Question 1

When a business factors its receivables,the factor collects cash on the receivables.

Accepted Answer

A) True 
 B)False

Question 2

On November 30,2019,Jenkins Company loaned M.Lee $4,000 for one year at an annual interest rate of 4%.Prepare the entry that Jenkins Company will make on November 30,2019.Omit explanations.

Accepted Answer

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Question 3

The Allowance for Bad Debts account has a debit balance of $8000 before the adjusting entry for bad debts expense.After analyzing the accounts in the accounts receivable subsidiary ledger using the aging-of-receivables method,the company's management estimates that uncollectible accounts will be $15,000.What amount of bad debts expense will be reported on the income statement?

Accepted Answer

A)  $4000 
B)  $23,000 
C)  $7000 
D)  $15,000 
A)  $4000 
B)  $23,000 
C)  $7000 
D)  $15,000

Question 4

The aging-of-receivables method is a balance sheet approach of estimating uncollectible accounts.

Accepted Answer

A) True 
 B)False

Question 5

On December 1,2019,Pinewood Company sold machinery to a customer for $2,000.Pinewood regularly sells machinery.The customer could not pay at the time of sale but agreed to pay 9 months later and signed a 9-month note at 12% interest.Prepare the journal entry to record the revenue at the time of sale.Ignore the entry for cost of goods sold.Omit explanation.

Accepted Answer

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Question 6

On January 1,Five Star Services has the following balances: Accounts Receivable $26,000 (debit)
Bad Debts Expense $0
Five Star Services has the following transactions during January: Credit sales of $100,000,collections of credit sales of $87,000,and write-offs of $18,000.Five Star Services uses the direct write-off method.At the end of January,the balance of Accounts Receivable is ________.

Accepted Answer

A)  $15,660 
B)  $21,000 
C)  $20,690 
D)  $39,000 
A)  $15,660 
B)  $21,000 
C)  $20,690 
D)  $39,000

Question 7

Days' sales in receivables measures ________.

Accepted Answer

A)  how many days it takes to order and receive inventory 
B)  how many days it takes to collect the average level of accounts receivable 
C)  how many days it takes to sell inventory 
D)  the number of times a company collects the average accounts receivable balance in one year 
A)  how many days it takes to order and receive inventory 
B)  how many days it takes to collect the average level of accounts receivable 
C)  how many days it takes to sell inventory 
D)  the number of times a company collects the average accounts receivable balance in one year

Question 8

Notes receivable ________.

Accepted Answer

A)  represent an oral promise to pay a fixed amount of principal plus interest on the maturity date 
B)  are included in a miscellaneous category called other receivables 
C)  due within 12 months or within the normal operating cycle if the cycle is longer than a year are considered long-term assets 
D)  are supported by a promissory note 
A)  represent an oral promise to pay a fixed amount of principal plus interest on the maturity date 
B)  are included in a miscellaneous category called other receivables 
C)  due within 12 months or within the normal operating cycle if the cycle is longer than a year are considered long-term assets 
D)  are supported by a promissory note

Question 9

The maturity date for a six-month note issued on January 15 would be ________.

Accepted Answer

A)  July 15 
B)  July 14 
C)  July 16 
D)  July 10 
A)  July 15 
B)  July 14 
C)  July 16 
D)  July 10

Question 10

An acid-test ratio of 1.0 is considered safer than a ratio of 0.50.

Accepted Answer

A) True 
 B)False

Question 11

When using the allowance method,after a company has previously written off an account,________.

Accepted Answer

A)  the company continues to send monthly statements to the customers whose accounts have been written off 
B)  the company cannot collect from these customers because their accounts have been written off 
C)  when a customer pays on an account that has been written off, the company needs to reverse the write-off to the Allowance for Bad Debts account and then record the receipt of cash 
D)  the company does not need to reestablish the receivable account 
A)  the company continues to send monthly statements to the customers whose accounts have been written off 
B)  the company cannot collect from these customers because their accounts have been written off 
C)  when a customer pays on an account that has been written off, the company needs to reverse the write-off to the Allowance for Bad Debts account and then record the receipt of cash 
D)  the company does not need to reestablish the receivable account

Question 12

When a company is using the direct write-off method,and an account is written off,the journal entry consists of a ________.

Accepted Answer

A)  debit to Accounts Receivable and a credit to Cash 
B)  credit to Accounts Receivable and a debit to Bad Debts Expense 
C)  debit to the Allowance for Bad Debts and a credit to Accounts Receivable 
D)  credit to Accounts Receivable and a debit to Interest Expense 
A)  debit to Accounts Receivable and a credit to Cash 
B)  credit to Accounts Receivable and a debit to Bad Debts Expense 
C)  debit to the Allowance for Bad Debts and a credit to Accounts Receivable 
D)  credit to Accounts Receivable and a debit to Interest Expense

Question 13

Factoring is an option available to a business to reduce the risk of uncollectible accounts receivable.

Accepted Answer

A) True 
 B)False

Question 14

In counting the number of days in a note term,omit the date the note was issued.

Accepted Answer

A) True 
 B)False

Question 15

Under both the allowance method and the direct-write off method of accounting for uncollectible accounts,the amount of bad debts expense is estimated at the end of each accounting period.

Accepted Answer

A) True 
 B)False

Question 16

Sales through credit or debit cards transfer the risk of collection of receivables from the seller to the card issuer.

Accepted Answer

A) True 
 B)False

Question 17

When businesses accept payment by credit and debit cards,there is almost always a fee to the purchaser to cover the processing costs charged by the card issuer.

Accepted Answer

A) True 
 B)False

Question 18

What is the maturity value of a 6-month,13% note for $80,000? (Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar.)

Accepted Answer

A)  $82,000 
B)  $90,400 
C)  $85,200 
D)  $80,000 
A)  $82,000 
B)  $90,400 
C)  $85,200 
D)  $80,000

Question 19

The direct write-off method is only acceptable for companies that have very few uncollectible receivables.

Accepted Answer

A) True 
 B)False

Question 20

On December 1,2018,Atlas Company sold machinery to a customer for $24,000.The customer could not pay at the time of sale but agreed to pay 10 months later and signed a 10-month note at 9% interest.How much interest revenue was earned during 2019? (Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar.)

Accepted Answer

A)  $1080 
B)  $2160 
C)  $1980 
D)  $1620 
A)  $1080 
B)  $2160 
C)  $1980 
D)  $1620

Exam 9: Receivables

When a business factors its receivables,the factor collects cash on the receivables.

On November 30,2019,Jenkins Company loaned M.Lee $4,000 for one year at an annual interest rate of 4%.Prepare the entry that Jenkins Company will make on November 30,2019.Omit explanations.

The aging-of-receivables method is a balance sheet approach of estimating uncollectible accounts.

Days' sales in receivables measures ________.

Notes receivable ________.

The maturity date for a six-month note issued on January 15 would be ________.

An acid-test ratio of 1.0 is considered safer than a ratio of 0.50.

When using the allowance method,after a company has previously written off an account,________.

When a company is using the direct write-off method,and an account is written off,the journal entry consists of a ________.

Factoring is an option available to a business to reduce the risk of uncollectible accounts receivable.

In counting the number of days in a note term,omit the date the note was issued.

Under both the allowance method and the direct-write off method of accounting for uncollectible accounts,the amount of bad debts expense is estimated at the end of each accounting period.

Sales through credit or debit cards transfer the risk of collection of receivables from the seller to the card issuer.

When businesses accept payment by credit and debit cards,there is almost always a fee to the purchaser to cover the processing costs charged by the card issuer.

What is the maturity value of a 6-month,13% note for $80,000? (Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar.)

The direct write-off method is only acceptable for companies that have very few uncollectible receivables.

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

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