Question 1

Which of the following are similarities between a six-month note receivable and an account receivable? They both are:

Accepted Answer

A)  formal written contracts.
B)  interest bearing.
C)  current liabilities.
D)  current assets.E) A) and B)
F) B) and D)

Question 2

Using the allowance method,which is the correct adjusting journal entry to record bad debt expense?

Accepted Answer

A)  Debit Bad Debt Expense and credit Allowance for Doubtful Accounts.
B)  Debit Allowance for Bad Debt Expense and credit Bad Debt Expense.
C)  Debit Bad Debt Expense and credit Sales Revenue.
D)  Debit Bad Debt Expense and credit Accounts Receivable.E) A) and B)
F) C) and D)

Question 3

Your company converted an existing account receivable in the amount of $5,000 to a note receivable to allow an extended payment period.The note is due in one year and includes an annual interest rate of 5%.The customer repays the principal at the maturity date.The entry to record the receipt of the principal includes a debit to:

Accepted Answer

A)  Cash and credit to Notes Receivable.
B)  Notes Receivable and credit to Accounts Receivable.
C)  Cash and credit to Interest Receivable.
D)  Notes Receivable and credit to Cash.E) A) and C)
F) All of the above

Question 4

Match the term and its definition.There are more definitions than terms.
-Accounts Receivable

Accepted Answer

A)  The total amount of money loaned through notes that the lender has not yet collected.
B)  A system used by companies to allocate their budgets over the different operating expenses.
C)  The interest that a company receives during the year divided by the principal of the loan.
D)  Another name for a company's total revenue,which is calculated by multiplying the quantity sold by the average price.
E)  The denominator of the receivables turnover ratio.F) The amount of interest a lender receives during a year.G) The costs of maintaining accounts with customers who have not made recent purchases.H) A separate record for each accounts receivable customer.I) Used by the percentage of credit sales method to estimate bad debts.J) The rate at which a company pays off its liabilities or debts.K) The numerator of the receivables turnover ratio.L) The portion of past credit sales that have not yet been collected.M) An accounting method which involves estimating bad debts.N) The average level of net sales revenue the firm earns each month.O) A) and I)
P) C) and H)

Question 5

Assume Zap Industries reported the following adjusted account balances at year-end.  Assume the company recorded no write-offs or recoveries during 2019.What was the amount of Bad Debt Expense reported in 2019?

Accepted Answer

A)  $126,400
B)  $103,360
C)  $46,080
D)  $23,040E) B) and C)
F) A) and B)

Question 6

As of December 31,Frappe Company has a balance of $5,000 in accounts receivable.Of this amount,$500 is past due and the remainder is not yet due.Frappe has a credit balance of $45 in the Allowance for Doubtful Accounts.Frappe Company estimates its bad debt losses using the aging of receivables method,with estimated bad debt loss rates equal to 1% of accounts not yet due and 10% of past due accounts.How will the Bad Debt Expense account be included in the required adjusting journal entry at year-end?

Accepted Answer

A)  Debit of $95
B)  Credit of $95
C)  Debit of $50
D)  Credit of $50E) A) and D)
F) B) and C)

Question 7

A company lent $10,000 to an employee who signed a 9%,6-month promissory note.The entry made by the company to record this loan to the employee will include a:

Accepted Answer

A)  debit to Accounts Receivable for $10,000.
B)  credit to Sales for $10,000.
C)  debit to Notes Receivable for $10,000.
D)  credit to Notes Payable for $10,000.E) C) and D)
F) A) and B)

Question 8

The direct write-off method is not allowed under GAAP because it violates the:

Accepted Answer

A)  cost principle.
B)  revenue recognition principle.
C)  sales method.
D)  expense recognition principle ("matching") .E) A) and C)
F) B) and D)

Question 9

The direct write-off method:

Accepted Answer

A)  results in better matching of costs with revenues than the allowance method.
B)  is an acceptable method under generally accepted accounting principles (GAAP) .
C)  requires that losses from bad debts be recorded in the period in which sales are made.
D)  does not report accounts receivable on the balance sheet at their net realizable value.E) All of the above
F) A) and D)

Question 10

Cambridge Co.uses the allowance method.During January 2019,Cambridge writes off a $640 customer account balance when it becomes clear that the customer will never pay.The entry to record the write-off will:

Accepted Answer

A)  decrease total assets by $640.
B)  decrease net income in 2019 by $640.
C)  decrease net accounts receivable by $640.
D)  not affect expenses in 2019.E) None of the above
F) C) and D)

Question 11

At the end of the period,the manager of Olive Co.estimated that $80,000 of its accounts receivable were uncollectible.If the Allowance for Doubtful Accounts has a credit balance of $22,400,which of the following sets forth the adjusting entry to record bad debts for the period? Assume the allowance method is used.

Accepted Answer

A)  Debit Bad Debt Expense and credit Accounts Receivable for $80,000.
B)  Debit Bad Debt Expense and credit Allowance for Doubtful Accounts for $57,600.
C)  Debit Bad Debt Expense and credit Allowance for Doubtful Accounts for $80,000.
D)  Debit Bad Debt Expense and credit Accounts Receivable for $57,600.E) All of the above
F) B) and D)

Question 12

If the receivables turnover ratio rises significantly,the increase may be a signal that the company is extending credit to high-risk borrowers or allowing an overly generous repayment schedule.

Accepted Answer

A) True 
 B)False

Question 13

An objective of the expense recognition principle ("matching") is to have bad debt expense debited in:

Accepted Answer

A)  the same period that the related accounts receivable is determined to be uncollectible.
B)  the same period the related credit sales are recorded.
C)  a later period after the related credit sales are recorded.
D)  the period that a customer eventually becomes bankrupt.E) A) and B)
F) A) and C)

Question 14

All of the following will likely be incurred by a company that extends credit except:

Accepted Answer

A)  increased revenues.
B)  increased wage costs.
C)  increased advertising expenses.
D)  a delay in the receipt of cash.E) B) and C)
F) All of the above

Question 15

ABC Corp.received a 3-month,8% per year,$1,500 note receivable on December 1.The adjusting entry on December 31 will include a:

Accepted Answer

A)  debit to Interest Revenue of $10.
B)  credit to Interest Receivable of $20.
C)  credit to Interest Revenue of $30.
D)  debit to Interest Receivable of $10.E) A) and B)
F) All of the above

Question 16

Which of the following statements about the receivables turnover analysis is correct?

Accepted Answer

A)  Accounts receivable decline as companies sell on credit.
B)  Accounts receivable increase as companies receive payment.
C)  Receivables turnover refers to how fast receivables are collected.
D)  The days to collect will increase as the receivables turnover increases.E) A) and B)
F) None of the above

Question 17

The following information is available:  The receivables turnover ratio for 2019 is closest to:

Accepted Answer

A)  8.93 times
B)  8.48 times
C)  8.71 times
D)  9.14 timesE) B) and D)
F) None of the above

Question 18

Santiago Cleaners allows customers make purchases using their VISA credit cards.If customers purchase from Santiago using VISA credit cards,which of the following statements is correct?

Accepted Answer

A)  VISA pays Santiago the full amount of purchase,without charging a fee.
B)  VISA will wait until the customer makes payment to the credit card company until forwarding payment to Santiago.
C)  Santiago does not have to collect directly from customers.
D)  Santiago must bear any losses from uncollectible accounts.E) A) and B)
F) C) and D)

Question 19

Assume ABC sells its receivables to another company for immediate cash on a regular basis.How should the factoring fee be reported in the income statement?

Accepted Answer

A)  Selling expense.
B)  Non-operating expense.
C)  Sales returns.
D)  Not at all.E) B) and C)
F) A) and D)

Question 20

Specialty Inc.converts an existing account receivable to a note receivable to allow an extended payment period.Specialty receives a $2,000,3-month,12% promissory note from its customer.What entry will Specialty make upon receipt of the note?

Accepted Answer

A)  Debit Notes Receivable and credit Accounts Receivable for $2,060.
B)  Debit Accounts Receivable and credit Notes Receivable for $2,000.
C)  Debit Notes Receivable for $2,000,debit Interest Receivable for $60,credit Accounts Receivable for $2,000,and credit Interest Revenue for $60.
D)  Debit Notes Receivable and credit Accounts Receivable for $2,000.E) All of the above
F) A) and C)

Exam 8: Receivables,Bad Debt Expense,and Interest Revenue

Santiago Cleaners allows customers make purchases using their VISA credit cards.If customers purchase from Santiago using VISA credit cards,which of the following statements is correct?

Correct Answer
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The direct write-off method:

Correct Answer
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ABC Corp.received a 3-month,8% per year,$1,500 note receivable on December 1.The adjusting entry on December 31 will include a:

Correct Answer
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Using the allowance method,which is the correct adjusting journal entry to record bad debt expense?

Correct Answer
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Correct Answer
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Cambridge Co.uses the allowance method.During January 2019,Cambridge writes off a $640 customer account balance when it becomes clear that the customer will never pay.The entry to record the write-off will:

Correct Answer
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All of the following will likely be incurred by a company that extends credit except:

Correct Answer
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Which of the following are similarities between a six-month note receivable and an account receivable? They both are:

Correct Answer
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If the receivables turnover ratio rises significantly,the increase may be a signal that the company is extending credit to high-risk borrowers or allowing an overly generous repayment schedule.

Correct Answer
verified

Specialty Inc.converts an existing account receivable to a note receivable to allow an extended payment period.Specialty receives a $2,000,3-month,12% promissory note from its customer.What entry will Specialty make upon receipt of the note?

Correct Answer
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Assume Zap Industries reported the following adjusted account balances at year-end. Assume the company recorded no write-offs or recoveries during 2019.What was the amount of Bad Debt Expense reported in 2019?

Correct Answer
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Which of the following statements about the receivables turnover analysis is correct?

Correct Answer
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An objective of the expense recognition principle ("matching") is to have bad debt expense debited in:

Correct Answer
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The direct write-off method is not allowed under GAAP because it violates the:

Correct Answer
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Correct Answer
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Correct Answer
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The following information is available: The receivables turnover ratio for 2019 is closest to:

Correct Answer
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A company lent $10,000 to an employee who signed a 9%,6-month promissory note.The entry made by the company to record this loan to the employee will include a:

Correct Answer
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Match the term and its definition.There are more definitions than terms. -Accounts Receivable

Correct Answer
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Assume ABC sells its receivables to another company for immediate cash on a regular basis.How should the factoring fee be reported in the income statement?

Correct Answer
verified

Exam 8: Receivables,Bad Debt Expense,and Interest Revenue

Santiago Cleaners allows customers make purchases using their VISA credit cards.If customers purchase from Santiago using VISA credit cards,which of the following statements is correct?

Correct AnswerverifiedShow Answer

The direct write-off method:

Correct AnswerverifiedShow Answer

ABC Corp.received a 3-month,8% per year,$1,500 note receivable on December 1.The adjusting entry on December 31 will include a:

Correct AnswerverifiedShow Answer

Using the allowance method,which is the correct adjusting journal entry to record bad debt expense?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Cambridge Co.uses the allowance method.During January 2019,Cambridge writes off a $640 customer account balance when it becomes clear that the customer will never pay.The entry to record the write-off will:

Correct AnswerverifiedShow Answer

All of the following will likely be incurred by a company that extends credit except:

Correct AnswerverifiedShow Answer

Which of the following are similarities between a six-month note receivable and an account receivable? They both are:

Correct AnswerverifiedShow Answer

If the receivables turnover ratio rises significantly,the increase may be a signal that the company is extending credit to high-risk borrowers or allowing an overly generous repayment schedule.

Correct AnswerverifiedShow Answer

Specialty Inc.converts an existing account receivable to a note receivable to allow an extended payment period.Specialty receives a $2,000,3-month,12% promissory note from its customer.What entry will Specialty make upon receipt of the note?

Correct AnswerverifiedShow Answer

Assume Zap Industries reported the following adjusted account balances at year-end. Assume the company recorded no write-offs or recoveries during 2019.What was the amount of Bad Debt Expense reported in 2019?

Correct AnswerverifiedShow Answer

Which of the following statements about the receivables turnover analysis is correct?

Correct AnswerverifiedShow Answer

An objective of the expense recognition principle ("matching") is to have bad debt expense debited in:

Correct AnswerverifiedShow Answer

The direct write-off method is not allowed under GAAP because it violates the:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The following information is available: The receivables turnover ratio for 2019 is closest to:

Correct AnswerverifiedShow Answer

A company lent $10,000 to an employee who signed a 9%,6-month promissory note.The entry made by the company to record this loan to the employee will include a:

Correct AnswerverifiedShow Answer

Match the term and its definition.There are more definitions than terms. -Accounts Receivable

Correct AnswerverifiedShow Answer

Assume ABC sells its receivables to another company for immediate cash on a regular basis.How should the factoring fee be reported in the income statement?

Correct AnswerverifiedShow Answer

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