Question 1

When a notes receivable is outstanding at the end of an accounting period,________.

Accepted Answer

A)  no adjusting entry is needed 
B)  the revenue recognition principle requires that earnings from the note be recorded in the year the cash is received 
C)  the total interest on the note should be recorded in an adjusting entry 
D)  the interest revenue earned on the note up to year-end is part of that year's earnings 
A)  no adjusting entry is needed 
B)  the revenue recognition principle requires that earnings from the note be recorded in the year the cash is received 
C)  the total interest on the note should be recorded in an adjusting entry 
D)  the interest revenue earned on the note up to year-end is part of that year's earnings D

Question 2

The expense associated with the cost of uncollectible accounts receivable is called bad debts expense.

Accepted Answer

A) True 
 B)False  True

Question 3

Customer G.Smith owed Stonehollow Electronics $125.On April 27,2018,Stonehollow determined this account receivable to be uncollectible and wrote off the account.The company uses the direct write-off method.On July 15,2018,Stonehollow received a check for $125 from the customer.How should the July 15,2018 transaction be recorded?

Accepted Answer

A)  $$\begin{array} { | l | l | l | l | } 
\hline \text { July 15 } & \text { Cash } & 125 & \
\hline & \text { Accounts Receivable - G. Smith } & & 125 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | l | l | } 
\hline \text { July 15 } & \text { Accounts Receivable - G. Smith } & 125 & \
\hline & \text { Bad Debt Revenue } & & 125 \
\hline \text { July 15 } & \text { Cash } & 125 & \
\hline & \text { Accounts Receivable - G. Smith } & & 125 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | l | l | } 
\hline \text { July 15 } & \text { Cash } & 125 & \
\hline & \text { Bad Debt Expense } & & 125 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | l | l | } 
\hline \text { July 15 } & \text { Accounts Receivable - G. Smith } & 125 & \
\hline & \text { Bad Debt Expense } & & 125 \
\hline \text { July 15 } & \text { Cash } & 125 & \
\hline & \text { Accounts Receivable - G. Smith } & & 125 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | l | l | l | l | } 
\hline \text { July 15 } & \text { Cash } & 125 & \
\hline & \text { Accounts Receivable - G. Smith } & & 125 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | l | l | } 
\hline \text { July 15 } & \text { Accounts Receivable - G. Smith } & 125 & \
\hline & \text { Bad Debt Revenue } & & 125 \
\hline \text { July 15 } & \text { Cash } & 125 & \
\hline & \text { Accounts Receivable - G. Smith } & & 125 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | l | l | } 
\hline \text { July 15 } & \text { Cash } & 125 & \
\hline & \text { Bad Debt Expense } & & 125 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | l | l | } 
\hline \text { July 15 } & \text { Accounts Receivable - G. Smith } & 125 & \
\hline & \text { Bad Debt Expense } & & 125 \
\hline \text { July 15 } & \text { Cash } & 125 & \
\hline & \text { Accounts Receivable - G. Smith } & & 125 \
\hline
\end{array}$$ D

Question 4

At the beginning of 2019,Elliott Company has the following account balances: Accounts Receivable $ \$ 44,000 $ (debit balance) 
Allowance for Bad Debts $ \$ 5000 $ (credit balance) Bad Debts Expense $0
During the year,credit sales amounted to $850,000.Cash collected on credit sales amounted to $790,000,and $16,000 has been written off.At the end of the year,the company adjusted for bad debts expense using the percent-of-sales method and applied a rate,based on past history,of 2.5%.The ending balance in the Allowance for Bad Debts is ________.

Accepted Answer

A)  $5000 
B)  $5250 
C)  $8750 
D)  $10,250 
A)  $5000 
B)  $5250 
C)  $8750 
D)  $10,250

Question 5

A business maintains subsidiary accounts for each of its customers.On May 15,the business provides services on account: $2400 to customer J.Anthony ; $4300 to customer A.Martin; and $1800 to customer S.Lee.Which journal entry is needed to record these transactions?

Accepted Answer

A)  $$\begin{array} { | l | l | r | r | } 
\hline \text { May 15 } & \text { Accounts Receivable } & 8500 & \
\hline & \text { Service Revenue } & & 8500 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | r | r | } 
\hline \text { May 15 } & \text { Accounts Receivable - J. Anthony } & 2400 & \
\hline & \text { Accounts Receivable - A. Martin } & 4300 & \
\hline & \text { Accounts Receivable - S. Lee } & 1800 & \
\hline & \text { Service Revenue } & & 8500 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | r | r | } 
\hline \text { May } 15 & \text { Service Revenue } & 8500 & \
\hline & \text { Accounts Receivable } & & 8500 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | r | l | r | r | } 
\hline \text { May 15 } & \text { Accounts Receivable Control } & 8500 & \
\hline & \text { Sales Revenue } & & 8500 \
\hline & & & \
\hline \text { May 15 } & \text { Accounts Receivable - J. Anthony } & 2400 & \
\hline & \text { Accounts Receivable - A. Martin } & 4300 & \
\hline & \text { Accounts Receivable -S. Lee } & 1800 & \
\hline & \text { Accounts Receivable - Control } & & 8500 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | l | l | r | r | } 
\hline \text { May 15 } & \text { Accounts Receivable } & 8500 & \
\hline & \text { Service Revenue } & & 8500 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | r | r | } 
\hline \text { May 15 } & \text { Accounts Receivable - J. Anthony } & 2400 & \
\hline & \text { Accounts Receivable - A. Martin } & 4300 & \
\hline & \text { Accounts Receivable - S. Lee } & 1800 & \
\hline & \text { Service Revenue } & & 8500 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | r | r | } 
\hline \text { May } 15 & \text { Service Revenue } & 8500 & \
\hline & \text { Accounts Receivable } & & 8500 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | r | l | r | r | } 
\hline \text { May 15 } & \text { Accounts Receivable Control } & 8500 & \
\hline & \text { Sales Revenue } & & 8500 \
\hline & & & \
\hline \text { May 15 } & \text { Accounts Receivable - J. Anthony } & 2400 & \
\hline & \text { Accounts Receivable - A. Martin } & 4300 & \
\hline & \text { Accounts Receivable -S. Lee } & 1800 & \
\hline & \text { Accounts Receivable - Control } & & 8500 \
\hline
\end{array}$$

Question 6

After the December 31,2019 adjusting journal entries have been posted,Sinclair Enterprises has the following account balances (all accounts have normal balances): $$\begin{array} { | l | l | } 
\hline \text { Account Title } & \text { Account Balance } \
\hline \text { Accounts Receivable } & \$ 154,000 \
\hline \text { Allowance for Bad Debts } & \$ 4700 \
\hline \text { Bad Debts Expense } & \$ 8000 \
\hline
\end{array}$$ What is the net realizable as of December 21,2019?

Accepted Answer

A)  $158,700 
B)  $146,000 
C)  $141,300 
D)  $149,300 
A)  $158,700 
B)  $146,000 
C)  $141,300 
D)  $149,300

Question 7

The acid-test ratio is a more stringent measure of liquidity than the cash ratio.

Accepted Answer

A) True 
 B)False

Question 8

The days' sales in receivables for Beckham Sales is 35.The days' sales in receivables for Xanadu Company is 25.This suggests that Xanadu is having greater difficulty than Beckham in collecting its accounts receivable.

Accepted Answer

A) True 
 B)False

Question 9

If the maker of a note does NOT pay at maturity,________.

Accepted Answer

A)  the debtor no longer owes the payee 
B)  interest revenue cannot be accrued on the note before the maturity date 
C)  the note is no longer in force because it has expired 
D)  the Accounts Receivable account increases for the amount of the note's principal only 
A)  the debtor no longer owes the payee 
B)  interest revenue cannot be accrued on the note before the maturity date 
C)  the note is no longer in force because it has expired 
D)  the Accounts Receivable account increases for the amount of the note's principal only

Question 10

Which method of estimating the amount of bad debts expense violates the matching principle?

Accepted Answer

A)  percent-of-receivables 
B)  percent-of-sales 
C)  aging-of-receivables 
D)  All of these methods comply with the matching principle 
A)  percent-of-receivables 
B)  percent-of-sales 
C)  aging-of-receivables 
D)  All of these methods comply with the matching principle

Question 11

On January 1,Cooper Company accepted a one-year note for $5,000 at 4% from one of its customers.When the note matured on December 31,the customer was unable to pay,and the company treated it as a dishonored note.Prepare the journal entry that Cooper will make to record the dishonored note.Omit explanation.

Accepted Answer

\[\begin{array} { | c | r | r

Question 12

Accounts receivable that are uncollectible must remain on the books because the customer may eventually pay.

Accepted Answer

A) True 
 B)False

Question 13

The maturity value of a note is the ________.

Accepted Answer

A)  principal amount minus interest due at maturity 
B)  principal amount plus interest due at maturity 
C)  face amount of the note 
D)  principal amount times the interest rate 
A)  principal amount minus interest due at maturity 
B)  principal amount plus interest due at maturity 
C)  face amount of the note 
D)  principal amount times the interest rate

Question 14

A debtor is a party to a credit transaction who will receive the cash for the transaction at a later date.

Accepted Answer

A) True 
 B)False

Question 15

On December 1,2020,Eagle Company sold machinery to a customer for $22,000.The customer could not pay at the time of sale but agreed to pay 6 months later and signed a 6-month note at 12% interest.How much interest revenue was earned for the entire term of the note? (Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar.)

Accepted Answer

A)  $1320 
B)  $1100 
C)  $220 
D)  $2640 
A)  $1320 
B)  $1100 
C)  $220 
D)  $2640

Question 16

Which of the following methods does NOT require an adjusting entry to recognize bad debts?

Accepted Answer

A)  percent-of receivables 
B)  aging-of-receivables 
C)  percent-of-sales 
D)  direct write-off 
A)  percent-of receivables 
B)  aging-of-receivables 
C)  percent-of-sales 
D)  direct write-off

Question 17

In order to keep accurate records about the collection of cash for a previously written off account,a business should re-establish the Accounts Receivable by debiting the receivable account.

Accepted Answer

A) True 
 B)False

Question 18

The following information is from the 2020 records of R & S Commercial Plumbing Company: $$\begin{array} { | l | l | } 
\hline \text { Accounts receivable, December 31, 2020 } & \$ 43,000 \text { (debit) } \
\hline \text { Allowance for Bad Debts, December 31,2020 prior to adjustment } & 1500 \text { (debit) } \
\hline \text { Net credit sales for 2020 } & 180,000 \
\hline \text { Accounts written off as uncollectible during 2017 } & 16,000 \
\hline \text { Cash sales during 2020 } & 26,000 \
\hline
\end{array}$$ Bad debts expense is estimated by the percent-of-sales method.Management estimates that 6% of net credit sales will be uncollectible.Calculate the amount of bad debts expense for 2020.

Accepted Answer

A)  $10,800 
B)  $8220 
C)  $12,360 
D)  $9300 
A)  $10,800 
B)  $8220 
C)  $12,360 
D)  $9300

Question 19

Because of the revenue recognition principle,interest on a note receivable is recorded in the year in which it is earned.

Accepted Answer

A) True 
 B)False

Question 20

The percent-of-sales method,used to compute bad debt expense,is also known as the balance sheet approach.

Accepted Answer

A) True 
 B)False

When a notes receivable is outstanding at the end of an accounting period,________.

The expense associated with the cost of uncollectible accounts receivable is called bad debts expense.

A business maintains subsidiary accounts for each of its customers.On May 15,the business provides services on account: $2400 to customer J.Anthony ; $4300 to customer A.Martin; and $1800 to customer S.Lee.Which journal entry is needed to record these transactions?

The acid-test ratio is a more stringent measure of liquidity than the cash ratio.

The days' sales in receivables for Beckham Sales is 35.The days' sales in receivables for Xanadu Company is 25.This suggests that Xanadu is having greater difficulty than Beckham in collecting its accounts receivable.

If the maker of a note does NOT pay at maturity,________.

Which method of estimating the amount of bad debts expense violates the matching principle?

Accounts receivable that are uncollectible must remain on the books because the customer may eventually pay.

The maturity value of a note is the ________.

A debtor is a party to a credit transaction who will receive the cash for the transaction at a later date.

Which of the following methods does NOT require an adjusting entry to recognize bad debts?

In order to keep accurate records about the collection of cash for a previously written off account,a business should re-establish the Accounts Receivable by debiting the receivable account.

Because of the revenue recognition principle,interest on a note receivable is recorded in the year in which it is earned.

The percent-of-sales method,used to compute bad debt expense,is also known as the balance sheet approach.

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Plant Assets,natural Resources,and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

Filters

Exam 9: Receivables

When a notes receivable is outstanding at the end of an accounting period,________.

The expense associated with the cost of uncollectible accounts receivable is called bad debts expense.

A business maintains subsidiary accounts for each of its customers.On May 15,the business provides services on account: $2400 to customer J.Anthony ; $4300 to customer A.Martin; and $1800 to customer S.Lee.Which journal entry is needed to record these transactions?

The acid-test ratio is a more stringent measure of liquidity than the cash ratio.

The days' sales in receivables for Beckham Sales is 35.The days' sales in receivables for Xanadu Company is 25.This suggests that Xanadu is having greater difficulty than Beckham in collecting its accounts receivable.

If the maker of a note does NOT pay at maturity,________.

Which method of estimating the amount of bad debts expense violates the matching principle?

Accounts receivable that are uncollectible must remain on the books because the customer may eventually pay.

The maturity value of a note is the ________.

A debtor is a party to a credit transaction who will receive the cash for the transaction at a later date.

Which of the following methods does NOT require an adjusting entry to recognize bad debts?

In order to keep accurate records about the collection of cash for a previously written off account,a business should re-establish the Accounts Receivable by debiting the receivable account.

Because of the revenue recognition principle,interest on a note receivable is recorded in the year in which it is earned.

The percent-of-sales method,used to compute bad debt expense,is also known as the balance sheet approach.

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Plant Assets,natural Resources,and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

Filters