Question 1

Comfort Shoes received a promissory note from a customer on April 1,2017.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 a(n)

Accepted Answer

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

Question 2

On August 16,2017,Blenim Corp.purchases 6,000 shares of common stock in Mountain Inc.at a market price of $17 per share.In addition,Blenim pays brokerage fees of $2,000.On October 21,2017,Blenim sells the Mountain stock for $12 per share.
?
Required
Analyze the adjustments needed on Blenim's books in connection with the investment beginning with the purchase of the common stock on August 16,2017,and the sale on October 21,2017.

Accepted Answer

The answer of On August 16,2017,Blenim Corp.purchases 6,000 shares of...

Question 3

The __________ the accounts receivable turnover ratio,the quicker each dollar of accounts receivable can be collected.

Accepted Answer

The answer of The __________ the accounts receivable turnover ratio,the...

Question 4

Utah Co.sold merchandise to Big Sky Corp.on December 1,2017,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 is the actual maturity date of the note?

Accepted Answer

A) December 31,2017 
B) January 29,2018 
C) February 28,2018 
D) March 1,2018

Question 5

Why do businesses invest in short-term investments?

Accepted Answer

A) They are trying to gain control over the activities of other companies. 
B) They are investing excess cash to meet future business operation or investment needs. 
C) They are lending money to companies that cannot obtain bank loans. 
D) None of these are correct.

Question 6

Discounting a note receivable

Accepted Answer

A) requires using an account called Discount on Notes Receivable. 
B) is the process of lending money. 
C) is the process of selling a promissory note. 
D) slows the collection process.

Question 7

On February 1,2017,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 20,2017,for $53,000.In this case,Vermont recognizes a(n)

Accepted Answer

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

Question 8

Changes in accounts receivable are reported in the __________ Activities section of a statement of cash flows prepared using the indirect method.

Accepted Answer

The answer of Changes in accounts receivable are reported in...

Question 9

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

Accepted Answer

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

Question 10

Verilux Company sold merchandise to Flight Corp.on November 1,2017,for $10,000.Verilux accepted a promissory note from Flight Corp.for $10,000.The note has a term of five months and a stated interest rate of 7%.Verilux's accounting period ends on December 31,2017.What amount should Verilux recognize as interest revenue on the maturity date of the note?

Accepted Answer

A) $0 
B) $175.00 
C) $291.67 
D) $420.00

Question 11

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

Question 12

The party to a promissory note that agrees to repay money on the maturity date of the note is called the

Accepted Answer

A) lender. 
B) maker of the note. 
C) payee of the note. 
D) recipient of the note.

Question 13

The party that receives the payment due from a note is called the __________.

Accepted Answer

The answer of The party that receives the payment due...

Question 14

Verilux Company sold merchandise to Flight Corp.on November 1,2017,for $10,000.Verilux accepted a promissory note from Flight Corp.for $10,000.The note has a term of five months and a stated interest rate of 7%.Verilux's accounting period ends on December 31,2017.What amount should Verilux recognize as interest revenue on December 31,2017?

Accepted Answer

A) $0 
B) $116.67 
C) $291.67 
D) $280.00

Question 15

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

Accepted Answer

A) It will report accounts receivable on the balance sheet at their net realizable value. 
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 violates the matching principle.

Question 16

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 17

The direct write-off method estimates the amount of bad debts before they occur.

Accepted Answer

A) True 
 B)False

Question 18

A(n)__________ categorizes the various accounts receivable amounts by the length of time outstanding.

Accepted Answer

The answer of A(n)__________ categorizes the various accounts receivable amounts...

Question 19

If accounts receivable are turned over faster,this means that fewer days are required to collect receivables.

Accepted Answer

A) True 
 B)False

Question 20

Wagner's Bookstore acquires a 6%,$12,000 certificate of deposit on September 1.The term of the CD is six months.At that time,all principal and accrued interest will be paid in cash.Indicate the effect on the financial statements at December 31.

Accepted Answer

A) Interest Receivable increases $240,Interest Revenue increases $240 
B) Interest Receivable increases $360,Interest Revenue increases $360 
C) Interest Receivable increases $480,Interest Revenue increases $480 
D) Interest Receivable increases $720,Interest Revenue increases $720

Exam 7: Receivables and Investments

The __________ the accounts receivable turnover ratio,the quicker each dollar of accounts receivable can be collected.

Utah Co.sold merchandise to Big Sky Corp.on December 1,2017,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 is the actual maturity date of the note?

Why do businesses invest in short-term investments?

Discounting a note receivable

On February 1,2017,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 20,2017,for $53,000.In this case,Vermont recognizes a(n)

Changes in accounts receivable are reported in the __________ Activities section of a statement of cash flows prepared using the indirect method.

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

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

The party to a promissory note that agrees to repay money on the maturity date of the note is called the

The party that receives the payment due from a note is called the __________.

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

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?

The direct write-off method estimates the amount of bad debts before they occur.

A(n)__________ categorizes the various accounts receivable amounts by the length of time outstanding.

If accounts receivable are turned over faster,this means that fewer days are required to collect receivables.

Wagner's Bookstore acquires a 6%,$12,000 certificate of deposit on September 1.The term of the CD is six months.At that time,all principal and accrued interest will be paid in cash.Indicate the effect on the financial statements at December 31.

Exam 7: Receivables and Investments

The __________ the accounts receivable turnover ratio,the quicker each dollar of accounts receivable can be collected.

Utah Co.sold merchandise to Big Sky Corp.on December 1,2017,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 is the actual maturity date of the note?

Why do businesses invest in short-term investments?

Discounting a note receivable

On February 1,2017,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 20,2017,for $53,000.In this case,Vermont recognizes a(n)

Changes in accounts receivable are reported in the __________ Activities section of a statement of cash flows prepared using the indirect method.

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

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

The party to a promissory note that agrees to repay money on the maturity date of the note is called the

The party that receives the payment due from a note is called the __________.

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

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?

The direct write-off method estimates the amount of bad debts before they occur.

A(n)__________ categorizes the various accounts receivable amounts by the length of time outstanding.

If accounts receivable are turned over faster,this means that fewer days are required to collect receivables.

Wagner's Bookstore acquires a 6%,$12,000 certificate of deposit on September 1.The term of the CD is six months.At that time,all principal and accrued interest will be paid in cash.Indicate the effect on the financial statements at December 31.

On February 1,2017,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 20,2017,for $53,000.In this case,Vermont recognizes a(n)