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

If a company did not extend credit to customers:

When credit card sales occur, the seller may either debit Cash or debit Accounts Receivable depending upon when the credit card company pays the seller.

Interest Revenue from notes receivable is reported on a multistep income statement as a part of Income from Operations.

The use of the Allowance method is required under the matching principle.

Before adjustment, the allowance for doubtful accounts has a credit balance of $2,700. The company had $140,000 of net credit sales during the period and historically fails to collect 4% of credit sales. The company Uses the percentage of credit sales method of estimating doubtful accounts. After adjusting for estimated bad debts, the new balance in the allowance for doubtful accounts account will be:

A company reported a receivables turnover ratio of 8.0. Cost of goods sold was $350,000 and net sales were $480,000. The average accounts receivable must have been

The unadjusted balance of the allowance for doubtful accounts of Johnstone Supplies, Inc., is a credit balance in the amount of $28,947 on July 31, 2011. Based on the accounts receivable aging report, bad debt expense will be:

The principal of a notes receivable depends on the maturity date.

The Grass is Greener Corporation's receivables turnover ratio decreases from 14.1 to 11.8. Which of the following statements is true?

The following information is available for a company at the end of the year: What was the amount of write-offs during the year?

When a company that uses the allowance method writes off an actual bad debt:

Which of the following statements regarding the receivables turnover ratio is true?

Purrfect Pets sells a $1,500 aquarium to a customer on account. This would be recorded by an entry that includes a:

The Grass is Greener Corporation uses the allowance method and learns that a customer who owes $350 has gone bankrupt and payment will not be made. The Grass is Greener Corporation should:

The amount of uncollectible accounts at the end of the year is estimated to be $25,000 using the aging of accounts receivable method. The balance in the Allowance of Doubtful Accounts account is an $8,000 credit before adjustment. Assuming no accounts are written off during the period, what will be the amount of bad debt expense for the period?

Using the allowance method, how would net income and the accounts receivable turnover ratio be affected when a customer's account balance, which is known to be uncollectible, is written off?

On January 31, 2011, Purrfect Pets receives a $4,680 interest payment on a note receivable representing two months of accumulated interest. One month of this interest accrued and was recorded during the year ended December 31, 2010. Upon receiving the payment, the company would:

If an uncollectible account, previously written off, is recovered:

In reviewing the accounts receivable, the net receivables value is $17,000 before writing off a $1,500 account. What is the net receivables value after the write-off?

On average, 5% of total accounts receivable has been uncollectible in the past. At the end of the year, the current balance of accounts receivable is $100,000. The allowance for doubtful accounts has an unadjusted debit balance of $500. Credit sales during the year were $150,000. The estimated bad debt expense is: