Question 1

The interest on a $10,000, 9%, 90-day note receivable is

Accepted Answer

A) $225. 
B) $900. 
C) $75. 
D) $150. 
A) $225. 
B) $900. 
C) $75. 
D) $150.

Question 2

An aging of accounts receivable schedule is based on the premise that the longer the period an account remains unpaid, the greater the probability that it will eventually be collected.

Accepted Answer

A) True 
 B)False

Question 3

The allowance for doubtful accounts is similar to accumulated depreciation in that it shows the total of all accounts written off over the years.

Accepted Answer

A) True 
 B)False

Question 4

Under the allowance method of accounting for uncollectible accounts,

Accepted Answer

A) the cash realizable value of accounts receivable is greater before an account is written off than after it is written off. 
B) Bad Debt Expense is debited when a specific account is written off as uncollectible. 
C) the cash realizable value of accounts receivable in the balance sheet is the same before and after an account is written off. 
D) Allowance for Doubtful Accounts is closed each year to Income Summary. 
A) the cash realizable value of accounts receivable is greater before an account is written off than after it is written off. 
B) Bad Debt Expense is debited when a specific account is written off as uncollectible. 
C) the cash realizable value of accounts receivable in the balance sheet is the same before and after an account is written off. 
D) Allowance for Doubtful Accounts is closed each year to Income Summary.

Question 5

The account Allowance for Doubtful Accounts is classified as a(n)

Accepted Answer

A) liability. 
B) contra account of Bad Debt Expense. 
C) expense. 
D) contra account to Accounts Receivable. 
A) liability. 
B) contra account of Bad Debt Expense. 
C) expense. 
D) contra account to Accounts Receivable.

Question 6

Under the allowance method of accounting for bad debts, why must uncollectible accounts receivable be estimated at the end of the accounting period?

Accepted Answer

A) To allow the collection department to schedule work for the next accounting period. 
B) To determine the gross realizable value of accounts receivable. 
C) The IRS rules require the company to make the estimate. 
D) To match bad debt expense to the period in which the revenues were earned. 
A) To allow the collection department to schedule work for the next accounting period. 
B) To determine the gross realizable value of accounts receivable. 
C) The IRS rules require the company to make the estimate. 
D) To match bad debt expense to the period in which the revenues were earned.

Question 7

If a company has a significant concentration of credit risk, it is not required to discuss that in its notes to its financial statements as that could increase the related risk.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following receivables would not be classified as an "other receivable"?

Accepted Answer

A) Advance to an employee 
B) Refundable income tax 
C) Notes receivable 
D) Interest receivable 
A) Advance to an employee 
B) Refundable income tax 
C) Notes receivable 
D) Interest receivable

Question 9

When using the balance sheet approach, the balance in Allowance for Doubtful Accounts must be considered prior to the end of period adjustment when using which of the following methods?

Accepted Answer

A) Net realizable method 
B) Direct write-off method 
C) Accrual method 
D) Allowance method 
A) Net realizable method 
B) Direct write-off method 
C) Accrual method 
D) Allowance method

Question 10

Accounts receivable are one of a company's least liquid assets.

Accepted Answer

A) True 
 B)False

Question 11

The basic formula for computing interest on an interest-bearing note is face value of note x annual interest rate x time in terms of one year = interest.

Accepted Answer

A) True 
 B)False

Question 12

If bad debt losses are significant, the direct write-off method is acceptable for financial reporting purposes.

Accepted Answer

A) True 
 B)False

Question 13

An aging of a company's accounts receivable indicates that $9,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $2,400 debit balance, the adjustment to record bad debts for the period will require a

Accepted Answer

A) debit to Bad Debt Expense for $9,000. 
B) debit to Allowance for Doubtful Accounts for $11,400. 
C) debit to Bad Debt Expense for $11,400. 
D) credit to Allowance for Doubtful Accounts for $9,000. 
A) debit to Bad Debt Expense for $9,000. 
B) debit to Allowance for Doubtful Accounts for $11,400. 
C) debit to Bad Debt Expense for $11,400. 
D) credit to Allowance for Doubtful Accounts for $9,000.

Question 14

A popular variation of the accounts receivable turnover is the

Accepted Answer

A) credit risk ratio. 
B) concentration of credit risk. 
C) bad debts ratio. 
D) average collection period. 
A) credit risk ratio. 
B) concentration of credit risk. 
C) bad debts ratio. 
D) average collection period.

Question 15

Advances to employees are referred to as accounts receivable.

Accepted Answer

A) True 
 B)False

Question 16

During 2017 Sedgewick Inc. had sales on account of $528,000, cash sales of $216,000, and collections on account of $336,000. In addition, they collected $5,800 which had been written off as uncollectible in 2016. As a result of these transactions the change in the accounts receivable balance indicates a

Accepted Answer

A) $402,200 increase. 
B) $192,000 increase. 
C) $186,200 increase. 
D) $408,000 increase. 
A) $402,200 increase. 
B) $192,000 increase. 
C) $186,200 increase. 
D) $408,000 increase.

Question 17

The following information is related to December 31, 2016 balances.   During 2017 sales on account were $390,000 and collections on account were $230,000. Also, during 2017 the company wrote off $22,000 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that bad debts should be estimated at $144,000. Bad debt expense for 2017 is:

Accepted Answer

A) $46,000. 
B) $24,000. 
C) $144,000. 
D) $ 2,000. 
A) $46,000. 
B) $24,000. 
C) $144,000. 
D) $ 2,000.

Question 18

Under the direct write-off method, no attempt is made to match bad debt expense to sales revenues in the same accounting period.

Accepted Answer

A) True 
 B)False

Question 19

A major advantage of national credit cards to retailers is that there is no charge to the retailer by the credit card companies for their services.

Accepted Answer

A) True 
 B)False

Question 20

When a company receives an interest-bearing note receivable, it will

Accepted Answer

A) debit Notes Receivable for the maturity value of the note. 
B) credit Notes Receivable for the maturity value of the note. 
C) debit Notes Receivable for the face value of the note. 
D) credit Notes Receivable for the face value of the note. 
A) debit Notes Receivable for the maturity value of the note. 
B) credit Notes Receivable for the maturity value of the note. 
C) debit Notes Receivable for the face value of the note. 
D) credit Notes Receivable for the face value of the note.

Exam 7: Reporting and Analyzing Receivables

The interest on a $10,000, 9%, 90-day note receivable is

An aging of accounts receivable schedule is based on the premise that the longer the period an account remains unpaid, the greater the probability that it will eventually be collected.

The allowance for doubtful accounts is similar to accumulated depreciation in that it shows the total of all accounts written off over the years.

Under the allowance method of accounting for uncollectible accounts,

The account Allowance for Doubtful Accounts is classified as a(n)

Under the allowance method of accounting for bad debts, why must uncollectible accounts receivable be estimated at the end of the accounting period?

If a company has a significant concentration of credit risk, it is not required to discuss that in its notes to its financial statements as that could increase the related risk.

Which of the following receivables would not be classified as an "other receivable"?

When using the balance sheet approach, the balance in Allowance for Doubtful Accounts must be considered prior to the end of period adjustment when using which of the following methods?

Accounts receivable are one of a company's least liquid assets.

The basic formula for computing interest on an interest-bearing note is face value of note x annual interest rate x time in terms of one year = interest.

If bad debt losses are significant, the direct write-off method is acceptable for financial reporting purposes.

An aging of a company's accounts receivable indicates that $9,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $2,400 debit balance, the adjustment to record bad debts for the period will require a

A popular variation of the accounts receivable turnover is the

Advances to employees are referred to as accounts receivable.

Under the direct write-off method, no attempt is made to match bad debt expense to sales revenues in the same accounting period.

A major advantage of national credit cards to retailers is that there is no charge to the retailer by the credit card companies for their services.

When a company receives an interest-bearing note receivable, it will

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

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