Question 1

Under the allowance method, writing off an uncollectible account

Accepted Answer

A)  affects only balance sheet accounts. 
B)  affects both balance sheet and income statement accounts. 
C)  affects only income statement accounts. 
D)  is not acceptable practice. 
A)  affects only balance sheet accounts. 
B)  affects both balance sheet and income statement accounts. 
C)  affects only income statement accounts. 
D)  is not acceptable practice.

Question 2

When calculating interest on a promissory note with the maturity date stated in terms of days, the

Accepted Answer

A)  maker pays more interest if 365 days are used instead of 360. 
B)  maker pays the same interest regardless if 365 or 360 days are used. 
C)  payee receives more interest if 360 days are used instead of 365. 
D)  payee receives less interest if 360 days are used instead of 365. 
A)  maker pays more interest if 365 days are used instead of 360. 
B)  maker pays the same interest regardless if 365 or 360 days are used. 
C)  payee receives more interest if 360 days are used instead of 365. 
D)  payee receives less interest if 360 days are used instead of 365.

Question 3

An aging of a company's accounts receivable indicates that $4,500 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 credit balance, the adjustment to record bad debts for the period will require a

Accepted Answer

A)  debit to Bad Debt Expense for $4,500. 
B)  debit to Allowance for Doubtful Accounts for $3,300. 
C)  debit to Bad Debt Expense for $3,300. 
D)  credit to Allowance for Doubtful Accounts for $4,500. 
A)  debit to Bad Debt Expense for $4,500. 
B)  debit to Allowance for Doubtful Accounts for $3,300. 
C)  debit to Bad Debt Expense for $3,300. 
D)  credit to Allowance for Doubtful Accounts for $4,500.

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 following information is related to December 31, 2013 balances. $\begin{array}{lr}
\text { Accounts receivable } & \$ 2,100,000 \
\text { Allowance for doubtful accounts (credit) } & (180,000) \
\text { Cash realizable value } & \$ 1,920,000
\end{array}$ During 2014 sales on account were $580,000 and collections on account were $344,000. Also during 2014 the company wrote off $32,000 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that bad debts should be estimated at $216,000. Bad debt expense for 2014 is

Accepted Answer

A)  $ 68,000. 
B)  $ 36,000. 
C)  $216,000. 
D)  $ 4,000. 
A)  $ 68,000. 
B)  $ 36,000. 
C)  $216,000. 
D)  $ 4,000.

Question 6

Trade receivables occur when two companies trade or exchange notes receivables.

Accepted Answer

A) True 
 B)False

Question 7

Kinsler Company uses the percentage-of-receivables method for recording bad debt expense. The Accounts Receivable balance is $200,000 and credit sales are $1,000,000. Management estimates that 6% of accounts receivable will be uncollectible. What adjusting entry will Kinsler Company make if the Allowance for Doubtful Accounts has a credit balance of $2,000 before adjustment?

Accepted Answer

The answer of Kinsler Company uses the percentage-of-receivables method for...

Question 8

There is only one way to calculate interest correctly.

Accepted Answer

A) True 
 B)False

Question 9

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 10

An aging of a company's accounts receivable indicates that $4,500 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,600 credit balance, the adjustment to record bad debts for the period will require a

Accepted Answer

A)  debit to Bad Debt Expense for $4,500. 
B)  debit to Allowance for Doubtful Accounts for $2,900. 
C)  debit to Bad Debt Expense for $2,900. 
D)  credit to Allowance for Doubtful Accounts for $4,500. 
A)  debit to Bad Debt Expense for $4,500. 
B)  debit to Allowance for Doubtful Accounts for $2,900. 
C)  debit to Bad Debt Expense for $2,900. 
D)  credit to Allowance for Doubtful Accounts for $4,500.

Question 11

A company regularly sells its receivables to a factor who assesses a 2% service charge on the amount of receivables purchased. Which of the following statements is true for the seller of the receivables?

Accepted Answer

A)  The loss section of the income statement will increase each time receivables are sold. 
B)  The credit to Accounts Receivable is less than the debit to Cash when the accounts are sold. 
C)  Selling expenses will increase each time accounts are sold. 
D)  The other expenses section of the income statement will increase each time accounts are sold. 
A)  The loss section of the income statement will increase each time receivables are sold. 
B)  The credit to Accounts Receivable is less than the debit to Cash when the accounts are sold. 
C)  Selling expenses will increase each time accounts are sold. 
D)  The other expenses section of the income statement will increase each time accounts are sold.

Question 12

When an account becomes uncollectible and must be written off

Accepted Answer

A)  Allowance for Doubtful Accounts should be credited. 
B)  Accounts Receivable should be credited. 
C)  Bad Debt Expense should be credited. 
D)  Sales Revenue should be debited. 
A)  Allowance for Doubtful Accounts should be credited. 
B)  Accounts Receivable should be credited. 
C)  Bad Debt Expense should be credited. 
D)  Sales Revenue should be debited.

Question 13

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 14

One might infer from a debit balance in Allowance for Doubtful Accounts that

Accepted Answer

A)  a posting error has been made. 
B)  more accounts have been written off than had been estimated. 
C)  the direct method is being used. 
D)  Bad Debt Expense has been overestimated. 
A)  a posting error has been made. 
B)  more accounts have been written off than had been estimated. 
C)  the direct method is being used. 
D)  Bad Debt Expense has been overestimated.

Question 15

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 16

The following information is related to December 31, 2013 balances. $\begin{array}{lc}
\text {- Accounts receivable } & \$ 700,000 \
\text {- Allowance for doubtful accounts (credit) } & (60,000) \
\text {- Cash realizable value } & 640,000
\end{array}$ During 2014 sales on account were $195,000 and collections on account were $115,000. Also, during 2014 the company wrote off $11,000 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that bad debts should be estimated at $72,000. The change in the cash realizable value from the balance at 12/31/13 to 12/31/14 was

Accepted Answer

A)  $68,000 increase. 
B)  $80,000 increase. 
C)  $57,000 increase. 
D)  $69,000 increase. 
A)  $68,000 increase. 
B)  $80,000 increase. 
C)  $57,000 increase. 
D)  $69,000 increase.

Question 17

The allowance method of handling bad debts violates the matching principle.

Accepted Answer

A) True 
 B)False

Question 18

The financial statements of the Belfry Manufacturing Company reports net sales of $500,000 and accounts receivable of $80,000 and $40,000 at the beginning of the year and end of year, respectively. What is the average collection period for accounts receivable in days?

Accepted Answer

A)  29.2 times 
B)  86.9 times 
C)  44.0 times 
D)  57.9 times 
A)  29.2 times 
B)  86.9 times 
C)  44.0 times 
D)  57.9 times

Question 19

Customer purchases using credit cards are a significant source of revenue for many retailers. From the standpoint of a retailer, briefly discuss some advantages and disadvantages of a retail store having its own credit card as opposed to accepting one of the national credit cards (e.g., Visa or MasterCard).

Accepted Answer

The advantages of a retail store using i

Question 20

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.

Under the allowance method, writing off an uncollectible account

When calculating interest on a promissory note with the maturity date stated in terms of days, the

An aging of a company's accounts receivable indicates that $4,500 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 credit balance, the adjustment to record bad debts for the period will require a

The accounts receivable turnover

Trade receivables occur when two companies trade or exchange notes receivables.

There is only one way to calculate interest correctly.

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.

An aging of a company's accounts receivable indicates that $4,500 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,600 credit balance, the adjustment to record bad debts for the period will require a

A company regularly sells its receivables to a factor who assesses a 2% service charge on the amount of receivables purchased. Which of the following statements is true for the seller of the receivables?

When an account becomes uncollectible and must be written off

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

One might infer from a debit balance in Allowance for Doubtful Accounts that

Interest is usually associated with

The allowance method of handling bad debts violates the matching principle.

The financial statements of the Belfry Manufacturing Company reports net sales of $500,000 and accounts receivable of $80,000 and $40,000 at the beginning of the year and end of year, respectively. What is the average collection period for accounts receivable in days?

Under the allowance method of accounting for uncollectible accounts,

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 and Acquisitions in Accounting

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Exam 8: Reporting and Analyzing Receivables

Under the allowance method, writing off an uncollectible account

When calculating interest on a promissory note with the maturity date stated in terms of days, the

An aging of a company's accounts receivable indicates that $4,500 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 credit balance, the adjustment to record bad debts for the period will require a

The accounts receivable turnover

Trade receivables occur when two companies trade or exchange notes receivables.

There is only one way to calculate interest correctly.

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.

An aging of a company's accounts receivable indicates that $4,500 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,600 credit balance, the adjustment to record bad debts for the period will require a

A company regularly sells its receivables to a factor who assesses a 2% service charge on the amount of receivables purchased. Which of the following statements is true for the seller of the receivables?

When an account becomes uncollectible and must be written off

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

One might infer from a debit balance in Allowance for Doubtful Accounts that

Interest is usually associated with

The allowance method of handling bad debts violates the matching principle.

The financial statements of the Belfry Manufacturing Company reports net sales of $500,000 and accounts receivable of $80,000 and $40,000 at the beginning of the year and end of year, respectively. What is the average collection period for accounts receivable in days?

Under the allowance method of accounting for uncollectible accounts,

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 and Acquisitions in Accounting

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