Question 1

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 2

A debit balance in the Allowance for Doubtful Accounts

Accepted Answer

A)  is the normal balance for that account. 
B)  indicates that actual bad debt write-offs have exceeded previous provisions for bad debts. 
C)  indicates that actual bad debt write-offs have been less than what was estimated. 
D)  cannot occur if the percentage of receivables method of estimating bad debts is used. 
A)  is the normal balance for that account. 
B)  indicates that actual bad debt write-offs have exceeded previous provisions for bad debts. 
C)  indicates that actual bad debt write-offs have been less than what was estimated. 
D)  cannot occur if the percentage of receivables method of estimating bad debts is used.

Question 3

The percentage of receivables approach to estimating bad debts expense is used by Hayes Company. On February 28, the firm had accounts receivable in the amount of $585,000 and Allowance for Doubtful Accounts had a credit balance of $370 before adjustment. Net credit sales for February amounted to $3,000,000. The credit manager estimated that uncollectible accounts would amount to 5% of accounts receivable. On March 10, an accounts receivable from Mark Dole for $2,100 was determined to be uncollectible and written off. However, on March 31, Dole received an inheritance and immediately paid his past due account in full.
(a) Prepare the journal entries made by Hayes Company on the following dates:
1. February 28
2. March 10
3. March 31
(b) Assume no other transactions occurred that affected the allowance account during March. Determine the balance of Allowance for Doubtful Accounts at March 31.

Accepted Answer

The answer of The percentage of receivables approach to estimating...

Question 4

Ramos Company has a 90-day note that carries an annual interest rate of 8%. If the amount of the total interest on the note is equal to $700, then what is the principal of the note?

Accepted Answer

A)  $8,750 
B)  $35,000 
C)  $50,400 
D)  $22,400 
A)  $8,750 
B)  $35,000 
C)  $50,400 
D)  $22,400

Question 5

A popular variation of the accounts receivable turnover is the

Accepted Answer

A)  credit risk ratio. 
B)  concentration of credit risk. 
C)  bad debts ratio. 
D)  average collection period. 
A)  credit risk ratio. 
B)  concentration of credit risk. 
C)  bad debts ratio. 
D)  average collection period.

Question 6

When using the direct write-off method year-end adjustments for bad debt expense must be made.

Accepted Answer

A) True 
 B)False

Question 7

The balance of Allowance for Doubtful Accounts prior to making the adjusting entry to record Bad Debt Expense

Accepted Answer

A)  is relevant when using the percentage-of-receivables basis. 
B)  is relevant when using the direct write-off method. 
C)  is relevant to both the percentage-of-receivables basis and the direct write-off method. 
D)  will never show a debit balance at this stage in the accounting cycle. 
A)  is relevant when using the percentage-of-receivables basis. 
B)  is relevant when using the direct write-off method. 
C)  is relevant to both the percentage-of-receivables basis and the direct write-off method. 
D)  will never show a debit balance at this stage in the accounting cycle.

Question 8

Allowance for Doubtful Accounts on the balance sheet

Accepted Answer

A)  is offset against total current assets. 
B)  increases the cash realizable value of accounts receivable. 
C)  appears under the heading "Other Assets." 
D)  is deducted from accounts receivable. 
A)  is offset against total current assets. 
B)  increases the cash realizable value of accounts receivable. 
C)  appears under the heading "Other Assets." 
D)  is deducted from accounts receivable.

Question 9

If a company fails to record estimated bad debts expense,

Accepted Answer

A)  cash realizable value is understated. 
B)  expenses are understated. 
C)  revenues are understated. 
D)  receivables are understated. 
A)  cash realizable value is understated. 
B)  expenses are understated. 
C)  revenues are understated. 
D)  receivables are understated.

Question 10

The bookkeeper recorded the following journal entry Allowance for Doubtful Accounts 1,000
Accounts Receivable - Richard James 1,000
Which one of the following statements is false?

Accepted Answer

A)  This entry is only prepared on the last day of the accounting period. 
B)  There should be written authorization for this transaction from someone who does not have responsibilities related to recording cash. 
C)  There could be a violation of internal control policies. 
D)  James' account was written off because it was determined to be uncollectible. 
A)  This entry is only prepared on the last day of the accounting period. 
B)  There should be written authorization for this transaction from someone who does not have responsibilities related to recording cash. 
C)  There could be a violation of internal control policies. 
D)  James' account was written off because it was determined to be uncollectible.

Question 11

Young Company lends Dobson industries $40,000 on January 1, 2014, accepting a 9-month, 12% interest note. If Dobson dishonors the note and does not pay it in full at maturity but Young expects that it will eventually be able to collect the debt, which of the following entries should most likely be made by Young Company?

Accepted Answer

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

Question 12

The interest on a $4,000, 9%, 90-day note receivable is

Accepted Answer

A)  $90. 
B)  $360. 
C)  $30. 
D)  $60. 
A)  $90. 
B)  $360. 
C)  $30. 
D)  $60.

Question 13

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 14

An article in the Wall Street Journal indicated that companies are selling receivables at a record rate. Why do companies sell their receivables?

Accepted Answer

The reasons companies are selling their

Question 15

The two key parties to a note are the maker and the payee.

Accepted Answer

A) True 
 B)False

Question 16

The allowance for doubtful accounts is similar to accumulated depreciation in that it shows the total of all accounts written off over the years.

Accepted Answer

A) True 
 B)False

Question 17

Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $30,000. If the balance of the Allowance for Doubtful Accounts is $4,000 credit before adjustment what is the amount of bad debt expense for that period?

Accepted Answer

A)  $30,000 
B)  $26,000 
C)  $34,000 
D)  $4,000 
A)  $30,000 
B)  $26,000 
C)  $34,000 
D)  $4,000

Question 18

The accounts receivable turnover is used to analyze

Accepted Answer

A)  profitability. 
B)  liquidity. 
C)  risk. 
D)  long-term solvency. 
A)  profitability. 
B)  liquidity. 
C)  risk. 
D)  long-term solvency.

Question 19

Receivables are valued and reported in the balance sheet at their gross amount less any sales returns and allowances and less any cash discounts.

Accepted Answer

A) True 
 B)False

Question 20

Bad debt losses are a cost of selling on credit.

Accepted Answer

A) True 
 B)False

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

A debit balance in the Allowance for Doubtful Accounts

Ramos Company has a 90-day note that carries an annual interest rate of 8%. If the amount of the total interest on the note is equal to $700, then what is the principal of the note?

A popular variation of the accounts receivable turnover is the

When using the direct write-off method year-end adjustments for bad debt expense must be made.

The balance of Allowance for Doubtful Accounts prior to making the adjusting entry to record Bad Debt Expense

Allowance for Doubtful Accounts on the balance sheet

If a company fails to record estimated bad debts expense,

The bookkeeper recorded the following journal entry Allowance for Doubtful Accounts 1,000 Accounts Receivable - Richard James 1,000 Which one of the following statements is false?

The interest on a $4,000, 9%, 90-day note receivable is

Factoring arrangements

An article in the Wall Street Journal indicated that companies are selling receivables at a record rate. Why do companies sell their receivables?

The two key parties to a note are the maker and the payee.

The allowance for doubtful accounts is similar to accumulated depreciation in that it shows the total of all accounts written off over the years.

Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $30,000. If the balance of the Allowance for Doubtful Accounts is $4,000 credit before adjustment what is the amount of bad debt expense for that period?

The accounts receivable turnover is used to analyze

Receivables are valued and reported in the balance sheet at their gross amount less any sales returns and allowances and less any cash discounts.

Bad debt losses are a cost of selling on credit.

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

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

A debit balance in the Allowance for Doubtful Accounts

Ramos Company has a 90-day note that carries an annual interest rate of 8%. If the amount of the total interest on the note is equal to $700, then what is the principal of the note?

A popular variation of the accounts receivable turnover is the

When using the direct write-off method year-end adjustments for bad debt expense must be made.

The balance of Allowance for Doubtful Accounts prior to making the adjusting entry to record Bad Debt Expense

Allowance for Doubtful Accounts on the balance sheet

If a company fails to record estimated bad debts expense,

The bookkeeper recorded the following journal entry Allowance for Doubtful Accounts 1,000 Accounts Receivable - Richard James 1,000 Which one of the following statements is false?

The interest on a $4,000, 9%, 90-day note receivable is

Factoring arrangements

An article in the Wall Street Journal indicated that companies are selling receivables at a record rate. Why do companies sell their receivables?

The two key parties to a note are the maker and the payee.

The allowance for doubtful accounts is similar to accumulated depreciation in that it shows the total of all accounts written off over the years.

Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $30,000. If the balance of the Allowance for Doubtful Accounts is $4,000 credit before adjustment what is the amount of bad debt expense for that period?

The accounts receivable turnover is used to analyze

Receivables are valued and reported in the balance sheet at their gross amount less any sales returns and allowances and less any cash discounts.

Bad debt losses are a cost of selling on credit.

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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