Question 1

The percentage of net sales method of estimating uncollectible accounts is in violation of the matching principle.

Accepted Answer

A) True 
 B)False

Question 2

The receivable turnover is expressed in terms of dollars.

Accepted Answer

A) True 
 B)False

Question 3

For each of the items below, use the following letters to identify the correct treatment in a bank reconciliation.
 $ \mathrm{A}= $ Add to balance per bank$\quad\quad\quad\quad \mathrm{C}= $ Add to balance per books
$ \mathrm{B}= $ Deduct from balance per bank$\quad\quad \mathrm{D}= $ Deduct from balance per books ____ 1. Interest income
____ 2. Outstanding checks
____ 3. Check written for $89, but $98 recorded in books
____ 4. Customer's NSF check
____ 5. Note receivable collected by bank
____ 6. Deposit made for $70, but $700 recorded in books
____ 7. Bank check-printing charge
____ 8. Check written for $52, but $25 recorded in books
____ 9. Deposits in transit
____ 10. Bank fee for collection on note receivable

Accepted Answer

1. C
2. B
3. C
4. D

Question 4

A promissory note is executed in June. When the note is paid the following January, the payee's entry includes (assuming a calendar-year accounting period and no reversing entries) a

Accepted Answer

A)  debit to Interest Income. 
B)  credit to Cash. 
C)  credit to Interest Receivable. 
D)  debit to Notes Receivable. 
A)  debit to Interest Income. 
B)  credit to Cash. 
C)  credit to Interest Receivable. 
D)  debit to Notes Receivable.

Question 5

At year end, Erwin Graphics has a $350 debit balance in Allowance for Uncollectible Accounts. It estimates that 5 percent of the $20,000 in sales are uncollectible. Give the amount that should be used in the adjusting entry to record uncollectible accounts using the percentage of net sales method. (Show your calculations.)

Accepted Answer

$1,000 credit to All

Question 6

Because bad debt losses are incurred to generate sales, they should be charged against the sales that they helped generate.

Accepted Answer

A) True 
 B)False

Question 7

A contingent liability is generally disclosed in the notes to the financial statements.

Accepted Answer

A) True 
 B)False

Question 8

Under the allowance method, Uncollectible Accounts Expense is recorded

Accepted Answer

A)  for an estimated amount. 
B)  several times during the accounting period. 
C)  when an individual account is written off. 
D)  for a known amount. 
A)  for an estimated amount. 
B)  several times during the accounting period. 
C)  when an individual account is written off. 
D)  for a known amount.

Question 9

Use this information to answer the following question. The general ledger account for Accounts Receivable shows a debit balance of $50,000. Allowance for Uncollectible Accounts has a credit balance of $1,000. Net sales for the year were $500,000. In the past, 2 percent of sales have proved uncollectible, and an aging of accounts receivable accounts results in an estimate of $13,500 of uncollectible accounts.
Using the percentage of net sales method, Uncollectible Accounts Expense would be debited for

Accepted Answer

A)  $9,000. 
B)  $11,000. 
C)  $1,000. 
D)  $10,000. 
A)  $9,000. 
B)  $11,000. 
C)  $1,000. 
D)  $10,000.

Question 10

A company performs the aging of accounts receivable calculation and arrives at an estimate for uncollectible accounts of $800. If Allowance for Uncollectible Accounts has a debit balance of $300 prior to the year-end adjustment, for how much should the adjustment be journalized?

Accepted Answer

A)  $1,100 
B)  $800 
C)  $300 
D)  $5,500 
A)  $1,100 
B)  $800 
C)  $300 
D)  $5,500

Question 11

Assume that on December 1, a note which has a face value of $1,000, bears interest at 6 percent for 90 days, received from a customer as an extension of his of past - due account is honored on due date. The entry that would be made to record the receipt on due date (ignoring interest) is:

Accepted Answer

The answer of Assume that on December 1, a note...

Question 12

A 60-day note dated December 10 is due on February 10.

Accepted Answer

A) True 
 B)False

Question 13

You have just received notice that Agnes Fisher, a customer of yours with an Accounts Receivable balance of $200, has gone bankrupt and will not be making any future payments. Assuming you use the allowance method, the journal entry you make is to

Accepted Answer

A)  debit Uncollectible Accounts Expense and credit Accounts Receivable. 
B)  debit Allowance for Uncollectible Accounts and credit Uncollectible Accounts Expense. 
C)  debit Uncollectible Accounts Expense and credit Allowance for Uncollectible Accounts. 
D)  debit Allowance for Uncollectible Accounts and credit Accounts Receivable. 
A)  debit Uncollectible Accounts Expense and credit Accounts Receivable. 
B)  debit Allowance for Uncollectible Accounts and credit Uncollectible Accounts Expense. 
C)  debit Uncollectible Accounts Expense and credit Allowance for Uncollectible Accounts. 
D)  debit Allowance for Uncollectible Accounts and credit Accounts Receivable.

Question 14

The fee for factoring without recourse is normally higher than it would be with recourse.

Accepted Answer

A) True 
 B)False

Question 15

The direct charge-off method makes not attempt to match bad-debt losses with revenues.

Accepted Answer

A) True 
 B)False

Question 16

Jayne Luke started a computer business in her basement less than a year ago. Her personal attention to clients and persistence in obtaining new customers has caused the business to grow at a tremendous pace. Jayne has become so busy she has neglected to keep after clients who have failed to pay her. As a result, Jayne has a large amount of accounts receivable and notes receivable on her balance sheet but not much cash. She continues to service clients, but she now realizes that her cash will soon be exhausted. Suggest some options Jayne has to achieve a strong cash balance.

Accepted Answer

Some options Jayne Luke could explore to

Question 17

Automated teller machines (ATMs) are used primarily by businesses rather than by consumers.

Accepted Answer

A) True 
 B)False

Question 18

Use the following T account to answer the questions below (assume a calendar-year accounting period).
 $\begin{array}{l}
\text { Allowance for Uncollectible Accounts }\
\begin{array}{rr|lr}
\hline 1 / 10 & 300 & 1 / 15 & 300 \
5 / 12 & 440 & 12 / 31 & 3,600
\end{array}
\end{array}$ What apparently occurred on: 
a. January 10?
b. January 15?
c. May 12?
d. December 31?

Accepted Answer

a. Wrote off individual accoun

Question 19

The account Allowance for Uncollectible Accounts is closed at the end of the accounting period.

Accepted Answer

A) True 
 B)False

Question 20

Bad debts are considered as an expense of selling on credit.

Accepted Answer

A) True 
 B)False

Exam 9: Cash and Receivables

The percentage of net sales method of estimating uncollectible accounts is in violation of the matching principle.

The receivable turnover is expressed in terms of dollars.

A promissory note is executed in June. When the note is paid the following January, the payee's entry includes (assuming a calendar-year accounting period and no reversing entries) a

Because bad debt losses are incurred to generate sales, they should be charged against the sales that they helped generate.

A contingent liability is generally disclosed in the notes to the financial statements.

Under the allowance method, Uncollectible Accounts Expense is recorded

A company performs the aging of accounts receivable calculation and arrives at an estimate for uncollectible accounts of $800. If Allowance for Uncollectible Accounts has a debit balance of $300 prior to the year-end adjustment, for how much should the adjustment be journalized?

Assume that on December 1, a note which has a face value of $1,000, bears interest at 6 percent for 90 days, received from a customer as an extension of his of past - due account is honored on due date. The entry that would be made to record the receipt on due date (ignoring interest) is:

A 60-day note dated December 10 is due on February 10.

You have just received notice that Agnes Fisher, a customer of yours with an Accounts Receivable balance of $200, has gone bankrupt and will not be making any future payments. Assuming you use the allowance method, the journal entry you make is to

The fee for factoring without recourse is normally higher than it would be with recourse.

The direct charge-off method makes not attempt to match bad-debt losses with revenues.

Automated teller machines (ATMs) are used primarily by businesses rather than by consumers.

Use the following T account to answer the questions below (assume a calendar-year accounting period). Allowance for Uncollectible Accounts 1/10 300 1/15 300 5/12 440 12/31 3,600 What apparently occurred on: a. January 10? b. January 15? c. May 12? d. December 31?

The account Allowance for Uncollectible Accounts is closed at the end of the accounting period.

Bad debts are considered as an expense of selling on credit.

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Completing the Accounting Cycle

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Internal Control

Inventories

Current Liabilities and Fair Value Accounting

Long Term Assets

Contributed Capital

Long Term Liabilities

The Corporate Income Statement and the Statement of Stockholders Equity

The Statement of Cash Flows

Financial Performance Measurement

Partnerships

The Changing Business Environment-A Managers Pers

Cost Concepts and Cost Allocation

Costing Systems: Job Order Costing

Costing Systems Process Costing

Activity-Based Systems-Abm and Lean

Cost Behavior Analysis

The Budgeting Process

Performance Management and Evaluation

Standard Costing and Variance Analysis

Short Run Decision Analysis

Capital Investment Analysis

Filters