Question 1

The days' sales uncollected ratio:

Accepted Answer

A)  Measures how much time is likely to pass before a company receives cash receipts from credit sales equal to the current amount of accounts receivable. 
B)  Is used to compare a company to other companies in the same industry. 
C)  Is used to compare between current and prior periods. 
D)  Is used to compare a company to other companies in the same industry and is used to compare between current and prior periods. 
E)  All of these answers are correct. 
A)  Measures how much time is likely to pass before a company receives cash receipts from credit sales equal to the current amount of accounts receivable. 
B)  Is used to compare a company to other companies in the same industry. 
C)  Is used to compare between current and prior periods. 
D)  Is used to compare a company to other companies in the same industry and is used to compare between current and prior periods. 
E)  All of these answers are correct.

Question 2

Accounts receivable turnover measures:

Accepted Answer

A)  How long it takes to sell inventory on credit. 
B)  How often a company converts its average accounts receivable balance into cash during the period. 
C)  Measures the relationship of cash sales to credit sales. 
D)  How long it takes to sell inventory on credit and how often a company converts its average accounts receivable balance into cash during the period. 
E)  How often a company converts its average accounts receivable balance into cash during the period and measures the relationship of cash sales to credit sales. 
A)  How long it takes to sell inventory on credit. 
B)  How often a company converts its average accounts receivable balance into cash during the period. 
C)  Measures the relationship of cash sales to credit sales. 
D)  How long it takes to sell inventory on credit and how often a company converts its average accounts receivable balance into cash during the period. 
E)  How often a company converts its average accounts receivable balance into cash during the period and measures the relationship of cash sales to credit sales.

Question 3

Pledging receivables:

Accepted Answer

A)  Allow firms to raise cash. 
B)  Allow firms to retain ownership of receivables. 
C)  Transfer risk of bad debt to the lender. 
D)  Allow firms to raise cash and retain ownership of receivables. 
E)  All of these answers are correct. 
A)  Allow firms to raise cash. 
B)  Allow firms to retain ownership of receivables. 
C)  Transfer risk of bad debt to the lender. 
D)  Allow firms to raise cash and retain ownership of receivables. 
E)  All of these answers are correct.

Question 4

The amount of bad debt expense can be estimated by:

Accepted Answer

A)  The percent of sales approach. 
B)  The percent of accounts receivable approach. 
C)  The aging of accounts receivable approach. 
D)  Both the percent of sales approach and the percent of accounts receivable approach. 
E)  All of these answers are correct. 
A)  The percent of sales approach. 
B)  The percent of accounts receivable approach. 
C)  The aging of accounts receivable approach. 
D)  Both the percent of sales approach and the percent of accounts receivable approach. 
E)  All of these answers are correct.

Question 5

Explain how the materiality principle can be used to justify the direct write-off method.

Accepted Answer

Materiality allows other principles to b

Question 6

The advantage of the allowance method of accounting for bad debts is that it identifies the customers who won't pay their bills.

Accepted Answer

A) True 
 B)False

Question 7

TechCom receives a 10%,90-day note for $2,500.The interest on the note is:

Accepted Answer

A)  $36.99. 
B)  $50.00. 
C)  $58.79. 
D)  $61.64. 
E)  $87.50. 
A)  $36.99. 
B)  $50.00. 
C)  $58.79. 
D)  $61.64. 
E)  $87.50.

Question 8

On December 31 of the current year,TechCom's unadjusted trial balance included the following items: Accounts Receivable,debit balance of $107,250; Allowance for Doubtful Accounts,credit balance of $1,900.What amount should be debited to Bad Debt Expense,assuming 6% of outstanding accounts receivable as of December 31 of the current year,are estimated to be uncollectible?

Accepted Answer

A)  $2,835. 
B)  $3,755. 
C)  $4,535. 
D)  $6,435. 
E)  $8,335. 
A)  $2,835. 
B)  $3,755. 
C)  $4,535. 
D)  $6,435. 
E)  $8,335.

Question 9

If a 60-day note receivable is dated September 22,what is the due date of the note?

Accepted Answer

The answer of If a 60-day note receivable is dated...

Question 10

The _________________ principle requires reporting bad debt expense in the same period as the sale.

Accepted Answer

The answer of The _________________ principle requires reporting bad debt...

Question 11

The materiality principle:

Accepted Answer

A)  States that an amount can be ignored if its effect on financial statements is unimportant to the user and permits use of the direct write-off method. 
B)  Permits use of the direct write-off method. 
C)  Prohibits use of the direct write-off method. 
D)  States that an amount can be ignored if its effect on financial statements is unimportant to the user. 
E)  Both permits and prohibits use of the direct write-off method. 
A)  States that an amount can be ignored if its effect on financial statements is unimportant to the user and permits use of the direct write-off method. 
B)  Permits use of the direct write-off method. 
C)  Prohibits use of the direct write-off method. 
D)  States that an amount can be ignored if its effect on financial statements is unimportant to the user. 
E)  Both permits and prohibits use of the direct write-off method.

Question 12

A dishonoured note receivable should be _______________________________.

Accepted Answer

Credited to es recei

Question 13

S & R Company uses the aging of accounts receivable approach to estimate bad debt expense.On December 31,2015,an analysis of accounts receivable revealed the following:   Required:
(a)Calculate the amount of allowance for doubtful accounts that should be reported on the balance sheet at December 31,2015.
(b)Calculate the amount of bad debts expense that should be reported on the 2015 income statement,assuming that the balance of Allowance for Doubtful Accounts on January 1 was $44,000 (credit balance)and accounts receivable written off during the year totaled $49,200.
(c)Present the appropriate general journal entry to record bad debts expense on December 31,2015.
(d)Show how accounts receivable will appear on the balance sheet at December 31,2015.

Accepted Answer

The answer of S & R Company uses the aging...

Question 14

A credit sale of $2,500 to a customer would result in:

Accepted Answer

A)  A credit to the Accounts Receivable account in the general ledger and a credit to the customer's account in the Accounts Receivable Ledger. 
B)  A debit to the Accounts Receivable account in the general ledger and a debit to the customer's account in the Accounts Receivable Ledger. 
C)  A debit to the Accounts Receivable account in the general ledger and a credit to the customer's account in the Accounts Receivable Ledger. 
D)  A credit to the Accounts Receivable account in the general ledger and a debit to the customer's account in the Accounts Receivable Ledger. 
E)  A credit to Sales and a credit to the customer's account in the Accounts Receivable Ledger. 
A)  A credit to the Accounts Receivable account in the general ledger and a credit to the customer's account in the Accounts Receivable Ledger. 
B)  A debit to the Accounts Receivable account in the general ledger and a debit to the customer's account in the Accounts Receivable Ledger. 
C)  A debit to the Accounts Receivable account in the general ledger and a credit to the customer's account in the Accounts Receivable Ledger. 
D)  A credit to the Accounts Receivable account in the general ledger and a debit to the customer's account in the Accounts Receivable Ledger. 
E)  A credit to Sales and a credit to the customer's account in the Accounts Receivable Ledger.

Question 15

A company can raise cash by borrowing money,and then factoring its accounts receivable as security for the loan.

Accepted Answer

A) True 
 B)False

Question 16

When a note is discounted to a bank without recourse,the bank assumes the risk of a bad debt loss and the original payee doesn't have a contingent liability.

Accepted Answer

A) True 
 B)False

Question 17

The direct write-off method does not use an allowance for doubtful accounts account.

Accepted Answer

A) True 
 B)False

Question 18

During the current year,TechCom concluded that a customer's $4,400 account receivable was uncollectible and that the account should be written off.What effect will this write-off have on TechCom's current year net income and balance sheet assuming the allowance method is used to account for bad debts?

Accepted Answer

A)  No effect on net income or on total assets. 
B)  Decrease in net income; no effect on total assets. 
C)  Decrease in net income; decrease in total assets. 
D)  Increase in net income; no effect on total assets. 
E)  No effect on net income; decrease in total assets. 
A)  No effect on net income or on total assets. 
B)  Decrease in net income; no effect on total assets. 
C)  Decrease in net income; decrease in total assets. 
D)  Increase in net income; no effect on total assets. 
E)  No effect on net income; decrease in total assets.

Question 19

Each December 31,Extra Company ages its accounts receivable to determine the amount of its adjustment for bad debts.At the end of this year,management estimated that $56,900 of the accounts receivable balance would be uncollectible.The Allowance for Doubtful Accounts account had a credit balance of $3,200.Prepare the adjusting journal entry that Extra Company should make on December 31 of the current year,to estimate bad debts expense.

Accepted Answer

The answer of Each December 31,Extra Company ages its accounts...

Question 20

The matching principle requires use of the direct write-off method.

Accepted Answer

A) True 
 B)False

The days' sales uncollected ratio:

Accounts receivable turnover measures:

Pledging receivables:

The amount of bad debt expense can be estimated by:

Explain how the materiality principle can be used to justify the direct write-off method.

The advantage of the allowance method of accounting for bad debts is that it identifies the customers who won't pay their bills.

TechCom receives a 10%,90-day note for $2,500.The interest on the note is:

If a 60-day note receivable is dated September 22,what is the due date of the note?

The _________________ principle requires reporting bad debt expense in the same period as the sale.

The materiality principle:

A dishonoured note receivable should be _______________________________.

A credit sale of $2,500 to a customer would result in:

A company can raise cash by borrowing money,and then factoring its accounts receivable as security for the loan.

When a note is discounted to a bank without recourse,the bank assumes the risk of a bad debt loss and the original payee doesn't have a contingent liability.

The direct write-off method does not use an allowance for doubtful accounts account.

The matching principle requires use of the direct write-off method.

Accounting in Business

Analyzing and Reporting Transactions

Adjusting Accounts for Financial Statements

Completing the Accounting Cycle and Classifying Accounts

Accounting for Merchandising Activities

Merchandise Inventory and Cost of Sales

Accounting Information Systems

Internal Control and Cash

Filters

Exam 9: Receivables

The days' sales uncollected ratio:

Accounts receivable turnover measures:

Pledging receivables:

The amount of bad debt expense can be estimated by:

Explain how the materiality principle can be used to justify the direct write-off method.

The advantage of the allowance method of accounting for bad debts is that it identifies the customers who won't pay their bills.

TechCom receives a 10%,90-day note for $2,500.The interest on the note is:

If a 60-day note receivable is dated September 22,what is the due date of the note?

The _________________ principle requires reporting bad debt expense in the same period as the sale.

The materiality principle:

A dishonoured note receivable should be _______________________________.

A credit sale of $2,500 to a customer would result in:

A company can raise cash by borrowing money,and then factoring its accounts receivable as security for the loan.

When a note is discounted to a bank without recourse,the bank assumes the risk of a bad debt loss and the original payee doesn't have a contingent liability.

The direct write-off method does not use an allowance for doubtful accounts account.

The matching principle requires use of the direct write-off method.

Accounting in Business

Analyzing and Reporting Transactions

Adjusting Accounts for Financial Statements

Completing the Accounting Cycle and Classifying Accounts

Accounting for Merchandising Activities

Merchandise Inventory and Cost of Sales

Accounting Information Systems

Internal Control and Cash

Filters