Question 1

When the allowance method is used, the write-off of an account receivable results in an expense at the time of write-off.

Accepted Answer

A) True 
 B)False

Question 2

A factor buys receivables from businesses for a fee and collects the payment directly from customers.

Accepted Answer

A) True 
 B)False

Question 3

Factoring arrangements

Accepted Answer

A) are ways to accelerate receivable collections. 
B) involve no commissions or service charges because the factor is guaranteed collections on the due date. 
C) are generally used by businesses that are insolvent. 
D) are mainly used in the textile and furniture industries. 
A) are ways to accelerate receivable collections. 
B) involve no commissions or service charges because the factor is guaranteed collections on the due date. 
C) are generally used by businesses that are insolvent. 
D) are mainly used in the textile and furniture industries.

Question 4

The accounts receivable turnover

Accepted Answer

A) is computed by dividing net credit sales for the accounting period by the cash realizable value of accounts receivable on the last day of the accounting period. 
B) can be used to compute the average collection period. 
C) is a method of evaluating the solvency of net accounts receivable. 
D) is only important to internal users of accounting information. 
A) is computed by dividing net credit sales for the accounting period by the cash realizable value of accounts receivable on the last day of the accounting period. 
B) can be used to compute the average collection period. 
C) is a method of evaluating the solvency of net accounts receivable. 
D) is only important to internal users of accounting information.

Question 5

The sale or transfer of accounts receivable in order to raise funds is called

Accepted Answer

A) pledging. 
B) factoring. 
C) leasing. 
D) collateralizing. 
A) pledging. 
B) factoring. 
C) leasing. 
D) collateralizing.

Question 6

The following information is related to December 31, 2016 balances. $\begin{array}{lc}
\text { Accounts receivable } & \$ 3,150,000 \
\text { Allowance for doubtful accounts (credit) } & (270,000) \
\text { Cash realizable value } & \$ 2,880,000
\end{array}$ During 2017 sales on account were $870,000 and collections on account were $516,000. Also during 2017 the company wrote off $48,000 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that bad debts should be estimated at $324,000. Bad debt expense for 2017 is

Accepted Answer

A) $102,000. 
B) $ 54,000. 
C) $324,000. 
D) $ 6,000. 
A) $102,000. 
B) $ 54,000. 
C) $324,000. 
D) $ 6,000.

Question 7

A note receivable is a negotiable instrument which

Accepted Answer

A) eliminates the need for a bad debts allowance. 
B) can be transferred to another party by endorsement. 
C) takes the place of checks in a business firm. 
D) can only be collected by a bank. 
A) eliminates the need for a bad debts allowance. 
B) can be transferred to another party by endorsement. 
C) takes the place of checks in a business firm. 
D) can only be collected by a bank.

Question 8

Non-trade receivables should be reported separately from trade receivables. Why is this statement either true or false?

Accepted Answer

A) It is true because trade receivables are current assets and non-trade receivables are long term. 
B) It is false because all current receivables must be grouped together in one account. 
C) It is true because non-trade receivables do not result from business operations and should not be included with accounts receivable. 
D) It is false because management can decide how to report receivables. 
A) It is true because trade receivables are current assets and non-trade receivables are long term. 
B) It is false because all current receivables must be grouped together in one account. 
C) It is true because non-trade receivables do not result from business operations and should not be included with accounts receivable. 
D) It is false because management can decide how to report receivables.

Question 9

The financial statements of the Phelps Manufacturing Company reports net sales of $600,000 and accounts receivable of $80,000 and $40,000 at the beginning of the year and end of year, respectively. What is the accounts receivable turnover for Phelps?

Accepted Answer

A) 10.0 times 
B) 15.0 times 
C) 7.5 times 
D) 5.0 times 
A) 10.0 times 
B) 15.0 times 
C) 7.5 times 
D) 5.0 times

Question 10

If an account is collected after having been previously written off

Accepted Answer

A) the allowance account should be debited. 
B) only the control account needs to be credited. 
C) both income statement and balance sheet accounts will be affected. 
D) there will be both a debit and a credit to accounts receivable. 
A) the allowance account should be debited. 
B) only the control account needs to be credited. 
C) both income statement and balance sheet accounts will be affected. 
D) there will be both a debit and a credit to accounts receivable.

Question 11

Other receivables include non-trade receivables such as loans to company officers.

Accepted Answer

A) True 
 B)False

Question 12

A 90-day note dated June 30, 2017, would mature on:

Accepted Answer

A) September 30, 2017. 
B) September 27, 2017. 
C) September 28, 2017. 
D) September 29, 2017. 
A) September 30, 2017. 
B) September 27, 2017. 
C) September 28, 2017. 
D) September 29, 2017.

Question 13

In 2017 Wilkinson Company had net credit sales of $2,250,000. On January 1, 2017, Allowance for Doubtful Accounts had a credit balance of $54,000. During 2017, $90,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage of receivables basis). If the accounts receivable balance at December 31 was $600,000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2017?

Accepted Answer

A) $ 60,000 
B) $ 25,000 
C) $ 96,000 
D) $ 90,000 
A) $ 60,000 
B) $ 25,000 
C) $ 96,000 
D) $ 90,000

Question 14

During 2017 Wheeler Inc. had sales on account of $792,000, cash sales of $324,000, and collections on account of $504,000. In addition, they collected $8,700 which had been written off as uncollectible in 2016. As a result of these transactions the change in the accounts receivable indicates a

Accepted Answer

A) $603,300 increase. 
B) $288,000 increase. 
C) $279,300 increase. 
D) $612,000 increase. 
A) $603,300 increase. 
B) $288,000 increase. 
C) $279,300 increase. 
D) $612,000 increase.

Question 15

In the table below the information for four companies is provided. $\begin{array}{|l|c|c|}
\hline \text { Company } & \begin{array}{c}
\text { Accounts Receivable } \
\text { turnover }
\end{array} & \text { Average collection period } \
\hline \text { Martin } & 13.9 & 26.3 \\hline \text { Lewis } & 13.3 & 27.4 \
\hline \text { D anforth } & 10.4 & 35.1 \
\hline \text { Gamer } & 14.5 & 25.2 \
\hline \text { Industry Average } & 13.0 & 28.1 \
\hline
\end{array}$ Assuming all four companies are in the same industry, which company appears to have the greatest likelihood of paying its current obligations?

Accepted Answer

A) Martin 
B) Lewis 
C) Danforth 
D) Garner 
A) Martin 
B) Lewis 
C) Danforth 
D) Garner

Question 16

Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $55,000. If the balance of the Allowance for Doubtful Accounts is $11,000 debit before adjustment, what is the amount of bad debt expense for that period?

Accepted Answer

A) $55,000 
B) $11,000 
C) $66,000 
D) $44,000 
A) $55,000 
B) $11,000 
C) $66,000 
D) $44,000

Question 17

Schofield Retailers accepted $40,000 of Silver Bank MasterCard credit card charges for merchandise sold on August 1. Silver Bank charges 4% for its credit card use. The entry to record this transaction by Schofield Retailers will include a credit to Sales Revenue of $40,000 and a debit(s) to

Accepted Answer

A) Cash for $38,400 and Service Charge Expense for $1,600. 
B) Accounts receivable for $38,400 and Service Charge Expense for $2,400. 
C) Cash for $40,000. 
D) Accounts Receivable for $40,000. 
A) Cash for $38,400 and Service Charge Expense for $1,600. 
B) Accounts receivable for $38,400 and Service Charge Expense for $2,400. 
C) Cash for $40,000. 
D) Accounts Receivable for $40,000.

Question 18

Which of the following is not true regarding a promissory note?

Accepted Answer

A) Promissory notes may not be transferred to another party by endorsement. 
B) Promissory notes may be sold to another party. 
C) Promissory notes give a stronger legal claim to the holder than accounts receivable. 
D) Promissory notes may be bearer notes and not specifically identify the payee by name. 
A) Promissory notes may not be transferred to another party by endorsement. 
B) Promissory notes may be sold to another party. 
C) Promissory notes give a stronger legal claim to the holder than accounts receivable. 
D) Promissory notes may be bearer notes and not specifically identify the payee by name.

Question 19

Which of the following would probably be the most significant type of a claim held by a company?

Accepted Answer

A) notes receivable 
B) non-trade receivables 
C) accounts receivable 
D) interest receivable 
A) notes receivable 
B) non-trade receivables 
C) accounts receivable 
D) interest receivable

Question 20

A dishonored note is a note that is not paid in full at maturity.

Accepted Answer

A) True 
 B)False

When the allowance method is used, the write-off of an account receivable results in an expense at the time of write-off.

A factor buys receivables from businesses for a fee and collects the payment directly from customers.

Factoring arrangements

The accounts receivable turnover

The sale or transfer of accounts receivable in order to raise funds is called

A note receivable is a negotiable instrument which

Non-trade receivables should be reported separately from trade receivables. Why is this statement either true or false?

The financial statements of the Phelps Manufacturing Company reports net sales of $600,000 and accounts receivable of $80,000 and $40,000 at the beginning of the year and end of year, respectively. What is the accounts receivable turnover for Phelps?

If an account is collected after having been previously written off

Other receivables include non-trade receivables such as loans to company officers.

A 90-day note dated June 30, 2017, would mature on:

During 2017 Wheeler Inc. had sales on account of $792,000, cash sales of $324,000, and collections on account of $504,000. In addition, they collected $8,700 which had been written off as uncollectible in 2016. As a result of these transactions the change in the accounts receivable indicates a

Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $55,000. If the balance of the Allowance for Doubtful Accounts is $11,000 debit before adjustment, what is the amount of bad debt expense for that period?

Schofield Retailers accepted $40,000 of Silver Bank MasterCard credit card charges for merchandise sold on August 1. Silver Bank charges 4% for its credit card use. The entry to record this transaction by Schofield Retailers will include a credit to Sales Revenue of $40,000 and a debit(s) to

Which of the following is not true regarding a promissory note?

Which of the following would probably be the most significant type of a claim held by a company?

A dishonored note is a note that is not paid in full at maturity.

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

Filters

Exam 7: Reporting and Analyzing Receivables

When the allowance method is used, the write-off of an account receivable results in an expense at the time of write-off.

A factor buys receivables from businesses for a fee and collects the payment directly from customers.

Factoring arrangements

The accounts receivable turnover

The sale or transfer of accounts receivable in order to raise funds is called

A note receivable is a negotiable instrument which

Non-trade receivables should be reported separately from trade receivables. Why is this statement either true or false?

The financial statements of the Phelps Manufacturing Company reports net sales of $600,000 and accounts receivable of $80,000 and $40,000 at the beginning of the year and end of year, respectively. What is the accounts receivable turnover for Phelps?

If an account is collected after having been previously written off

Other receivables include non-trade receivables such as loans to company officers.

A 90-day note dated June 30, 2017, would mature on:

During 2017 Wheeler Inc. had sales on account of $792,000, cash sales of $324,000, and collections on account of $504,000. In addition, they collected $8,700 which had been written off as uncollectible in 2016. As a result of these transactions the change in the accounts receivable indicates a

Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $55,000. If the balance of the Allowance for Doubtful Accounts is $11,000 debit before adjustment, what is the amount of bad debt expense for that period?

Schofield Retailers accepted $40,000 of Silver Bank MasterCard credit card charges for merchandise sold on August 1. Silver Bank charges 4% for its credit card use. The entry to record this transaction by Schofield Retailers will include a credit to Sales Revenue of $40,000 and a debit(s) to

Which of the following is not true regarding a promissory note?

Which of the following would probably be the most significant type of a claim held by a company?

A dishonored note is a note that is not paid in full at maturity.

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

Filters