Question 1

During a given year, a company had net sales of $500,000 and average accounts receivable of $80,000. Its accounts receivable turnover is equal to 6.25.

Accepted Answer

A) True 
 B)False  True

Question 2

A supplementary record created to maintain a separate account for each customer is called the ________________________.

Accepted Answer

Accounts receivable ledger

Question 3

The amount of bad debt expense can be estimated by:

Accepted Answer

A)  The percent of sales method 
B)  The percent of accounts receivable method 
C)  The aging of accounts receivable method 
D)  Only b and c 
E)  Bad debt expense can be estimated by any of the three methods listed above 
A)  The percent of sales method 
B)  The percent of accounts receivable method 
C)  The aging of accounts receivable method 
D)  Only b and c 
E)  Bad debt expense can be estimated by any of the three methods listed above E

Question 4

A promissory note is a written promise to pay a specified amount of money either on demand or at a definite future date.

Accepted Answer

A) True 
 B)False

Question 5

The advantage of the allowance method of accounting for uncollectible accounts is that it identifies the specific customers who do not pay their bills.

Accepted Answer

A) True 
 B)False

Question 6

The following information is from the annual financial statements of Duke Company.
$\begin{array}{lrrr}&2011&2010&2009\
\text { Net Sales } & \$ 385,000 & \$ 308,000 & \$ 255,000 \
\text { Accounts Receivable, net (year-end) } & 57,500 & 54,000 & 44,700
\end{array}$
Calculate the accounts receivable turnover ratio for 2010 and 2011.

Accepted Answer

2010: 308,000/((54,0

Question 7

ABC Co. sold $80,000 of accounts receivable to First Bank and incurred a 2% factoring fee. Prepare the journal entry for ABC Co. to record the sale.

Accepted Answer

The answer of ABC Co. sold $80,000 of accounts receivable...

Question 8

Converting receivables to cash before they are due is usually done by either (1) _______________________ or (2)________________________________.

Accepted Answer

(1) Selling them (2)

Question 9

Companies can report a credit card expense as a discount deducted from sales or as a selling expense.

Accepted Answer

A) True 
 B)False

Question 10

The matching principle requires:

Accepted Answer

A)  That expenses be ignored if their effect on the financial statements are less important than revenues to the financial statement user 
B)  The use of the direct write-off method for bad debts 
C)  The use of the allowance method of accounting for bad debts 
D)  That bad debts be disclosed in the financial statements 
E)  That bad debts not be written off 
A)  That expenses be ignored if their effect on the financial statements are less important than revenues to the financial statement user 
B)  The use of the direct write-off method for bad debts 
C)  The use of the allowance method of accounting for bad debts 
D)  That bad debts be disclosed in the financial statements 
E)  That bad debts not be written off

Question 11

The person to whom a note is payable to is known as the ______________.

Accepted Answer

The answer of The person to whom a note is...

Question 12

A 90-day note issued on April 20 has a maturity date of:

Accepted Answer

A)  July 17 
B)  July 18 
C)  July 19 
D)  July 20 
E)  July 21 
A)  July 17 
B)  July 18 
C)  July 19 
D)  July 20 
E)  July 21

Question 13

The interest accrued on $3,600 at 7% for 60 days is:

Accepted Answer

A)  $36 
B)  $42 
C)  $252 
D)  $180 
E)  $420 
A)  $36 
B)  $42 
C)  $252 
D)  $180 
E)  $420

Question 14

A company factored $35,000 of its accounts receivable and was charged a 2% factoring fee. The journal entry to record this transaction would include a debit to Cash of $35,000, a debit to Factoring Fee Expense of $700 and credit to Accounts Receivable of $35,700.

Accepted Answer

A) True 
 B)False

Question 15

A company reports the following results in its financial statements:
$$\begin{array} { | l | r | r | r | } 
\hline & \text { Year 3 } & \text { Year } 2 & \text { Year 1 } \
\hline \text { Net sales } & \$ 2,500,000 & \$ 2,050,000 & \$ 1,900,000 \
\hline \text { Accounts receivable, Ending Balance } & 175,000 & 167,000 & 165,000 \
\hline
\end{array}$$ 
Calculate this company's accounts receivable turnover for Year 2 and Year 3. Compare these two results and give a possible explanation for any significant change.

Accepted Answer

Year 2 accounts rece

Question 16

Sellers generally prefer to receive notes receivable rather than accounts receivable when the credit period is long and the receivable is for a large amount.

Accepted Answer

A) True 
 B)False

Question 17

Explain the options a company has when converting its receivables to cash.

Accepted Answer

A company's receivables are normally con

Question 18

Dell reported net sales of $8,739 million and average accounts receivable of $864 million. Its accounts receivable turnover is:

Accepted Answer

A)  0.90 
B)  10.1 
C)  36.1 
D)  50.0 
E)  3,686 
A)  0.90 
B)  10.1 
C)  36.1 
D)  50.0 
E)  3,686

Question 19

A company uses the aging of accounts receivable method to estimate its bad debts expense. On December 31 of the current year an aging analysis of accounts receivable revealed the following:
 
Required:
a. Calculate the amount of the Allowance for Doubtful Accounts that should be reported on the current year-end balance sheet
b. Calculate the amount of the Bad Debts Expense that should be reported on the current year's income statement, assuming that the balance of the Allowance for Doubtful Accounts on January 1 of the current year was $44,000 and that accounts receivable written off during the current year totaled $49,200
c. Prepare the adjusting journal entry to record bad debts expense on December 31 of the current year
d. Show how Accounts Receivable will appear on the current year-end balance sheet as of December 31

Accepted Answer

The answer of A company uses the aging of accounts...

Question 20

The following information is from the annual financial statements of Nancy Company.
$\begin{array}{lrrr}&2010&2009&2008\
\text { Net Sales } & \$ 307,000 & \$ 238,000 & \$ 285,000 \
\text { Accounts Receivable, net (year-end) } & 47,900 & 45,700 & 42,400
\end{array}$
What is the accounts receivable turnover ratio for 2010?

Accepted Answer

A)  6.41 
B)  4.97 
C)  6.72 
D)  5.40 
E)  6.56 
A)  6.41 
B)  4.97 
C)  6.72 
D)  5.40 
E)  6.56

Exam 7: Accounts and Notes Receivable

During a given year, a company had net sales of $500,000 and average accounts receivable of $80,000. Its accounts receivable turnover is equal to 6.25.

A supplementary record created to maintain a separate account for each customer is called the ________________________.

The amount of bad debt expense can be estimated by:

A promissory note is a written promise to pay a specified amount of money either on demand or at a definite future date.

The advantage of the allowance method of accounting for uncollectible accounts is that it identifies the specific customers who do not pay their bills.

The following information is from the annual financial statements of Duke Company. 2011 2010 2009 Net Sales \ 385,000 \ 308,000 \ 255,000 Accounts Receivable, net (year-end) 57,500 54,000 44,700 Calculate the accounts receivable turnover ratio for 2010 and 2011.

ABC Co. sold $80,000 of accounts receivable to First Bank and incurred a 2% factoring fee. Prepare the journal entry for ABC Co. to record the sale.

Converting receivables to cash before they are due is usually done by either (1) _______________________ or (2)________________________________.

Companies can report a credit card expense as a discount deducted from sales or as a selling expense.

The matching principle requires:

The person to whom a note is payable to is known as the ______________.

A 90-day note issued on April 20 has a maturity date of:

The interest accrued on $3,600 at 7% for 60 days is:

A company factored $35,000 of its accounts receivable and was charged a 2% factoring fee. The journal entry to record this transaction would include a debit to Cash of $35,000, a debit to Factoring Fee Expense of $700 and credit to Accounts Receivable of $35,700.

Sellers generally prefer to receive notes receivable rather than accounts receivable when the credit period is long and the receivable is for a large amount.

Explain the options a company has when converting its receivables to cash.

Dell reported net sales of $8,739 million and average accounts receivable of $864 million. Its accounts receivable turnover is:

The following information is from the annual financial statements of Nancy Company. 2010 2009 2008 Net Sales \ 307,000 \ 238,000 \ 285,000 Accounts Receivable, net (year-end) 47,900 45,700 42,400 What is the accounts receivable turnover ratio for 2010?

Introducing Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash and Internal Controls

Long-Term Assets

Current Liabilities

Long-Term Liabilities

Corporate Reporting and Analysis

Reporting and Analyzing Cash Flows

Analyzing Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Performance Reporting

Master Budgets and Performance Planning

Flexible Budgets and Standard Costing

Decentralization and Performance Evaluation

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Investments and International Operations

Accounting for Partnerships

Appendix : Accounting With Special Journals

Filters

Converting receivables to cash before they are due is usually done by either (1) _ or (2)__________.