Question 1

Under the direct write-off method of accounting for uncollectible accounts,

Accepted Answer

A) the allowance account is increased for the actual amount of bad debt at the time of write-off. 
B) a specific account receivable is decreased for the actual amount of bad debt at the time of write-off. 
C) balance sheet relationships are emphasized. 
D) bad debt expense is always recorded in the period in which the revenue was recorded. 
A) the allowance account is increased for the actual amount of bad debt at the time of write-off. 
B) a specific account receivable is decreased for the actual amount of bad debt at the time of write-off. 
C) balance sheet relationships are emphasized. 
D) bad debt expense is always recorded in the period in which the revenue was recorded.

Question 2

The maturity value of a $50,000, 12%, 3-month note receivable is

Accepted Answer

A) $51,500. 
B) $50,600. 
C) $56,000. 
D) $50,500. 
A) $51,500. 
B) $50,600. 
C) $56,000. 
D) $50,500.

Question 3

The financial statements of the Belfry Manufacturing Company report net sales of $600,000 and accounts receivable of $80,000 and $40,000 at the beginning of the year and the end of the year, respectively.What is the average collection period for accounts receivable in days?

Accepted Answer

A) 24.3 times 
B) 73.0 times 
C) 36.5 times 
D) 48.7 times 
A) 24.3 times 
B) 73.0 times 
C) 36.5 times 
D) 48.7 times

Question 4

If a company has significant concentrations of credit risk, it must discuss this risk in the notes to its financial statements.

Accepted Answer

A) True 
 B)False

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

Young Company lends Dobson industries $40,000 on August 1, 2022, accepting a 9-month, 9% interest note.If Young accrued interest at its December 31, 2022 year-end, what entry must it make to record the collection of the note and interest at its maturity date?

Accepted Answer

The answer of Young Company lends Dobson industries $40,000 on...

Question 7

Under the allowance method, Bad Debt Expense is recorded

Accepted Answer

A) when an individual account is written off. 
B) when the loss amount is known. 
C) for an amount that the company estimates it will not collect. 
D) several times during the accounting period. 
A) when an individual account is written off. 
B) when the loss amount is known. 
C) for an amount that the company estimates it will not collect. 
D) several times during the accounting period.

Question 8

Interest on a 6-month, 10 percent, $10,000 note is calculated by multiplying $10,000 * 0.10 * 6/12.

Accepted Answer

A) True 
 B)False

Question 9

When using the allowance method, year-end adjustments for bad debt expense must be made.

Accepted Answer

A) True 
 B)False

Question 10

If an account is collected after having been previously written off

Accepted Answer

A) the allowance account should be debited. 
B) only Accounts Receivable is 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 Accounts Receivable is 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

The average collection period for receivables is computed by dividing 365 days by

Accepted Answer

A) net credit sales. 
B) average accounts receivable. 
C) ending accounts receivable. 
D) accounts receivable turnover. 
A) net credit sales. 
B) average accounts receivable. 
C) ending accounts receivable. 
D) accounts receivable turnover.

Question 12

Carson Company on July 15 sells merchandise on account to Tayler Co.for $3,000, terms 2/10, n/30.On July 20, Tayler Co.returns merchandise worth $1,200 to Carson Company.On July 24, payment is received from Tayler Co.for the balance due.What is the amount of cash received?

Accepted Answer

A) $1,800 
B) $1,764 
C) $1,740 
D) $3,000 
A) $1,800 
B) $1,764 
C) $1,740 
D) $3,000

Question 13

Interest is usually associated with

Accepted Answer

A) accounts receivable. 
B) notes receivable. 
C) doubtful accounts. 
D) bad debts. 
A) accounts receivable. 
B) notes receivable. 
C) doubtful accounts. 
D) bad debts.

Question 14

The Allowance for Doubtful Accounts is a liability account.

Accepted Answer

A) True 
 B)False

Question 15

Both the gross amount of receivables and the allowance for doubtful accounts should be reported in the balance sheet.

Accepted Answer

A) True 
 B)False

Question 16

When a note is written to settle an open account, no entry is necessary.

Accepted Answer

A) True 
 B)False

Question 17

Selling accounts receivables to factors and allowing credit terms such as 2/10, n/30

Accepted Answer

A) represent common business practices. 
B) represent ways to accelerate receivables collections. 
C) result in collections that are less than the gross accounts receivable. 
D) All of these answer choices are correct. 
A) represent common business practices. 
B) represent ways to accelerate receivables collections. 
C) result in collections that are less than the gross accounts receivable. 
D) All of these answer choices are correct.

Question 18

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 19

Which of the following is least likely to help a company minimize losses as credit standards are relaxed?

Accepted Answer

A) Require potential customers to provide bank guarantees. 
B) Ask a potential customer for references regarding payment history. 
C) Increase the estimate of uncollectible accounts at the end of each period. 
D) Check a potential customer's credit rating. 
A) Require potential customers to provide bank guarantees. 
B) Ask a potential customer for references regarding payment history. 
C) Increase the estimate of uncollectible accounts at the end of each period. 
D) Check a potential customer's credit rating.

Question 20

The direct write-off method is acceptable for financial reporting purposes only if the bad debt losses are insignificant.

Accepted Answer

A) This is a false statement because the direct write-off method violates the matching principle. 
B) This is a true statement based on the concept of materiality. 
C) This is a false statement because the direct write-off method can only be used for tax reporting. 
D) This is a true statement because companies can choose either the direct write-off or the allowance method for financial reporting, as long as they consistently apply the method. 
A) This is a false statement because the direct write-off method violates the matching principle. 
B) This is a true statement based on the concept of materiality. 
C) This is a false statement because the direct write-off method can only be used for tax reporting. 
D) This is a true statement because companies can choose either the direct write-off or the allowance method for financial reporting, as long as they consistently apply the method.

Under the direct write-off method of accounting for uncollectible accounts,

The maturity value of a $50,000, 12%, 3-month note receivable is

The financial statements of the Belfry Manufacturing Company report net sales of $600,000 and accounts receivable of $80,000 and $40,000 at the beginning of the year and the end of the year, respectively.What is the average collection period for accounts receivable in days?

If a company has significant concentrations of credit risk, it must discuss this risk in the notes to its financial statements.

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

Young Company lends Dobson industries $40,000 on August 1, 2022, accepting a 9-month, 9% interest note.If Young accrued interest at its December 31, 2022 year-end, what entry must it make to record the collection of the note and interest at its maturity date?

Under the allowance method, Bad Debt Expense is recorded

Interest on a 6-month, 10 percent, $10,000 note is calculated by multiplying $10,000 * 0.10 * 6/12.

When using the allowance method, year-end adjustments for bad debt expense must be made.

If an account is collected after having been previously written off

The average collection period for receivables is computed by dividing 365 days by

Carson Company on July 15 sells merchandise on account to Tayler Co.for $3,000, terms 2/10, n/30.On July 20, Tayler Co.returns merchandise worth $1,200 to Carson Company.On July 24, payment is received from Tayler Co.for the balance due.What is the amount of cash received?

Interest is usually associated with

The Allowance for Doubtful Accounts is a liability account.

Both the gross amount of receivables and the allowance for doubtful accounts should be reported in the balance sheet.

When a note is written to settle an open account, no entry is necessary.

Selling accounts receivables to factors and allowing credit terms such as 2/10, n/30

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

Which of the following is least likely to help a company minimize losses as credit standards are relaxed?

The direct write-off method is acceptable for financial reporting purposes only if the bad debt losses are insignificant.

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

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

Understanding Investments in Debt and Equity Securities

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Exam 8: Reporting and Analyzing Receivables

Under the direct write-off method of accounting for uncollectible accounts,

The maturity value of a $50,000, 12%, 3-month note receivable is

The financial statements of the Belfry Manufacturing Company report net sales of $600,000 and accounts receivable of $80,000 and $40,000 at the beginning of the year and the end of the year, respectively.What is the average collection period for accounts receivable in days?

If a company has significant concentrations of credit risk, it must discuss this risk in the notes to its financial statements.

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

Young Company lends Dobson industries $40,000 on August 1, 2022, accepting a 9-month, 9% interest note.If Young accrued interest at its December 31, 2022 year-end, what entry must it make to record the collection of the note and interest at its maturity date?

Under the allowance method, Bad Debt Expense is recorded

Interest on a 6-month, 10 percent, $10,000 note is calculated by multiplying $10,000 * 0.10 * 6/12.

When using the allowance method, year-end adjustments for bad debt expense must be made.

If an account is collected after having been previously written off

The average collection period for receivables is computed by dividing 365 days by

Carson Company on July 15 sells merchandise on account to Tayler Co.for $3,000, terms 2/10, n/30.On July 20, Tayler Co.returns merchandise worth $1,200 to Carson Company.On July 24, payment is received from Tayler Co.for the balance due.What is the amount of cash received?

Interest is usually associated with

The Allowance for Doubtful Accounts is a liability account.

Both the gross amount of receivables and the allowance for doubtful accounts should be reported in the balance sheet.

When a note is written to settle an open account, no entry is necessary.

Selling accounts receivables to factors and allowing credit terms such as 2/10, n/30

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

Which of the following is least likely to help a company minimize losses as credit standards are relaxed?

The direct write-off method is acceptable for financial reporting purposes only if the bad debt losses are insignificant.

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

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

Understanding Investments in Debt and Equity Securities

Filters