accounts } & & 15,750 \
\hline
\end{array}$$

Exam 9: Accounting for Receivables

A company borrowed $16,000 by signing a 4-month promissory note at 12%. The amount of interest to be paid at maturity is $640.

A company had net sales of $550,000 and an average accounts receivable of $110,000. Its accounts receivable turnover equals 5.0.

Honoring a note receivable indicates that the maker has:

The accounts receivable turnover is calculated by dividing ________ by ________.

A company factored $45,000 of its accounts receivable and was charged a 4% factoring fee. The journal entry to record this transaction would include a:

Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. Jasper's entry to record the collection of the note and interest at maturity should be: (Use 360 days a 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?

The expense recognition (matching) principle, as applied to bad debts, requires:

The notes receivable account of a business should include both the notes that have not yet matured and the dishonored notes.

The expense recognition (matching) principle permits the use of the direct write-off method of accounting for uncollectible accounts when bad debts are very large in relation to a company's other financial statement items such as sales and net income.

The use of the direct write-off method is allowed under the materiality constraint.

A company receives a 10%, 120-day note for $1,500. The total interest due on the maturity date is: (Use 360 days a year.)

A supplementary record created to maintain a separate account for each customer is called the ________.

The ________ method uses both past and current receivables to estimate the allowance amount, and assumes that the longer an amount is past due, the more likely it is to be uncollectible.

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

The process of using accounts receivable as security for a loan is known as pledging accounts receivable.

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

Filters

The accounts receivable turnover is calculated by dividing by .