Question 1

Cyprus Corp. received a 7%, 6-month promissory note with a face amount of $8,000 from the Mustafa Company
for the sale of merchandise on May 1, 2014. Cyprus' accounting year­end is December 31.
REQUIRED: Identify the maturity date of the note.

Accepted Answer

The answer of Cyprus Corp. received a 7%, 6-month promissory...

Question 2

-Refer to the data for Music Corporation. If the aging approach is used to estimate bad debts, what amount should be recorded as bad debt expense for 2015?

Accepted Answer

A)  $8,000 
B)  $8,100 
C)  $8,700 
D)  $8,900

Question 3

The total amount of interest calculated annually on a $7,000 promissory note payable for 3 years at 12% that is not Compounded is

Accepted Answer

A)  $280 
B)  $840 
C)  $2,520 
D)  $8,260

Question 4

An increase in accounts receivable is reported on the statement of cash flows under the indirect method as an addition.

Accepted Answer

A) True 
 B)False

Question 5

What should a company do to improve its accounts receivable turnover rate?

Accepted Answer

A)  Lower its selling prices. 
B)  Increase its sales force. 
C)  Give customers credit terms of 2/10, n/30 rather than 1/10, n/30. 
D)  Reduce the number of employees working in the credit department.

Question 6

Match the following definitions with their appropriate terms in the next 14 questions.
-Note receivable

Accepted Answer

A) A liability resulting from the signing of a promissory note. 
B) A measure of how long it takes to collect receivables. 
C) A written promise to repay a definite sum of money on demand or at a fixed or determinable date in the future. 
D) 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. 
E) The party that will receive the money from a promissory note at some future date.
F)The process of selling a promissory note.
G)The date the promissory note is due.
H)The amount of cash the maker is to pay the payee on the maturity date of the note.
I)The difference between the principal amount of the note and its maturity value.
J)An asset resulting from the acceptance of a promissory note from another company.
K)Securities issued by corporations and governmental bodies as a form of borrowing.
L)Securities issued by corporations as a form of ownership in the business.
M)The party that agrees to repay the money for a promissory note at some future date.
N)The amount of cash received, or the fair value of the products or services received, by the maker when a promissory note is issued.

Question 7

If a company uses the direct write-off method of accounting for bad debts,

Accepted Answer

A)  It is applying the matching principle 
B)  It will record bad debt expense only when an account is determined to be uncollectible 
C)  It will reduce the accounts receivable account 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 8

Evanston Inc. started the year with $35,000 in accounts receivable and ended the year with
$50,000 in the account. Describe how information regarding the company's accounts receivable should be reflected on its statement of cash flows, assuming use of the indirect method.

Accepted Answer

The answer of Evanston Inc. started the year with $35,000...

Question 9

When a note receivable has been discounted by a company

Accepted Answer

A)  An account called discount on notes receivable is used 
B)  It will be shown as an asset of the company 
C)  It slows the collection process 
D)  It may be shown as a contingent liability in the footnotes

Question 10

During 2014, the accounts receivable turnover rate for Cordner Company increased from 10 to 14 times per year. Which one of the following statements is the most likely explanation for the change?

Accepted Answer

A)  The company's credit department has followed up with customers whose account balances are past due in order to generate quicker collections. 
B)  The company has decreased sales to its most credit worthy customers. 
C)  The company has increased the amount of time customers have to pay their accounts before they are past due. 
D)  The company has extended credit to more risky customers in order to increase sales.

Question 11

Write a short paragraph explaining the following:
1. When bad debts are estimated, why is the balance in Allowance for Doubtful Accounts considered when the percentage of accounts receivable approach is used but not when the percentage of net credit sales approach is used?
2. When estimating bad debts on the basis of a percentage of accounts receivable, what is the advantage of using an aging schedule?

Accepted Answer

The answer of Write a short paragraph explaining the following:
1....

Question 12

The 2015 annual report of Ski Products, Inc. reported the following amounts in millions of dollars:
  REQUIRED:
1. Compute Ski's accounts receivable turnover ratio for the year ended May 31, 2015. Assume that all sales are
on credit.
2. What is the average collection period in days for an account receivable? Explain your answer.
3. Ski's main products are medium to high­end skis and snow boards. Give some examples of the types of customers you would expect Ski to have. Do you think the average collection period for sales to these customers is reasonable? What other information do you need to fully answer that question?

Accepted Answer

The answer of The 2015 annual report of Ski Products,...

Question 13

Clarion Corp. invested cash in a 6-month certificate of deposit CD on November 1, 2015. If Clarion Corp. has an accounting period that ends on December 31, 2015, when should Clarion recognize interest revenue from the CD?

Accepted Answer

A)  On December 31, 2015 only 
B)  On May 1, 2016 only 
C)  Both December 31, 2015 and May 31, 2016. 
D)  On the date when its income tax return is filed.

Question 14

Bonds issued by corporations or governmental bodies as a form of borrowing are called
____________________.

Accepted Answer

The answer of Bonds issued by corporations or governmental bodies...

Question 15

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 the maturity date of the note?

Accepted Answer

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

Question 16

Match the following definitions with their appropriate terms in the next 14 questions.
-Interest

Accepted Answer

A) A liability resulting from the signing of a promissory note. 
B) A measure of how long it takes to collect receivables. 
C) A written promise to repay a definite sum of money on demand or at a fixed or determinable date in the future. 
D) 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. 
E) The party that will receive the money from a promissory note at some future date.
F)The process of selling a promissory note.
G)The date the promissory note is due.
H)The amount of cash the maker is to pay the payee on the maturity date of the note.
I)The difference between the principal amount of the note and its maturity value.
J)An asset resulting from the acceptance of a promissory note from another company.
K)Securities issued by corporations and governmental bodies as a form of borrowing.
L)Securities issued by corporations as a form of ownership in the business.
M)The party that agrees to repay the money for a promissory note at some future date.
N)The amount of cash received, or the fair value of the products or services received, by the maker when a promissory note is issued.

Question 17

The data presented below is for Craft, Inc. for 2015.  What is the effect on liquidity when Craft records its estimate for bad debt expense using the allowance method?

Accepted Answer

A)  Liquidity decreases 
B)  Liquidity increases 
C)  Liquidity stays the same 
D)  Liquidity both increases and decreases

Question 18

Refer to the data for Beatrice Equipment.
Determine the balance of Accounts Receivable at December 31, 2014.

Accepted Answer

The answer of Refer to the data for Beatrice Equipment.
Determine...

Question 19

On July 1, 2015, Frank Corp. purchased $100,000 of 8% bonds at face value. Interest is paid annually on June 30. If the accounting year for Frank ends at December 31, 2015, what will be reported with respect to the bonds on that date?

Accepted Answer

A)  The carrying value of the bonds will be $108,000. 
B)  The cash received in interest will be $8,000. 
C)  Interest income in the amount of $4,000 will be accrued. 
D)  A loss on the bonds will be reported in the Other Income and Expense section of the 2015 income statement until the entire amount of interest is paid on June 30, 2016.

Question 20

Securities issued by corporations as a form of ownership in the business, such as common and preferred stock, are called equity securities.

Accepted Answer

A) True 
 B)False

Exam 7: Receivables and Investments

Cyprus Corp. received a 7%, 6-month promissory note with a face amount of $8,000 from the Mustafa Company for the sale of merchandise on May 1, 2014. Cyprus' accounting yearend is December 31. REQUIRED: Identify the maturity date of the note.

-Refer to the data for Music Corporation. If the aging approach is used to estimate bad debts, what amount should be recorded as bad debt expense for 2015?

The total amount of interest calculated annually on a $7,000 promissory note payable for 3 years at 12% that is not Compounded is

An increase in accounts receivable is reported on the statement of cash flows under the indirect method as an addition.

What should a company do to improve its accounts receivable turnover rate?

Match the following definitions with their appropriate terms in the next 14 questions. -Note receivable

If a company uses the direct write-off method of accounting for bad debts,

Evanston Inc. started the year with $35,000 in accounts receivable and ended the year with $50,000 in the account. Describe how information regarding the company's accounts receivable should be reflected on its statement of cash flows, assuming use of the indirect method.

When a note receivable has been discounted by a company

During 2014, the accounts receivable turnover rate for Cordner Company increased from 10 to 14 times per year. Which one of the following statements is the most likely explanation for the change?

Clarion Corp. invested cash in a 6-month certificate of deposit CD on November 1, 2015. If Clarion Corp. has an accounting period that ends on December 31, 2015, when should Clarion recognize interest revenue from the CD?

Bonds issued by corporations or governmental bodies as a form of borrowing are called ____________________.

Match the following definitions with their appropriate terms in the next 14 questions. -Interest

The data presented below is for Craft, Inc. for 2015. What is the effect on liquidity when Craft records its estimate for bad debt expense using the allowance method?

Refer to the data for Beatrice Equipment. Determine the balance of Accounts Receivable at December 31, 2014.

On July 1, 2015, Frank Corp. purchased $100,000 of 8% bonds at face value. Interest is paid annually on June 30. If the accounting year for Frank ends at December 31, 2015, what will be reported with respect to the bonds on that date?

Securities issued by corporations as a form of ownership in the business, such as common and preferred stock, are called equity securities.

Exam 7: Receivables and Investments

Cyprus Corp. received a 7%, 6-month promissory note with a face amount of $8,000 from the Mustafa Company for the sale of merchandise on May 1, 2014. Cyprus' accounting year­end is December 31. REQUIRED: Identify the maturity date of the note.

-Refer to the data for Music Corporation. If the aging approach is used to estimate bad debts, what amount should be recorded as bad debt expense for 2015?

The total amount of interest calculated annually on a $7,000 promissory note payable for 3 years at 12% that is not Compounded is

An increase in accounts receivable is reported on the statement of cash flows under the indirect method as an addition.

What should a company do to improve its accounts receivable turnover rate?

Match the following definitions with their appropriate terms in the next 14 questions. -Note receivable

If a company uses the direct write-off method of accounting for bad debts,

Evanston Inc. started the year with $35,000 in accounts receivable and ended the year with $50,000 in the account. Describe how information regarding the company's accounts receivable should be reflected on its statement of cash flows, assuming use of the indirect method.

When a note receivable has been discounted by a company

During 2014, the accounts receivable turnover rate for Cordner Company increased from 10 to 14 times per year. Which one of the following statements is the most likely explanation for the change?

Clarion Corp. invested cash in a 6-month certificate of deposit CD on November 1, 2015. If Clarion Corp. has an accounting period that ends on December 31, 2015, when should Clarion recognize interest revenue from the CD?

Bonds issued by corporations or governmental bodies as a form of borrowing are called ____________________.

Match the following definitions with their appropriate terms in the next 14 questions. -Interest

The data presented below is for Craft, Inc. for 2015. What is the effect on liquidity when Craft records its estimate for bad debt expense using the allowance method?

Refer to the data for Beatrice Equipment. Determine the balance of Accounts Receivable at December 31, 2014.

On July 1, 2015, Frank Corp. purchased $100,000 of 8% bonds at face value. Interest is paid annually on June 30. If the accounting year for Frank ends at December 31, 2015, what will be reported with respect to the bonds on that date?

Securities issued by corporations as a form of ownership in the business, such as common and preferred stock, are called equity securities.

Cyprus Corp. received a 7%, 6-month promissory note with a face amount of $8,000 from the Mustafa Company for the sale of merchandise on May 1, 2014. Cyprus' accounting yearend is December 31. REQUIRED: Identify the maturity date of the note.