Question 1

What is the total amount of interest on this note?

Accepted Answer

A)  $900 
B)  $450 
C)  $0 
D)  $2,700 
A)  $900 
B)  $450 
C)  $0 
D)  $2,700

Question 2

Bad Debt Expense is classified as

Accepted Answer

A)  part of cost of goods sold on the Income Statement. 
B)  a selling expense on the Income Statement. 
C)  a non-operating expense on the Income Statement. 
D)  a deduction from Accounts Receivable on the Balance Sheet. 
A)  part of cost of goods sold on the Income Statement. 
B)  a selling expense on the Income Statement. 
C)  a non-operating expense on the Income Statement. 
D)  a deduction from Accounts Receivable on the Balance Sheet.

Question 3

The direct write-off method is not allowed by GAAP because is ignores the conservatism concept and the matching principle.

Accepted Answer

A) True 
 B)False

Question 4

Dry Corporation cannot pay off its account with Bone Corporation on a timely basis. Bone Corporation issues a $2,000, 3-month, 12% promissory note to Dry Corporation in settlement of an open accounts receivable.
What entry will Bone Corporation make upon issuance?

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D

Question 5

An allowance for doubtful accounts is a contra-account paired with:

Accepted Answer

A)  expenses. 
B)  cash. 
C)  net income. 
D)  accounts receivable. 
A)  expenses. 
B)  cash. 
C)  net income. 
D)  accounts receivable.

Question 6

For each scenario below, indicate the appropriate change in current revenue, expenses and net income. Use the following symbols:
   or none

Accepted Answer

The answer of For each scenario below, indicate the appropriate...

Question 7

A company extends credit to customers because it expects the:

Accepted Answer

A)  rise in sales revenue to be greater than the rise in cost of extending credit. 
B)  delay in receiving cash to cost more than the increase in wage costs. 
C)  tax savings from a lower net income to be greater than the cost of extending credit. 
D)  bad debts expense to be less than the additional wage costs. 
A)  rise in sales revenue to be greater than the rise in cost of extending credit. 
B)  delay in receiving cash to cost more than the increase in wage costs. 
C)  tax savings from a lower net income to be greater than the cost of extending credit. 
D)  bad debts expense to be less than the additional wage costs.

Question 8

Generous Inc. lends Blue Inc. $40,000 on April 1, accepting a four-month, 4.5% interest-bearing note. Generous Inc. prepares financial statements on April 30. What adjusting entry should be made by Generous Inc. before its financial statements are prepared?

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D

Question 9

What is the receivables turnover ratio for 2011 (rounded to two decimal places)?

Accepted Answer

A)  8.93 
B)  8.48 
C)  8.71 
D)  9.14 
A)  8.93 
B)  8.48 
C)  8.71 
D)  9.14

Question 10

When an adjusting entry is made in anticipation of some receivables being uncollectible, the adjustment reduces:

Accepted Answer

A)  both net income and net accounts receivable. 
B)  net income and increases liabilities. 
C)  net accounts receivable and increases liabilities. 
D)  net income and selling expenses. 
A)  both net income and net accounts receivable. 
B)  net income and increases liabilities. 
C)  net accounts receivable and increases liabilities. 
D)  net income and selling expenses.

Question 11

A company lends its CEO $150,000 for 3 years at a 6% annual interest rate. Interest payments are to be made twice a year. The company initially records the transaction by:

Accepted Answer

A)  debiting Notes Receivable for $150,000 and crediting Cash for $150,000. 
B)  debiting assets for $150,000 and crediting liabilities for $150,000. 
C)  debiting Cash for $9,000 and crediting Interest Revenue for $9,000. 
D)  debiting Interest Receivable for $4,500 and crediting Interest Revenue for $4,500. 
A)  debiting Notes Receivable for $150,000 and crediting Cash for $150,000. 
B)  debiting assets for $150,000 and crediting liabilities for $150,000. 
C)  debiting Cash for $9,000 and crediting Interest Revenue for $9,000. 
D)  debiting Interest Receivable for $4,500 and crediting Interest Revenue for $4,500.

Question 12

Which of the following statements regarding the recording of interest on notes receivable is true?

Accepted Answer

A)  Interest on notes receivable is recorded as revenue only when the cash is received. 
B)  When a company receives an interest payment on a note, the entire payment is recorded as revenue when received. 
C)  Interest on notes receivable is recognized when it is earned which is not necessarily when the interest is received in cash. 
D)  Interest earned but not yet received must be recorded in an adjusting entry which includes a debit to interest 
A)  Interest on notes receivable is recorded as revenue only when the cash is received. 
B)  When a company receives an interest payment on a note, the entire payment is recorded as revenue when received. 
C)  Interest on notes receivable is recognized when it is earned which is not necessarily when the interest is received in cash. 
D)  Interest earned but not yet received must be recorded in an adjusting entry which includes a debit to interest

Question 13

Over the past five years, a company had average annual credit sales of $320,000 and write-offs this year of $2,000. Credit sales in the current year are $300,000. The balance in the Allowance for Doubtful Accounts is a
$500 credit. Using the percentage of credit sales method, and an estimate of 1%, what amount should the company record as an estimate of bad debt expense?

Accepted Answer

A)  $2,000 
B)  $3,000 
C)  $3,500 
D)  $1,500 
A)  $2,000 
B)  $3,000 
C)  $3,500 
D)  $1,500

Question 14

The receivables turnover ratio is calculated using the average net receivables.

Accepted Answer

A) True 
 B)False

Question 15

Allowance for doubtful accounts is a temporary account which is closed to retained earnings at the end of the accounting period.

Accepted Answer

A) True 
 B)False

Question 16

If the company is preparing financial statements 3 months after this transaction, what is the necessary adjusting entry?

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D

Question 17

To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a debit to:

Accepted Answer

A)  Accounts Receivable and a credit to Allowance for Doubtful Accounts. 
B)  Bad Debt Expense and a credit to Allowance for Doubtful Accounts. 
C)  Allowance for Doubtful Accounts and a credit to Accounts Receivable. 
D)  Loss on Credit Sales and a credit to Accounts Receivable. 
A)  Accounts Receivable and a credit to Allowance for Doubtful Accounts. 
B)  Bad Debt Expense and a credit to Allowance for Doubtful Accounts. 
C)  Allowance for Doubtful Accounts and a credit to Accounts Receivable. 
D)  Loss on Credit Sales and a credit to Accounts Receivable.

Question 18

Assume the Mirtha Company had the following balances at year-end.   Assume the company recorded no write-offs or recoveries during 2012. What was the amount of bad debt expense reported in 2012?

Accepted Answer

A)  $79,000. 
B)  $64,600. 
C)  $28,800. 
D)  $14,400. 
A)  $79,000. 
B)  $64,600. 
C)  $28,800. 
D)  $14,400.

Question 19

A high accounts receivable turnover ratio indicates:

Accepted Answer

A)  the company's sales are increasing. 
B)  a large proportion of the company's sales are on credit. 
C)  customers are making payments very quickly. 
D)  the company is taking longer to sell inventory. 
A)  the company's sales are increasing. 
B)  a large proportion of the company's sales are on credit. 
C)  customers are making payments very quickly. 
D)  the company is taking longer to sell inventory.

Question 20

Net accounts receivable is:

Accepted Answer

A)  gross accounts receivable minus cost of goods sold. 
B)  also known as net pretax income. 
C)  gross accounts receivable minus allowance for doubtful accounts. 
D)  also known as net after-tax income. 
A)  gross accounts receivable minus cost of goods sold. 
B)  also known as net pretax income. 
C)  gross accounts receivable minus allowance for doubtful accounts. 
D)  also known as net after-tax income.

What is the total amount of interest on this note?

Bad Debt Expense is classified as

The direct write-off method is not allowed by GAAP because is ignores the conservatism concept and the matching principle.

Dry Corporation cannot pay off its account with Bone Corporation on a timely basis. Bone Corporation issues a $2,000, 3-month, 12% promissory note to Dry Corporation in settlement of an open accounts receivable. What entry will Bone Corporation make upon issuance?

An allowance for doubtful accounts is a contra-account paired with:

For each scenario below, indicate the appropriate change in current revenue, expenses and net income. Use the following symbols: or none

A company extends credit to customers because it expects the:

Generous Inc. lends Blue Inc. $40,000 on April 1, accepting a four-month, 4.5% interest-bearing note. Generous Inc. prepares financial statements on April 30. What adjusting entry should be made by Generous Inc. before its financial statements are prepared?

What is the receivables turnover ratio for 2011 (rounded to two decimal places)?

When an adjusting entry is made in anticipation of some receivables being uncollectible, the adjustment reduces:

A company lends its CEO $150,000 for 3 years at a 6% annual interest rate. Interest payments are to be made twice a year. The company initially records the transaction by:

Which of the following statements regarding the recording of interest on notes receivable is true?

The receivables turnover ratio is calculated using the average net receivables.

Allowance for doubtful accounts is a temporary account which is closed to retained earnings at the end of the accounting period.

If the company is preparing financial statements 3 months after this transaction, what is the necessary adjusting entry?

To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a debit to:

Assume the Mirtha Company had the following balances at year-end. Assume the company recorded no write-offs or recoveries during 2012. What was the amount of bad debt expense reported in 2012?

A high accounts receivable turnover ratio indicates:

Net accounts receivable is:

Business Decisions and Financial Accounting

Reporting Investing and Financing Results on the Balance Sheet

Reporting Operating Results on the Income Statement

Adjustments, Financial Statements, and Financial Results

Financial Reporting and Analysis

Internal Control and Financial Reporting for Cash and Merchandise Sales

Reporting and Interpreting Inventories and Cost of Goods Sold

Reporting and Interpreting Long-Lived Tangible and Intangible Assets

Reporting and Interpreting Liabilities

Reporting and Interpreting Stockholders Equity

Reporting and Interpreting the Statement of Cash Flows

Measuring and Evaluating Financial Performance

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

What is the total amount of interest on this note?

Bad Debt Expense is classified as

The direct write-off method is not allowed by GAAP because is ignores the conservatism concept and the matching principle.

Dry Corporation cannot pay off its account with Bone Corporation on a timely basis. Bone Corporation issues a $2,000, 3-month, 12% promissory note to Dry Corporation in settlement of an open accounts receivable. What entry will Bone Corporation make upon issuance?

An allowance for doubtful accounts is a contra-account paired with:

For each scenario below, indicate the appropriate change in current revenue, expenses and net income. Use the following symbols: or none

A company extends credit to customers because it expects the:

Generous Inc. lends Blue Inc. $40,000 on April 1, accepting a four-month, 4.5% interest-bearing note. Generous Inc. prepares financial statements on April 30. What adjusting entry should be made by Generous Inc. before its financial statements are prepared?

What is the receivables turnover ratio for 2011 (rounded to two decimal places)?

When an adjusting entry is made in anticipation of some receivables being uncollectible, the adjustment reduces:

A company lends its CEO $150,000 for 3 years at a 6% annual interest rate. Interest payments are to be made twice a year. The company initially records the transaction by:

Which of the following statements regarding the recording of interest on notes receivable is true?

The receivables turnover ratio is calculated using the average net receivables.

Allowance for doubtful accounts is a temporary account which is closed to retained earnings at the end of the accounting period.

If the company is preparing financial statements 3 months after this transaction, what is the necessary adjusting entry?

To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a debit to:

Assume the Mirtha Company had the following balances at year-end. Assume the company recorded no write-offs or recoveries during 2012. What was the amount of bad debt expense reported in 2012?

A high accounts receivable turnover ratio indicates:

Net accounts receivable is:

Business Decisions and Financial Accounting

Reporting Investing and Financing Results on the Balance Sheet

Reporting Operating Results on the Income Statement

Adjustments, Financial Statements, and Financial Results

Financial Reporting and Analysis

Internal Control and Financial Reporting for Cash and Merchandise Sales

Reporting and Interpreting Inventories and Cost of Goods Sold

Reporting and Interpreting Long-Lived Tangible and Intangible Assets

Reporting and Interpreting Liabilities

Reporting and Interpreting Stockholders Equity

Reporting and Interpreting the Statement of Cash Flows

Measuring and Evaluating Financial Performance

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