Question 1

Explain the distinction between a note receivable and an account receivable.

Accepted Answer

The answer of Explain the distinction between a note receivable...

Question 2

On February 1, 2015, Vermont Corp. pays $50,000 for shares of Stream, Inc. common stock and another $1,000 in commissions. Assume that Vermont sells the Stream stock on May 20, 2015, for $53,000. In this case, Vermont recognizes

Accepted Answer

A)  An increase in assets and stockholders' equity for $2,000. 
B)  An decrease in assets and an increase in stockholders' equity for $2,000. 
C)  An increase and decrease in assets by the same amount. 
D)  An increase in assets and stockholders' equity for $3,000.

Question 3

The amount of money received, or the fair value of the products or services received by the maker when a promissory note is issued is called the .

Accepted Answer

The answer of The amount of money received, or the...

Question 4

If a company uses the allowance method of accounting for bad debts, which one of the following statements is true?

Accepted Answer

A)  It violates the matching principle 
B)  It will record bad debts only when an account is determined to be uncollectible 
C)  It will reduce the accounts receivable at the end of the accounting period for estimated uncollectible accounts 
D)  It will report accounts receivable in the balance sheet at their net realizable value

Question 5

The maker of a note recognizes a note receivable on the balance sheet and interest revenue on its income statement.

Accepted Answer

A) True 
 B)False

Question 6

Pharma Corp.
The data presented below for Pharma Corp. is for the year ended December 31, 2015:
 
-See the data for Pharma Corp. If Pharma Corp.uses the aging of accounts receivable approach to estimate its bad debts, what will be the net realizable value of its accounts receivable after the adjustment for bad debt expense?

Accepted Answer

A)  $140,000 
B)  $156,000 
C)  $167,000 
D)  $184,000

Question 7

Typically, the lower the accounts receivable turnover ratio, the better.

Accepted Answer

A) True 
 B)False

Question 8

A company invests excess cash in a certificate of deposit. At the end of an accounting period before the CD matures, the company will recognize interest expense.

Accepted Answer

A) True 
 B)False

Question 9

Utah Co. sold merchandise to Big Sky Corp. on December 1, 2014, for $9,000, and accepted a promissory note for payment in the same amount. The note has a term of 90 days and a stated interest rate of 8%. Utah's accounting period ends on December 31. What amount should Utah recognize as interest revenue on December 31, 2014 if a 360 day year is assumed?

Accepted Answer

A)  $ -0- 
B)  $ 60 
C)  $120 
D)  $180

Question 10

Refer to the data for Sliders Company.
The firm estimates that bad debts could be 1% of their net sales.
A What amount will Sliders Company recognize as bad debts expense for the year?
Once this calculation is recorded, assume that the company has a balance of Accounts
B Receivable of $58,700, and an Allowance for Doubtful Accounts of $800. What will be the net realizable value once the adjustment from Part A is made?

Accepted Answer

The answer of Refer to the data for Sliders Company.
The...

Question 11

What is the distinguishing characteristic between accounts receivable and notes receivable?

Accepted Answer

A)  Accounts receivable are usually current assets while notes receivable are usually long-term assets. 
B)  Accounts receivable require payment of interest if not paid within the usual credit terms. 
C)  Notes receivable result from credit sale transactions for merchandising companies, while accounts receivable result from credit sale transactions for service companies. 
D)  Notes receivable result from a written promise to pay within a specified amount of time.

Question 12

The mechanism that keeps track of the balances owed by individual customers is called an
_________________________.

Accepted Answer

The answer of The mechanism that keeps track of the...

Question 13

Which one of the following statements is true if a company's collection period for accounts receivable is unacceptably long?

Accepted Answer

A)  The company may need to borrow to acquire operating cash 
B)  The company may offer trade discounts to lengthen the collection period 
C)  Cash flows from operations may be higher than expected for the company's sales 
D)  The company should expand operations with its excess cash

Question 14

Speed Wear Bicycle Gear accepts VISA credit cards from its customers. Speed Wear is closed on Sundays and on that day records the weekly sales and remits the credit card drafts to VISA. For the week ending on Sunday, April 12, cash sales totaled $3,650 and credit card sales amounted to $3,900. On April 15, Speed Wear received
$3,794.70 from VISA as payment for the credit card drafts. Identify the effects on the accounting equation for the April 12 and April 15 transactions. As a percentage, what collection fee is VISA charging Speed Wear?

Accepted Answer

The answer of Speed Wear Bicycle Gear accepts VISA credit...

Question 15

For each item listed below, identify how it will be reported on the Statement of Cash Flows under the indirect method.
-Write­off of a customer's account receivable under the allowance method

Accepted Answer

A) Operating activity 
B) Investing activity 
C) Financing activity 
D) Not reported separately on the cash flow statement

Question 16

If a company uses the allowance method to account for bad debts, when will the company's owners' equity decrease?

Accepted Answer

A)  At the date a customer's account is written off 
B)  At the end of the accounting period when an adjusting entry for bad debts is recorded 
C)  At the date a customer's account is determined to be uncollectible 
D)  When the accounts receivable amount becomes past due

Question 17

The gross accounts receivable less the allowance for doubtful accounts is known as the
_________________________.

Accepted Answer

The answer of The gross accounts receivable less the allowance...

Question 18

Select the term from the list below that matches each of the following six descriptions.
-The sale of a note

Accepted Answer

A) Interest 
B) Maturity value 
C) Principal 
D) Payee 
E) Discounting
F)Term
G)Recourse
H)Implicit
I)Maker

Question 19

A note discounted with recourse means that if the original customer fails to pay the bank the total amount due on the maturity date of the note, the company that transferred the note to the bank is liable for the full amount.

Accepted Answer

A) True 
 B)False

Question 20

The length of time a note is outstanding that is, the period of time between the date it is issued and the date it matures is called the ____________________.

Accepted Answer

The answer of The length of time a note is...

Exam 7: Receivables and Investments

Explain the distinction between a note receivable and an account receivable.

On February 1, 2015, Vermont Corp. pays $50,000 for shares of Stream, Inc. common stock and another $1,000 in commissions. Assume that Vermont sells the Stream stock on May 20, 2015, for $53,000. In this case, Vermont recognizes

The amount of money received, or the fair value of the products or services received by the maker when a promissory note is issued is called the .

If a company uses the allowance method of accounting for bad debts, which one of the following statements is true?

The maker of a note recognizes a note receivable on the balance sheet and interest revenue on its income statement.

Typically, the lower the accounts receivable turnover ratio, the better.

A company invests excess cash in a certificate of deposit. At the end of an accounting period before the CD matures, the company will recognize interest expense.

What is the distinguishing characteristic between accounts receivable and notes receivable?

The mechanism that keeps track of the balances owed by individual customers is called an _________________________.

Which one of the following statements is true if a company's collection period for accounts receivable is unacceptably long?

For each item listed below, identify how it will be reported on the Statement of Cash Flows under the indirect method. -Writeoff of a customer's account receivable under the allowance method

If a company uses the allowance method to account for bad debts, when will the company's owners' equity decrease?

The gross accounts receivable less the allowance for doubtful accounts is known as the _________________________.

Select the term from the list below that matches each of the following six descriptions. -The sale of a note

A note discounted with recourse means that if the original customer fails to pay the bank the total amount due on the maturity date of the note, the company that transferred the note to the bank is liable for the full amount.

The length of time a note is outstanding that is, the period of time between the date it is issued and the date it matures is called the ____________________.

Exam 7: Receivables and Investments

Explain the distinction between a note receivable and an account receivable.

On February 1, 2015, Vermont Corp. pays $50,000 for shares of Stream, Inc. common stock and another $1,000 in commissions. Assume that Vermont sells the Stream stock on May 20, 2015, for $53,000. In this case, Vermont recognizes

The amount of money received, or the fair value of the products or services received by the maker when a promissory note is issued is called the .

If a company uses the allowance method of accounting for bad debts, which one of the following statements is true?

The maker of a note recognizes a note receivable on the balance sheet and interest revenue on its income statement.

Typically, the lower the accounts receivable turnover ratio, the better.

A company invests excess cash in a certificate of deposit. At the end of an accounting period before the CD matures, the company will recognize interest expense.

What is the distinguishing characteristic between accounts receivable and notes receivable?

The mechanism that keeps track of the balances owed by individual customers is called an _________________________.

Which one of the following statements is true if a company's collection period for accounts receivable is unacceptably long?

For each item listed below, identify how it will be reported on the Statement of Cash Flows under the indirect method. -Write­off of a customer's account receivable under the allowance method

If a company uses the allowance method to account for bad debts, when will the company's owners' equity decrease?

The gross accounts receivable less the allowance for doubtful accounts is known as the _________________________.

Select the term from the list below that matches each of the following six descriptions. -The sale of a note

A note discounted with recourse means that if the original customer fails to pay the bank the total amount due on the maturity date of the note, the company that transferred the note to the bank is liable for the full amount.

The length of time a note is outstanding that is, the period of time between the date it is issued and the date it matures is called the ____________________.

For each item listed below, identify how it will be reported on the Statement of Cash Flows under the indirect method. -Writeoff of a customer's account receivable under the allowance method