Question 1

Which one of the following is an accurate description of the Allowance for Doubtful Accounts?

Accepted Answer

A) Contra Account 
B) Liability Account 
C) Revenue Account 
D) Expense Account

Question 2

Match each statement to the item listed below
a.Bad debt expense
d.Percentage of credit sales
b.Net sales revenue
e.Profitability ratios
c.Nontrade receivables
f.Trade receivables
-Receivables that the company is not able to collect.

Accepted Answer

The answer of Match each statement to the item listed...

Question 3

To encourage prompt payment, sellers offer a(n)____________________.

Accepted Answer

The answer of To encourage prompt payment, sellers offer a(n)____________________....

Question 4

-Refer to AT&U Company. If the company estimates its bad debts at 1% of net credit sales, what amount will be reported as bad debt expense for 2013?

Accepted Answer

A) $44,500 
B) $25,000 
C) $24,500 
D) $4,500

Question 5

Match each statement to the item listed below
a.Bad debt expense
d.Percentage of credit sales
b.Net sales revenue
e.Profitability ratios
c.Nontrade receivables
f.Trade receivables
-The amount of sales expected to be collectible after deducting discounts and returns and allowances.

Accepted Answer

The answer of Match each statement to the item listed...

Question 6

The higher the accounts receivable turnover the better because it indicates that the company is more quickly collecting cash (through sales).

Accepted Answer

A) True 
 B)False

Question 7

Action Signs recorded credit sales of $10,000 on the gross method. Terms are 2/20, n/30. Select the correct statement about the entry to record this sale.

Accepted Answer

A) Accounts receivable increases $10,000. 
B) Sales increase $9,800 
C) Sales discounts increase $200 
D) All of the above are correct

Question 8

-Refer to AT&U Company. If the company estimates its bad debt to be 2% of net credit sales, what will be the balance in the Allowance for Doubtful Accounts account after the adjustment for bad debts?

Accepted Answer

A) $20,000 
B) $19,000 
C) $49,000 
D) $69,000

Question 9

-Refer to Aardvark Resale. Assume that the company estimates bad debts based on the aging method, and the aging schedule indicates that $30,100 of the year-end accounts receivable will be uncollected.

Accepted Answer

The answer of 
-Refer to Aardvark Resale. Assume that the...

Question 10

Academy Grill Supply
On October 1, 2013, the company received a $50,000 promissory note from a customer. The annual interest rate is 6%. Principal and interest will be collected in cash at the maturity date of September 30, 2013.
-Refer to Absolute Appliances. What amount should the company recognize as interest revenue on December 31, 2013?

Accepted Answer

A) $ -0- 
B) $ 1,000 
C) $12,000 
D) $11,000

Question 11

The direct write-off method does a better job of matching revenues and expenses.ANS: C PTS: 1 DIF: Difficulty: Moderate
OBJ: LO: 5-1 NAT: BUSPROG: Analytic
STA: AICPA FN-Measurement | ACBSP-APC-12-Receivables Reporting
KEY: Bloom's: Knowledge NOT: 3 min.A2Z Events
The following data are from the company's records for 2013:
 
-Refer to A2Z Events. What are the effects on the accounting equation when the company makes the adjustment to record bad debt expense using the allowance method?

Accepted Answer

A) Assets increase and liabilities decrease 
B) Assets and stockholders' equity decrease 
C) Assets increase and stockholders' equity decreases 
D) Assets decrease and stockholders' equity increases

Question 12

The following data are from the company's records for 2013:
 
-Refer to A&B Foods. If the company uses the aging of accounts receivable method to estimate its bad debts, what amount will be reported as bad debt expense for 2013?

Accepted Answer

A) $50,000 
B) $75,000 
C) $78,000 
D) $53,000

Question 13

Accent Flooring
The company received a promissory note from a customer on March 1, 2013. The principal amount of the note is $20,000; the terms are 3 months and 9% annual interest
-Refer to the information for Accent Flooring. At the maturity date, the customer pays the amount due for the note and interest. What entry is required on the books of Accent Flooring on the maturity date assuming that none of the interest had already been recognized?

Accepted Answer

A) Increase Cash and decrease Notes Receivable by $20,000 
B) Increase Cash by $20,450, increase Interest Revenue by $450, and decrease Notes Receivable by $20,000 
C) Increase Cash by $20,450, increase Notes Receivable by $20,000, and increase Interest Revenue by $450 
D) No entry is required; the customer pays the amount due to Accent Flooring.

Question 14

Academy Grill Supply
On October 1, 2013, the company received a $50,000 promissory note from a customer. The annual interest rate is 6%. Principal and interest will be collected in cash at the maturity date of September 30, 2013.
-Refer to Academy Grill Supply. If the company's year ends December 31, 2013, an adjusting entry is needed to

Accepted Answer

A) increase interest revenue by $2,250. 
B) increase notes receivable by $750. 
C) increase interest receivable by $750. 
D) increase notes receivable by $2,250.

Question 15

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 while notes receivable does not have payment of interest. 
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 generally specify an interest rate and a maturity date at which any interest and principle must be repaid.

Question 16

The lender 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 17

The College Store accepts MasterCard for payments of purchases made by students. The credit card drafts are deposited directly in a bank account. MasterCard charges a 1.55% collection fee. Credit card drafts totaling $10,000 are deposited during August. Recording the sales and deposits will result in an increase in

Accepted Answer

A) Cash for $10,000 
B) Sales for $ 9,854 
C) Accounts Receivable for $9,854 
D) Service Charge Expense for $155

Question 18

The following data are from the company's records for 2013:
 
-Refer to Accelerated Solutions. What is the balance of Accounts Receivable at December 31, 2013?

Accepted Answer

A) $700,000 
B) $340,000 
C) $690,000 
D) $710,000

Exam 5: Sales and Receivables

Which one of the following is an accurate description of the Allowance for Doubtful Accounts?

Match each statement to the item listed below a.Bad debt expense d.Percentage of credit sales b.Net sales revenue e.Profitability ratios c.Nontrade receivables f.Trade receivables -Receivables that the company is not able to collect.