Question 1

Days' sales in receivables is also called the collection period.

Accepted Answer

A) True 
 B)False

Question 2

When using the allowance method to account for uncollectible accounts receivable,companies estimate bad debt expense at the end of the period and then record an adjusting entry.

Accepted Answer

A) True 
 B)False

Question 3

Alltech Company maintains a separate accounts receivable account for each customer.On June 18,Alltech provides $6100 of services on account to customer Anthony and $1000 of services on account to customer Walker.How will these two transactions affect the control and subsidiary accounts?

Accepted Answer

A)  The control account, Accounts Receivable, will be increased with a debit of $7100. 
B)  The individual customer accounts in the subsidiary ledger will be increased with credits. 
C)  After posting these transactions, the sum of the balances in subsidiary accounts receivable will not equal the control account balance. 
D)  The control account will have a debit balance and the subsidiary accounts will have a credit balance. This keeps the accounting equation in balance.

Question 4

Each receivable transaction involves two parties - the one who takes on the obligation and the one who will collect the cash.

Accepted Answer

A) True 
 B)False

Question 5

The days' sales in receivables indicates the number of days it takes to collect the average level of accounts receivable.

Accepted Answer

A) True 
 B)False

Question 6

Accounts Receivable are generally reported at the gross amount on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 7

The accounts receivable turnover ratio indicates whether a company could pay all its current liabilities if they were to become due immediately.

Accepted Answer

A) True 
 B)False

Question 8

Notes receivable represent a written promise that a party will pay a fixed amount of principal plus interest on a stated maturity date.

Accepted Answer

A) True 
 B)False

Question 9

In order to keep accurate records about the collection of cash for a previously written off account,a business should re-establish the Accounts Receivable by crediting the receivable account.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements,regarding notes receivable,is incorrect?

Accepted Answer

A)  Notes receivable usually have longer terms than accounts receivable. 
B)  A notes receivable is a written promise that a customer will pay a fixed amount of principal plus interest by a certain date in the future. 
C)  All notes receivable are considered long-term assets. 
D)  Notes receivable are sometimes called promissory notes.

Question 11

On October 1,2019,Springfield Company made a loan to one of its customers.The customer signed a 6-month note for $130,000 at 12%.How much interest revenue did the company record in 2020 for this note? (Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar.)

Accepted Answer

A)  $5200 
B)  $2600 
C)  $3900 
D)  $7800

Question 12

When businesses accept payment by credit and debit cards,the costs of processing fees are greater than the benefits of transferring the risk of not being able to collect from the customer and avoiding the costs associated with credit customers.

Accepted Answer

A) True 
 B)False

Question 13

Interest on a $15,000 note at 4% for 4 months is $200.

Accepted Answer

A) True 
 B)False

Question 14

On July 15,2018,Ellison Brothers Oil Company sold $5,000 of merchandise to S & G Company,on account.Ignore cost of goods sold.Ellison could not collect cash from S & G and wrote off the account on December 31,2018.On November 4,2019,S & G unexpectedly paid $5,000.Journalize the transactions on December 31,2018 and November 4,2019.(Ellison uses the allowance method.)Omit explanations.

Accepted Answer

The answer of On July 15,2018,Ellison Brothers Oil Company sold...

Question 15

The entry to write off an account receivable under the allowance method will ________.

Accepted Answer

A)  reduce net income 
B)  have no effect on net income 
C)  increase total assets 
D)  increase net income

Question 16

Modern Designs is a new business.During its first year of operations,credit sales were $43,000 and collections of credit sales were $34,000.One account,$625,was written off.Management uses the percent-of-sales method to account for bad debts expense and estimates 3% of credit sales to be uncollectible.Bad debts expense for the first year of operations is ________.

Accepted Answer

A)  $665 
B)  $1290 
C)  $625 
D)  $2310

Question 17

Under GAAP,which of the following is NOT an acceptable method of estimating the amount of bad debt expense at the end of the accounting period?

Accepted Answer

A)  percent-of-receivables 
B)  percent-of-sales 
C)  direct write-off 
D)  aging-of-receivables

Question 18

Which of the following statements is TRUE of the direct write-off method?

Accepted Answer

A)  GAAP requires public companies to follow the direct write-off method. 
B)  It provides better matching of revenues with expenses. 
C)  It results in more accurate net income than any other method. 
D)  It is only suitable for small companies that have very few uncollectible receivables.

Question 19

During July 2019,Midtown Catering recorded the following:
Catering services of $86,400 were provided ($64,500 on account,$21,900 for cash)
Collections on account,$58,950
Write-offs of uncollectible receivables,$2,560
Recovery of receivable previously written off,$1,000
Journalize Midtown's transactions during July,assuming Midtown uses the allowance method.Omit explanations.

Accepted Answer

The answer of During July 2019,Midtown Catering recorded the following:
Catering...

Question 20

On October 1,2019,Westfield Company sold machinery to a customer for $21,000.The customer could not pay at the time of sale,but agreed to pay 10 months later,and signed a 10-month note at 12% interest.How much interest revenue was earned during 2019? Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar.

Accepted Answer

A)  $660 
B)  $630 
C)  $4410 
D)  $2100

Exam 9: Receivables

Days' sales in receivables is also called the collection period.

When using the allowance method to account for uncollectible accounts receivable,companies estimate bad debt expense at the end of the period and then record an adjusting entry.

Alltech Company maintains a separate accounts receivable account for each customer.On June 18,Alltech provides $6100 of services on account to customer Anthony and $1000 of services on account to customer Walker.How will these two transactions affect the control and subsidiary accounts?

Each receivable transaction involves two parties - the one who takes on the obligation and the one who will collect the cash.

The days' sales in receivables indicates the number of days it takes to collect the average level of accounts receivable.

Accounts Receivable are generally reported at the gross amount on the balance sheet.

The accounts receivable turnover ratio indicates whether a company could pay all its current liabilities if they were to become due immediately.

Notes receivable represent a written promise that a party will pay a fixed amount of principal plus interest on a stated maturity date.

In order to keep accurate records about the collection of cash for a previously written off account,a business should re-establish the Accounts Receivable by crediting the receivable account.

Which of the following statements,regarding notes receivable,is incorrect?

When businesses accept payment by credit and debit cards,the costs of processing fees are greater than the benefits of transferring the risk of not being able to collect from the customer and avoiding the costs associated with credit customers.

Interest on a $15,000 note at 4% for 4 months is $200.

The entry to write off an account receivable under the allowance method will ________.

Under GAAP,which of the following is NOT an acceptable method of estimating the amount of bad debt expense at the end of the accounting period?

Which of the following statements is TRUE of the direct write-off method?