Question 1

When a note receivable is dishonored, it reverts to an account receivable.

Accepted Answer

A) True 
 B)False

Question 2

Notes receivable are classified as current liabilities regardless of the time to maturity.

Accepted Answer

A) True 
 B)False

Question 3

Winkler Company borrows $85,000 and pledges its receivables as security. The journal entry to record this transaction would be:

Accepted Answer

A) Debit Cash $85,000 and credit Notes Payable $85,000. 
B) Debit Cash of $85,000 and credit Accounts Receivable $85,000. 
C) Debit Cash of $85,000 and credit Accounts Payable $85,000. 
D) Debit Accounts Receivable $85,000 and credit Notes Payable $85,000. 
E) Debit Note Receivable $85,000 and credit Accounts Receivable $85,000. 
A) Debit Cash $85,000 and credit Notes Payable $85,000. 
B) Debit Cash of $85,000 and credit Accounts Receivable $85,000. 
C) Debit Cash of $85,000 and credit Accounts Payable $85,000. 
D) Debit Accounts Receivable $85,000 and credit Notes Payable $85,000. 
E) Debit Note Receivable $85,000 and credit Accounts Receivable $85,000.

Question 4

Brinker accepts all major bank credit cards, including First Savings Bank's, which assesses a 2.5% charge on sales for using its card. On May 26, Brinker had $4,800 in First Savings Bank Card credit sales. What entry should Brinker make on May 26 to record the deposit?

Accepted Answer

A) Debit Cash $4,920; credit Credit Card Expense $120; credit Sales $4,800. 
B) Debit Accounts Receivable $4,680; debit Credit Card Expense $120; credit Sales $4,800. 
C) Debit Accounts Receivable $4,800; credit Sales $4,800. 
D) Debit Cash $4,800; credit Sales $4,800. 
E) Debit Cash $4,680; debit Credit Card Expense $120; credit Sales $4,800. 
A) Debit Cash $4,920; credit Credit Card Expense $120; credit Sales $4,800. 
B) Debit Accounts Receivable $4,680; debit Credit Card Expense $120; credit Sales $4,800. 
C) Debit Accounts Receivable $4,800; credit Sales $4,800. 
D) Debit Cash $4,800; credit Sales $4,800. 
E) Debit Cash $4,680; debit Credit Card Expense $120; credit Sales $4,800.

Question 5

A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts: $\begin{array}{ll}
\text { Accounts receivable } & \$ 375,000 \text { debit } \
\text { Allowance for unco llectible accounts } & 500 \text { credit } \
\text { Net Sales } & 800,000 \text { credit }
\end{array}$ All sales are made on credit. Based on past experience, the company estimates that 0.6% of net credit sales are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

Accepted Answer

A) $5,500 
B) $1,275 
C) $1,775 
D) $4,800 
E) $4,500 
A) $5,500 
B) $1,275 
C) $1,775 
D) $4,800 
E) $4,500

Question 6

The person that borrows money and signs a promissory note is called the maker.

Accepted Answer

A) True 
 B)False

Question 7

Separate accounts receivable information for each customer is important because it reveals all of the following except:

Accepted Answer

A) When the customer intends to pay outstanding balances. 
B) The basis for sending bills to customers. 
C) How much each customer has purchased on credit. 
D) How much each customer has paid. 
E) How much each customer still owes. 
A) When the customer intends to pay outstanding balances. 
B) The basis for sending bills to customers. 
C) How much each customer has purchased on credit. 
D) How much each customer has paid. 
E) How much each customer still owes.

Question 8

What is the accounts receivable turnover ratio? How is it calculated and how is it used to assess financial condition?

Accepted Answer

The accounts receivable turnover ratio i

Question 9

When using the allowance method of accounting for uncollectible accounts, the entry to record the estimated bad debts expense is a debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts.

Accepted Answer

A) True 
 B)False

Question 10

The quality of receivables refers to the likelihood of collection without loss.

Accepted Answer

A) True 
 B)False

Question 11

A company has $80,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 6% of outstanding receivables are uncollectible. The current debit balance (before adjustments)in the allowance for doubtful accounts is $1,200. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for $6,000.

Accepted Answer

A) True 
 B)False

Question 12

On November 19, Nicholson Company receives a $15,000, 60-day, 8% note from a customer as payment on account. What adjusting entry should be made on the December 31 year-end? (Use 360 days a year.)

Accepted Answer

A) Debit Interest Receivable $140; credit Interest Revenue $140. 
B) Debit Notes Receivable $140; credit Interest Revenue $140. 
C) Debit Interest Receivable $1,200; credit Interest Revenue $1,200. 
D) Debit Notes Receivable $140; credit Interest Receivable $140. 
E) Debit Interest Revenue $200; credit Interest Receivable $200. 
A) Debit Interest Receivable $140; credit Interest Revenue $140. 
B) Debit Notes Receivable $140; credit Interest Revenue $140. 
C) Debit Interest Receivable $1,200; credit Interest Revenue $1,200. 
D) Debit Notes Receivable $140; credit Interest Receivable $140. 
E) Debit Interest Revenue $200; credit Interest Receivable $200.

Question 13

The quality of receivables refers to:

Accepted Answer

A) The likelihood of collection without loss. 
B) Sales turnover. 
C) The creditworthiness of sellers. 
D) The speed of collection. 
E) The interest rate. 
A) The likelihood of collection without loss. 
B) Sales turnover. 
C) The creditworthiness of sellers. 
D) The speed of collection. 
E) The interest rate.

Question 14

The unadjusted trial balance at year-end for a company that uses the percent of receivables method to determine its bad debts expense reports the following selected amounts: $$\begin{array} { | l | r | l | } 
\hline \text { Accounts receivable } & \$ 435,000 & \text { Debit } \
\hline \text { Allowance for Doubtful Accounts } & 1,250 & \text { Credit } \
\hline \text { Net Sales } & 2,100,000 & \text { Credit } \
\hline
\end{array}$$ All sales are made on credit. Based on past experience, the company estimates 3.5% of ending account receivable to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Accepted Answer

A) Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225. 
B) Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350. 
C) Debit Bad Debts Expense $16,475; credit Allowance for Doubtful Accounts $16,475. 
D) Debit Bad Debts Expense $17,350; credit Allowance for Doubtful Accounts $17,350. 
E) Debit Bad Debts Expense $13,975; credit Allowance for Doubtful Accounts $13,975. 
A) Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225. 
B) Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350. 
C) Debit Bad Debts Expense $16,475; credit Allowance for Doubtful Accounts $16,475. 
D) Debit Bad Debts Expense $17,350; credit Allowance for Doubtful Accounts $17,350. 
E) Debit Bad Debts Expense $13,975; credit Allowance for Doubtful Accounts $13,975.

Question 15

Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. Jasper's entry to record the collection of the note and interest at maturity should be: (Use 360 days a year.)

Accepted Answer

A) Debit Cash $25,437.50; credit Notes Receivable for $25,437.50. 
B) Debit Cash $26,750; credit Interest Revenue $1,750, credit Notes Receivable $25,000. 
C) Debit Cash $25,437.50; credit Interest Revenue $437.50; credit Notes Receivable $25,000. 
D) Debit Cash for $25,000; credit Notes Receivable $25,000. 
E) Debit Notes Payable $25,000; Debit Interest Expense $1,750; credit Cash $26,750. 
A) Debit Cash $25,437.50; credit Notes Receivable for $25,437.50. 
B) Debit Cash $26,750; credit Interest Revenue $1,750, credit Notes Receivable $25,000. 
C) Debit Cash $25,437.50; credit Interest Revenue $437.50; credit Notes Receivable $25,000. 
D) Debit Cash for $25,000; credit Notes Receivable $25,000. 
E) Debit Notes Payable $25,000; Debit Interest Expense $1,750; credit Cash $26,750.

Question 16

Jervis accepts all major bank credit cards, including those issued by Northern Bank (NB), which assesses a 3% charge on sales for using its card. On June 28, Jervis had $3,500 in NB Card credit sales. What entry should Jervis make on June 28 to record the deposit?

Accepted Answer

A) Debit Accounts Receivable $3,500; credit Sales $3,500 
B) Debit Cash $3,500; credit Sales $3,500 
C) Debit Accounts Receivable $3,395; debit Credit Card Expense $105; credit Sales $3,500 
D) Debit Cash $3,395; debit Credit Card Expense $105; credit Sales $3,500 
E) Debit Cash $3,605; credit Credit Card Expense $105; credit Sales $3,500 
A) Debit Accounts Receivable $3,500; credit Sales $3,500 
B) Debit Cash $3,500; credit Sales $3,500 
C) Debit Accounts Receivable $3,395; debit Credit Card Expense $105; credit Sales $3,500 
D) Debit Cash $3,395; debit Credit Card Expense $105; credit Sales $3,500 
E) Debit Cash $3,605; credit Credit Card Expense $105; credit Sales $3,500

Question 17

A company ages its accounts receivables to determine its end of period adjustment for bad debts. At the end of the current year, management estimated that $15,750 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a debit balance of $375. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?
A)
$\begin{array}{|l|r|r|}
\hline \text { Accounts Receivable } & 16,125 & \
\hline \text { Allowance for Doubtful Accounts } & & 16,125 \
\hline
\end{array}$
B)
$\begin{array}{|l|r|r|}
\hline \text { Accounts Receivable } & 15,750 & \
\hline \text { Bad Debts Expense } & 375 & \
\hline \text { Sales } & & 16,125 \
\hline
\end{array}$
C)
$\begin{array}{|l|r|r|}
\hline \text { Bad Debts Expense } & 16,125 & \
\hline \text { Allowance for Doubtful Accounts } & & 16,125 \
\hline
\end{array}$
D)
$\begin{array}{|l|l|l|}
\hline \text { Bad Debts Expense } & 15,375 & \
\hline \text { Allowance for Doubtful Accounts } & & 15,375 \
\hline
\end{array}$
E)
$\begin{array}{|l|r|l|}
\hline \text { Bad Debts Expense } & 15,750 & \
\hline \text { Allowance for Doubtful Accounts } & & 15,750 \
\hline
\end{array}$

Accepted Answer

The answer of A company ages its accounts receivables to...

Question 18

All of the following statements regarding recognition of receivables under U.S. GAAP and IFRS are true except:

Accepted Answer

A) Under U.S. GAAP, provision refers to a liability whose amount or timing is uncertain. 
B) Differences arise mainly from industry-specific guidance under U.S. GAAP. 
C) The realization principle under GAAP implies an arm's length transaction occurs. 
D) Receivables that arise from revenue-generating activities are subject to broadly similar criteria for U.S. GAAP and IFRS. 
E) U.S. GAAP and IFRS have similar asset criteria that apply to recognition of receivables. 
A) Under U.S. GAAP, provision refers to a liability whose amount or timing is uncertain. 
B) Differences arise mainly from industry-specific guidance under U.S. GAAP. 
C) The realization principle under GAAP implies an arm's length transaction occurs. 
D) Receivables that arise from revenue-generating activities are subject to broadly similar criteria for U.S. GAAP and IFRS. 
E) U.S. GAAP and IFRS have similar asset criteria that apply to recognition of receivables.

Question 19

When using the allowance method of accounting for uncollectible accounts, the recovery of a bad debt would be recorded as a debit to Cash and a credit to Bad Debts Expense.

Accepted Answer

A) True 
 B)False

Question 20

On November 1, Orpheum Company accepted a $10,000, 90-day, 8% note from a customer settle an account. What entry should be made on the November 1 to record the acceptance of the note?

Accepted Answer

A) Debit Note Receivable $10,000; credit Cash $10,000. 
B) Debit Note Receivable $10,200; credit Accounts Receivable $10,000; credit Interest Revenue $200. 
C) Debit Note Receivable $10,000; credit Accounts Receivable $10,000. 
D) Debit Sales $10,000; credit Accounts Receivable $10,000. 
E) Debit Note Receivable $10,000; credit Sales $10,000. 
A) Debit Note Receivable $10,000; credit Cash $10,000. 
B) Debit Note Receivable $10,200; credit Accounts Receivable $10,000; credit Interest Revenue $200. 
C) Debit Note Receivable $10,000; credit Accounts Receivable $10,000. 
D) Debit Sales $10,000; credit Accounts Receivable $10,000. 
E) Debit Note Receivable $10,000; credit Sales $10,000.

When a note receivable is dishonored, it reverts to an account receivable.

Notes receivable are classified as current liabilities regardless of the time to maturity.

Winkler Company borrows $85,000 and pledges its receivables as security. The journal entry to record this transaction would be:

Brinker accepts all major bank credit cards, including First Savings Bank's, which assesses a 2.5% charge on sales for using its card. On May 26, Brinker had $4,800 in First Savings Bank Card credit sales. What entry should Brinker make on May 26 to record the deposit?

The person that borrows money and signs a promissory note is called the maker.

Separate accounts receivable information for each customer is important because it reveals all of the following except:

What is the accounts receivable turnover ratio? How is it calculated and how is it used to assess financial condition?

When using the allowance method of accounting for uncollectible accounts, the entry to record the estimated bad debts expense is a debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts.

The quality of receivables refers to the likelihood of collection without loss.

On November 19, Nicholson Company receives a $15,000, 60-day, 8% note from a customer as payment on account. What adjusting entry should be made on the December 31 year-end? (Use 360 days a year.)

The quality of receivables refers to:

Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. Jasper's entry to record the collection of the note and interest at maturity should be: (Use 360 days a year.)

Jervis accepts all major bank credit cards, including those issued by Northern Bank (NB), which assesses a 3% charge on sales for using its card. On June 28, Jervis had $3,500 in NB Card credit sales. What entry should Jervis make on June 28 to record the deposit?

All of the following statements regarding recognition of receivables under U.S. GAAP and IFRS are true except:

When using the allowance method of accounting for uncollectible accounts, the recovery of a bad debt would be recorded as a debit to Cash and a credit to Bad Debts Expense.

On November 1, Orpheum Company accepted a $10,000, 90-day, 8% note from a customer settle an account. What entry should be made on the November 1 to record the acceptance of the note?

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Plant Assets, Natural Resoures, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Filters

Exam 9: Accounting for Receivables

When a note receivable is dishonored, it reverts to an account receivable.

Notes receivable are classified as current liabilities regardless of the time to maturity.

Winkler Company borrows $85,000 and pledges its receivables as security. The journal entry to record this transaction would be:

Brinker accepts all major bank credit cards, including First Savings Bank's, which assesses a 2.5% charge on sales for using its card. On May 26, Brinker had $4,800 in First Savings Bank Card credit sales. What entry should Brinker make on May 26 to record the deposit?

The person that borrows money and signs a promissory note is called the maker.

Separate accounts receivable information for each customer is important because it reveals all of the following except:

What is the accounts receivable turnover ratio? How is it calculated and how is it used to assess financial condition?

When using the allowance method of accounting for uncollectible accounts, the entry to record the estimated bad debts expense is a debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts.

The quality of receivables refers to the likelihood of collection without loss.

On November 19, Nicholson Company receives a $15,000, 60-day, 8% note from a customer as payment on account. What adjusting entry should be made on the December 31 year-end? (Use 360 days a year.)

The quality of receivables refers to:

Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. Jasper's entry to record the collection of the note and interest at maturity should be: (Use 360 days a year.)

Jervis accepts all major bank credit cards, including those issued by Northern Bank (NB), which assesses a 3% charge on sales for using its card. On June 28, Jervis had $3,500 in NB Card credit sales. What entry should Jervis make on June 28 to record the deposit?

All of the following statements regarding recognition of receivables under U.S. GAAP and IFRS are true except:

When using the allowance method of accounting for uncollectible accounts, the recovery of a bad debt would be recorded as a debit to Cash and a credit to Bad Debts Expense.

On November 1, Orpheum Company accepted a $10,000, 90-day, 8% note from a customer settle an account. What entry should be made on the November 1 to record the acceptance of the note?

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Plant Assets, Natural Resoures, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Filters