Question 1

Which of the following accounts would not appear on the financial statements of a retailer that does NOT issue its own private label credit card?

Accepted Answer

A)  Merchandise Inventory 
B)  Cash and Cash Equivalents 
C)  Merchandise Sales 
D)  Credit Card Receivable

Question 2

Under the allowance method,if a customer makes payment on a receivable that has already been written off,the company needs to reverse the write-off to the Allowance for Bad Debts account.

Accepted Answer

A) True 
 B)False

Question 3

Under the direct write-off method,the entry to write off an uncollectible account will include ________.

Accepted Answer

A)  a debit to Bad Debts Expense account 
B)  a debit to the customer's Account Receivable 
C)  a credit to the Allowance for Bad Debts 
D)  No entry is made to write off uncollectible accounts.

Question 4

On July 7,University Bank lent $530,000 to Jazz Music Shop on a 60 day,7% note.What is the maturity value of the note? (Use a 360-day year and round answers to the nearest dollar.)

Accepted Answer

A)  $530,000 
B)  $567,100 
C)  $536,099 
D)  $536,183

Question 5

When a business factors its receivables,it uses the receivables as security for a loan.

Accepted Answer

A) True 
 B)False

Question 6

At the beginning of 2018,Uptown Travel Company has the following account balances: Accounts receivable $45,000 (Debit)
Allowance for Bad Debts $6000 (Credit)
During the year,credit sales were $850,000.Cash collected on credit sales was $770,000,and $17,000 was written off.Uptown uses the aging-of-receivables method to record bad debts expense.The amount estimated as uncollectible was $26,000.The amount of Bad Debts Expense for 2018 is ________.

Accepted Answer

A)  $37,000 
B)  $26,000 
C)  $11,000 
D)  $9000

Question 7

The use of the allowance method to record bad debts expense violates the matching principle.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is a disadvantage when a business accepts credit cards or debit cards from customers?

Accepted Answer

A)  The business bears the responsibility of collecting cash from the customer. 
B)  The business bears the risk of nonpayment by the customer. 
C)  The business pays a processing fee. 
D)  The business checks customers' credit ratings.

Question 9

The following information is from the 2019 records of Uptown Antique Shop: $$\begin{array} { | l | l | } 
\hline \text { Accounts receivable, December 31, 2019 } & \$ 44,000 \text { (debit) } \
\hline \text { Allowance for Bad Debts, December 31,2019 prior to adjustment } & 1500 \text { (debit) } \
\hline \text { Net credit sales for 2019 } & 180,000 \
\hline \text { Accounts written off as uncollectible during 2019 } & 13,000 \
\hline \text { Cash sales during 2019 } & 27,000 \
\hline
\end{array}$$ Bad debts expense is estimated by the percent-of-sales method.Management estimates that 4% of net credit sales will be uncollectible.The ending balance of the Allowance for Bad Debts account after adjustment will be ________.

Accepted Answer

A)  $8700 
B)  $6780 
C)  $9780 
D)  $5700

Question 10

Accounts Receivable has a balance of $33,000,and the Allowance for Bad Debts has a credit balance of $3300.The allowance method is used.What is the net realizable value of Accounts Receivable before and after a $2300 account receivable is written off?

Accepted Answer

A)  $29,700; $29,700 
B)  $27,400; $27,400 
C)  $29,700; $27,400 
D)  $27,400; $32,000

Question 11

Businesses must maintain a single Accounts Receivable control account regardless of the number of customers.

Accepted Answer

A) True 
 B)False

Question 12

The higher the acid-test ratio,the less able the business is to pay its current liabilities.

Accepted Answer

A) True 
 B)False

Question 13

On November 1,2018,Downtown Jewelers accepted a 3-month,15% note for $6,000 in settlement of an overdue account receivable.The accounting period ends on December 31.Prepare the journal entry to record the accrued interest at the year end.Omit explanation.

Accepted Answer

The answer of On November 1,2018,Downtown Jewelers accepted a 3-month,15%...

Question 14

Because customers make payments on account throughout the period,the sum of all balances in subsidiary accounts receivable will not equal the control account balance.

Accepted Answer

A) True 
 B)False

Question 15

At the beginning of 2019,Patriots Company has the following account balances: Accounts Receivable $40,000 (Debit)
Allowance for Bad Debts $7000 (Credit)
Bad Debts Expense $0
During the year,credit sales amounted to $810,000.Cash collected on credit sales amounted to $790,000,and $17,000 has been written off.At the end of the year,the company adjusted for bad debts expense using the percent-of-sales method and applied a rate,based on past history,of 2.5%.The amount of bad debts expense for 2019 is ________.

Accepted Answer

A)  $20,250 
B)  $41,000 
C)  $17,000 
D)  $10,250

Question 16

Under the direct write-off method,which of the following is included in the entry to write off an uncollectible account?

Accepted Answer

A)  a credit to the Allowance for Bad Debts 
B)  a credit to the customer's Account Receivable 
C)  a debit to Allowance for Uncollectible Accounts 
D)  No entry is made to write off uncollectible accounts.

Question 17

A & B Commercial Cleaning is a new business.During its first year of operations,credit sales were $42,000 and collections from credit sales were $31,000.One account for $625 was written off.Management uses the percent-of-sales method to account for bad debts expense and estimates 2% of credit sales to be uncollectible.What is the balance of Accounts Receivable at the end of the first year?

Accepted Answer

A)  $11,000 
B)  $9535 
C)  $10,375 
D)  $10,160

Question 18

The accounts receivable turnover ratio measures ________.

Accepted Answer

A)  a company's ability to pay its current liabilities with its current assets 
B)  how many days it takes, on average, to collect receivables 
C)  how many days it takes, on average, to sell the inventory 
D)  the number of times a company collects the average accounts receivable balance in a year

Question 19

A business maintains a separate Accounts Receivable account for each customer in order to account for payments received from the customer and amounts still owed by the customer.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is included in the category of other receivables?

Accepted Answer

A)  interest receivable 
B)  accounts receivable 
C)  notes receivable 
D)  investments

Exam 9: Receivables

Which of the following accounts would not appear on the financial statements of a retailer that does NOT issue its own private label credit card?

Under the allowance method,if a customer makes payment on a receivable that has already been written off,the company needs to reverse the write-off to the Allowance for Bad Debts account.

Under the direct write-off method,the entry to write off an uncollectible account will include ________.

On July 7,University Bank lent $530,000 to Jazz Music Shop on a 60 day,7% note.What is the maturity value of the note? (Use a 360-day year and round answers to the nearest dollar.)

When a business factors its receivables,it uses the receivables as security for a loan.

The use of the allowance method to record bad debts expense violates the matching principle.

Which of the following is a disadvantage when a business accepts credit cards or debit cards from customers?

Accounts Receivable has a balance of $33,000,and the Allowance for Bad Debts has a credit balance of $3300.The allowance method is used.What is the net realizable value of Accounts Receivable before and after a $2300 account receivable is written off?

Businesses must maintain a single Accounts Receivable control account regardless of the number of customers.

The higher the acid-test ratio,the less able the business is to pay its current liabilities.

On November 1,2018,Downtown Jewelers accepted a 3-month,15% note for $6,000 in settlement of an overdue account receivable.The accounting period ends on December 31.Prepare the journal entry to record the accrued interest at the year end.Omit explanation.

Because customers make payments on account throughout the period,the sum of all balances in subsidiary accounts receivable will not equal the control account balance.

Under the direct write-off method,which of the following is included in the entry to write off an uncollectible account?

The accounts receivable turnover ratio measures ________.

A business maintains a separate Accounts Receivable account for each customer in order to account for payments received from the customer and amounts still owed by the customer.

Which of the following is included in the category of other receivables?