Question 1

The three major types of receivables are accounts receivable,notes receivable,and other receivables.

Accepted Answer

A) True 
 B)False

Question 2

Provide a brief definition of each of the following terms.
 $$\begin{array} { | l | l | } 
\hline \text { Term } & \text { Brief Definition } \
\hline \text { Factoring Receivables } & \
\hline \text { Receivable } & \
\hline \text { Maturity Date } & \
\hline
\end{array}$$

Accepted Answer

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

Question 3

The employees who handle cash know how customers pay and thus are in the best position to grant credit to customers.

Accepted Answer

A) True 
 B)False

Question 4

On October 1,2020,Jewelry Specialists Company made a loan to one of its customers.The customer signed a 6-month note for $100,000 at 15%.Calculate the total interest earned on the note.(Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar.)

Accepted Answer

A)  $7500 
B)  $3750 
C)  $1250 
D)  $15,000 
A)  $7500 
B)  $3750 
C)  $1250 
D)  $15,000

Question 5

Jayson Enterprises uses the allowance method to account for uncollectible receivables.When an uncollectible account is written off,________.

Accepted Answer

A)  the Bad Debt Expense account is debited 
B)  no entry is required because bad debt expense is estimated at the end of the accounting period 
C)  the write off has no effect on net income 
D)  the Allowance for Bad Debts account is credited 
A)  the Bad Debt Expense account is debited 
B)  no entry is required because bad debt expense is estimated at the end of the accounting period 
C)  the write off has no effect on net income 
D)  the Allowance for Bad Debts account is credited

Question 6

The percent-of-sales method calculates bad debts expense based on a percentage of net cash sales.

Accepted Answer

A) True 
 B)False

Question 7

When using the allowance method,the receipt of a payment on receivables that have been written-off requires an entry to reverse the write-off to the Allowance for Bad Debts account and an entry to record the receipt of cash.

Accepted Answer

A) True 
 B)False

Question 8

GAAP requires companies to ________ method to record bad debts expense.

Accepted Answer

A)  use the direct write-off 
B)  use the allowance 
C)  select either the direct write-off or allowance 
D)  use the fair value 
A)  use the direct write-off 
B)  use the allowance 
C)  select either the direct write-off or allowance 
D)  use the fair value

Question 9

When a company uses the allowance method to measure bad debts,________.

Accepted Answer

A)  the Bad Debts Expense account is debited when an account is written off 
B)  the amount of bad debts expense is estimated at the end of the accounting period 
C)  the normal balance in the Allowance for Bad Debts account is a debit 
D)  the amount of bad debts expense is not estimated at the end of the accounting period 
A)  the Bad Debts Expense account is debited when an account is written off 
B)  the amount of bad debts expense is estimated at the end of the accounting period 
C)  the normal balance in the Allowance for Bad Debts account is a debit 
D)  the amount of bad debts expense is not estimated at the end of the accounting period

Question 10

Factoring occurs when a business sells its receivables to a finance company or bank.

Accepted Answer

A) True 
 B)False

Question 11

A five-month note dated October 15,2019 would mature on February 15,2020.

Accepted Answer

A) True 
 B)False

Question 12

For a company with significant uncollectible receivables,the direct write-off method is unsuitable because ________.

Accepted Answer

A)  it overstates liabilities on the balance sheet 
B)  it violates the matching principle 
C)  it uses estimates for determining the bad debt expense 
D)  companies are not able to track customer payment histories 
A)  it overstates liabilities on the balance sheet 
B)  it violates the matching principle 
C)  it uses estimates for determining the bad debt expense 
D)  companies are not able to track customer payment histories

Question 13

The role of the credit department includes ________.

Accepted Answer

A)  approving all credit applications in order to avoid losing sales 
B)  evaluating customers' credit applications to determine whether they meet the company's approval standards 
C)  following unwritten approval standards for processing customers' credit applications 
D)  collecting cash from customers 
A)  approving all credit applications in order to avoid losing sales 
B)  evaluating customers' credit applications to determine whether they meet the company's approval standards 
C)  following unwritten approval standards for processing customers' credit applications 
D)  collecting cash from customers

Question 14

Uptown Company has determined that an account receivable of $125 is uncollectible.The company uses the direct write-off method.Which of the following entries is required to record the write-off?

Accepted Answer

A)  $$\begin{array} { | c | r | r | } 
\hline \text { Bad Debts Expense } & 125 & \
\hline \text { Accounts Receivable } & & 125 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | r | r | } 
\hline \text { Cash } & 125 & \
\hline \text { Accounts Receivable } & & 125 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | r | r | } 
\hline \text { Allowance for Bad Debts } & 125 & \
\hline \text { Accounts Receivable } & & 125 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | r | r | } 
\hline \text { Accounts Receivable } & 125 & \
\hline \text { Bad Debts Expense } & & 125 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | c | r | r | } 
\hline \text { Bad Debts Expense } & 125 & \
\hline \text { Accounts Receivable } & & 125 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | r | r | } 
\hline \text { Cash } & 125 & \
\hline \text { Accounts Receivable } & & 125 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | r | r | } 
\hline \text { Allowance for Bad Debts } & 125 & \
\hline \text { Accounts Receivable } & & 125 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | r | r | } 
\hline \text { Accounts Receivable } & 125 & \
\hline \text { Bad Debts Expense } & & 125 \
\hline
\end{array}$$

Question 15

At the beginning of 2019,Statewide Delivery Company has the following account balances: Accounts Receivable $ \$ 44,000 $ (debit balance)
 Allowance for Bad Debts $ \$ 8000 $ (credit balance) Bad Debts Expense $0
During the year,credit sales amounted to $800,000.Cash collected on credit sales amounted to $780,000,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 3.5%.The ending balance of Accounts Receivable is ________.

Accepted Answer

A)  $44,000 
B)  $48,000 
C)  $56,840 
D)  $16,000 
A)  $44,000 
B)  $48,000 
C)  $56,840 
D)  $16,000

Question 16

Use the following to calculate the acid-test ratio.(Round your answer to two decimal places.) $$\begin{array} { | l | l | } 
\hline \text { Cash } & \$ 100,000 \
\hline \text { Short-term investments } & 15,000 \
\hline \text { Net current receivables } & 250,000 \
\hline \text { Inventory } & 310,000 \
\hline \text { Total current liabilities } & 780,000 \
\hline
\end{array}$$

Accepted Answer

A)  0.74 
B)  6.67 
C)  0.87 
D)  0.47 
A)  0.74 
B)  6.67 
C)  0.87 
D)  0.47

Question 17

On October 1,2018,Mandy's Electronic sold merchandise in exchange for a 4 month,$50,000 note receivable,with 3% interest.Interest revenue of $500 is earned in 2018.

Accepted Answer

A) True 
 B)False

Question 18

Companies that follow GAAP are required to use the direct write-off method for uncollectible accounts receivable.

Accepted Answer

A) True 
 B)False

Question 19

When a company accepts a promissory note from a customer who cannot pay an accounts receivable,the company will credit Notes Receivable.

Accepted Answer

A) True 
 B)False

Question 20

When a business pledges its accounts receivable,it transfers the right to collect cash from customers to the bank.

Accepted Answer

A) True 
 B)False

Exam 9: Receivables

The three major types of receivables are accounts receivable,notes receivable,and other receivables.

Provide a brief definition of each of the following terms. Term Brief Definition Factoring Receivables Receivable Maturity Date

The employees who handle cash know how customers pay and thus are in the best position to grant credit to customers.

On October 1,2020,Jewelry Specialists Company made a loan to one of its customers.The customer signed a 6-month note for $100,000 at 15%.Calculate the total interest earned on the note.(Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar.)

Jayson Enterprises uses the allowance method to account for uncollectible receivables.When an uncollectible account is written off,________.

The percent-of-sales method calculates bad debts expense based on a percentage of net cash sales.

When using the allowance method,the receipt of a payment on receivables that have been written-off requires an entry to reverse the write-off to the Allowance for Bad Debts account and an entry to record the receipt of cash.

GAAP requires companies to ________ method to record bad debts expense.

When a company uses the allowance method to measure bad debts,________.

Factoring occurs when a business sells its receivables to a finance company or bank.

A five-month note dated October 15,2019 would mature on February 15,2020.

For a company with significant uncollectible receivables,the direct write-off method is unsuitable because ________.

The role of the credit department includes ________.

Uptown Company has determined that an account receivable of $125 is uncollectible.The company uses the direct write-off method.Which of the following entries is required to record the write-off?

Use the following to calculate the acid-test ratio.(Round your answer to two decimal places.) Cash \ 100,000 Short-term investments 15,000 Net current receivables 250,000 Inventory 310,000 Total current liabilities 780,000

On October 1,2018,Mandy's Electronic sold merchandise in exchange for a 4 month,$50,000 note receivable,with 3% interest.Interest revenue of $500 is earned in 2018.

Companies that follow GAAP are required to use the direct write-off method for uncollectible accounts receivable.

When a company accepts a promissory note from a customer who cannot pay an accounts receivable,the company will credit Notes Receivable.

When a business pledges its accounts receivable,it transfers the right to collect cash from customers to the bank.

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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