Question 1

On November 2, 2016, Quaint General Store concluded that a customer's $400 account receivable was uncollectible and that the account should be written off.What effect will this write-off have on Quaint's 2016 net income and balance sheet totals assuming the allowance method is used to account for bad debts?

Accepted Answer

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

Question 2

Match the following definitions with their appropriate terms .
-Subsidiary ledger

Accepted Answer

A) A receivable arising from the sale of goods or services 
B) A form used to categorize the various individual with a verbal promise to pay. accounts receivable according to the length of time each has been outstanding. 
C) A method of estimating bad debts on the basis of either 
D) A measure of the number of times receivables are the net credit sales of the period or the accounts collected in a period. receivable at the end of the period. 
E) The general ledger account that is supported by a
F)A contra-asset account used to reduce accounts subsidiary ledger. receivable to its net realizable value.
G)The detail for a number of individual items that
H)The recognition of bad debts expense at the point an collectively make up a single general ledger account. account is written off as uncollectible.

Question 3

Utah Co.sold merchandise to Big Sky Corp.on December 1, 2016, 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 4

Which one of the approaches for the allowance method of accounting for bad debts emphasizes the net realizable value of accounts receivable on the balance sheet?

Accepted Answer

A)  The percentage of accounts receivable approach 
B)  The percentage of net credit sales approach 
C)  The direct write-off method 
D)  The uncollectible approach

Question 5

The data presented below for Lynx Corp.is for the year ended December 31, 2016: $$\begin{array} { l r } 
\text { Sales (100\% on credit) } & \$ 1,000,000 \
\text { Sales returns } & 30,000 \
\text { Accounts Receivable (December 31,2016) } & 170,000 \
\text { Allowance for Doubtful Accounts [Cr. B alance] } & \
\quad \text { (Before adjustment at December 31, 2016) } & 1,300 \
\text { Estimated amount of uncollectible accounts based on aging analysis } & 14,000
\end{array}$$
-See the data for Lynx Corp. If Lynx Corp.uses the aging of accounts receivable approach to estimate its bad debts, what amount will be reported as bad debt expense for 2016?

Accepted Answer

A)  $12,700 
B)  $13,700 
C)  $14,000 
D)  $15,300

Question 6

Textbooks.com accepts VISA for payments of purchases made by students.The credit card drafts are deposited directly in a bank account.VISA charges a 2% collection fee.Credit card drafts totaling $12,000 are deposited during September.The effect on the accounting equation to record the sales and deposits will include

Accepted Answer

A)  An increase in Cash for $12,000 
B)  An increase to Sales for $11,760 
C)  An increase to Accounts Receivable for $11,760 
D)  An increase in Collection Fee Expense for $240

Question 7

The data below is for Music Corporation for 2016. $$\begin{array} { l r } 
\text { Accounts receivable-January 1, 2016 } & \$ 236,000 \
\text { Credit sales during 2016 } & 820,000 \
\text { Collections from credit customers during 2016 } & 590,000 \
\text { Customer accounts written off as uncoll ectible during 2016 } & 8,000 \
\text { All owance for doubtful accounts-January 1, 2016 } & 8,700 \
\text { Estimated uncollectible accounts based on an aging analysis } & 9,600
\end{array}$$
-Refer to the data for Music Corporation. What is the balance of Accounts Receivable at December 31, 2016?

Accepted Answer

A)  $336,000 
B)  $448,400 
C)  $458,000 
D)  $466,000

Question 8

For each item listed below, identify how it will be reported on the Statement of Cash Flows under the indirect method.
-Decrease in accounts receivable

Accepted Answer

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

Question 9

The following data concerns Wang Corporation for 2016: $\begin{array}{lr}
\text { Credit sales during the year } & \$ 1,600,000 \
\text { Accounts Receivable-December } 31,2016 & 235,000 \
\text { Allowance for Doubtful Accounts-December } 31,2016 & 18,000 \
\text { Bad debt expense for the year } & 11,000
\end{array}$ ? What amount will Wang show on its year-end balance sheet for the net realizable value of its accounts receivable?

Accepted Answer

A)  $253,000 
B)  $235,000 
C)  $224,000 
D)  $217,000

Question 10

Comfort Shoes received a promissory note from a customer on April 1, 2016.The face amount of the note is $2,000; the terms are 12 months and 8% annual interest.At the maturity date, the customer pays for the note and interest.Comfort Shoes made the proper adjustment at the end of December for interest.The effect of recognizing the transaction on the maturity date is

Accepted Answer

A)  A decrease to Cash 
B)  An increase to Notes Receivable 
C)  An increase to Discount on Notes Receivable 
D)  A decrease to Notes Receivable

Question 11

Lasiter Corp.reported net credit sales of $2,000,000 and cost of goods sold of $1,400,000 for 2016.On January 1, 2016, accounts receivable was $250,000.Amounts owed by customers increased by $20,000 during 2016.Rounding to two decimal places, what is Lasiter's accounts receivable turnover rate for 2016?

Accepted Answer

A)  8.33 
B)  8.00 
C)  7.69 
D)  7.41

Question 12

The data presented below is for Mellon Corporation for the year ended December 31, 2016: $\begin{array}{lr}
\text { Sales (100\% on credit) } & \$ 1,500,000 \
\text { Sales returns } & 60,000 \
\text { Accounts Receivable (December 31, 2016) } & 250,000 \
\text { Allowance for Doubtful Accounts [Credit B al ance] (Before adjustment at December } & \
31,2016 &3,000  \
\text { Estimated amount of uncollectible accounts based on an aging analysis }&31,000\
\end{array}$
-Refer to the information for Mellon Corporation. If Mellon 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)  $216,000 
B)  $219,000 
C)  $222,000 
D)  $250,000

Question 13

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 14

Select the term from the list below that matches each of the following six descriptions.
-The difference between the principal amount of the note and its maturity value

Accepted Answer

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

Question 15

The comparative balance sheets for Flagler Co.for 2017 and 2016 indicate that accounts receivable decreased during 2017.Flagler uses the indirect method of preparing the operating activities section of its statement of cash flows.How will the decrease in accounts receivable be reported on the statement of cash flows?

Accepted Answer

A)  It will be included in the amount of cash and cash equivalents at the end of 2017. 
B)  It will be deducted from net income in the operating activities section. 
C)  It will be added to net income in the operating activities section. 
D)  It will be reported as a cash outflow in the investing activities section.

Question 16

During 2016, 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 17

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 18

A contra-asset account used to reduce accounts receivable to its net realizable value is known as a(n) ____________________.

Accepted Answer

The answer of A contra-asset account used to reduce accounts...

Question 19

Match the following definitions with their appropriate terms .
-Equity securities

Accepted Answer

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

Question 20

Match the following definitions with their appropriate terms .
-Accounts Receivable turnover

Accepted Answer

A) A receivable arising from the sale of goods or services 
B) A form used to categorize the various individual with a verbal promise to pay. accounts receivable according to the length of time each has been outstanding. 
C) A method of estimating bad debts on the basis of either 
D) A measure of the number of times receivables are the net credit sales of the period or the accounts collected in a period. receivable at the end of the period. 
E) The general ledger account that is supported by a
F)A contra-asset account used to reduce accounts subsidiary ledger. receivable to its net realizable value.
G)The detail for a number of individual items that
H)The recognition of bad debts expense at the point an collectively make up a single general ledger account. account is written off as uncollectible.

Exam 7: Receivables and Investments

Match the following definitions with their appropriate terms . -Subsidiary ledger

Which one of the approaches for the allowance method of accounting for bad debts emphasizes the net realizable value of accounts receivable on the balance sheet?

For each item listed below, identify how it will be reported on the Statement of Cash Flows under the indirect method. -Decrease in accounts receivable

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.

Select the term from the list below that matches each of the following six descriptions. -The difference between the principal amount of the note and its maturity value

During 2016, 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?

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

A contra-asset account used to reduce accounts receivable to its net realizable value is known as a(n) ____________________.

Match the following definitions with their appropriate terms . -Equity securities

Match the following definitions with their appropriate terms . -Accounts Receivable turnover