Question 1

In reviewing the accounts receivable,the net receivables value is $17,000 before writing off a $1,500 account.What is the net receivables value after the write-off?

Accepted Answer

A) $17,000. 
B) $1,500. 
C) $18,500. 
D) $15,500.

Question 2

Bad Debt Expense is classified as

Accepted Answer

A) part of cost of goods sold on the Income Statement. 
B) a selling expense on the Income Statement. 
C) a non-operating expense on the Income Statement. 
D) a deduction from Accounts Receivable on the Balance Sheet.

Question 3

Companies A and B both report net income growth of 12% per year.Company A has a receivables turnover ratio of 5.6,which is smaller than its previous year.Company B has a receivables turnover ratio of 11.3,which is higher than its previous year.All other things being equal:

Accepted Answer

A) Company A appears to be better managed. 
B) Company A will have the lower days-to-collect measure. 
C) Company B appears to be better managed. 
D) Company B's days-to-collect measure is rising.

Question 4

A company reported a receivables turnover ratio of 8.0.Cost of goods sold was $350,000 and net sales were $480,000.The average accounts receivable must have been

Accepted Answer

A) $45,000 
B) $120,000 
C) $60,000 
D) $90,000

Question 5

Use the information above to answer the following question.Assuming the entry to record bad debt expense was $8,250,what is the balance in the allowance for doubtful accounts after this entry was made?

Accepted Answer

A) $6,850 
B) $8,250 
C) $9,650 
D) $1,150

Question 6

On average,5% of total accounts receivable has been uncollectible in the past.At the end of the year,the balance of accounts receivable is $100,000 and the allowance for doubtful accounts has an unadjusted credit balance of $500.Credit sales during the year were $150,000.Using the aging of accounts receivable method,the estimated bad debt expense would be:

Accepted Answer

A) $4,500. 
B) $5,000. 
C) $7,000. 
D) $7,500.

Question 7

The Grass is Greener Corporation uses the allowance method and learns that a customer who owes $350 has gone bankrupt and payment will not be made.The Grass is Greener Corporation should:

Accepted Answer

A) debit Bad Debt Expense and credit Accounts Receivable for $350. 
B) debit the Allowance for Doubtful Accounts and credit Accounts Receivable for $350. 
C) debit Bad Debt Expense and credit Cash for $350. 
D) debit Accounts Receivable and credit Bad Debt Expense for $350.

Question 8

The accounts receivable account for each customer is called a subsidiary account.

Accepted Answer

A) True 
 B)False

Question 9

Use the information above to answer the following question.Assuming the company uses the aging of receivables method and estimates the uncollectible amount at 5% of accounts receivable,what is the required adjusting entry to record bad debt expense for the year?

Accepted Answer

A) Option A 
B) Option B 
C) Option C 
D) Option D

Question 10

A high accounts receivable turnover ratio indicates:

Accepted Answer

A) the company's sales are increasing. 
B) a large proportion of the company's sales are on credit. 
C) customers are making payments very quickly. 
D) the company is taking longer to sell inventory.

Question 11

The direct write-off method:

Accepted Answer

A) results in better matching of costs with revenues than the allowance method. 
B) is an acceptable method under generally accepted accounting principles (GAAP). 
C) requires that losses from bad debts be recorded in the period in which sales are made. 
D) does not report accounts receivable on the balance sheet at their net realizable value.

Question 12

Geisel,Inc had credit sales for 2014 of $510,000.and sales returns of $10,000.Credit sales for 2013 were $610,000 and sales returns were $10,000.Accounts receivable on December 31,2014 were $148,000.The allowance for doubtful accounts at December 31,2014 before adjustment had a debit balance of $1,000.Bad debt expense of $6,000 was recorded for 2014.
a.Calculate the accounts receivable turnover ratio and the days to collect for 2013 and 2014 (round each calculation to one decimal place).
The net receivables balance reported on the company's 12/31/12 financial statements was $120,000.The net receivables balance reported on the 12/31/13 financial statements was $130,000.
b.Discuss the implications of the receivables turnover ratio and days to collect as calculated in part (a).Discuss possible reasons for any changes in the values for these ratios,and implications for the provision for uncollectible accounts.

Accepted Answer

The answer of Geisel,Inc had credit sales for 2014 of...

Question 13

When the direct write-off method is used,the entry to write-off a specific account would

Accepted Answer

A) decrease expenses and increase net income. 
B) have no effect on net income. 
C) increase the accounts receivable and increase net income. 
D) decrease the accounts receivable and decrease net income.

Question 14

Which of the following is true?

Accepted Answer

A) Accounts receivable decline as companies sell on credit. 
B) Accounts receivable increase as companies receive payment. 
C) Receivables turnover refers to how fast receivables are collected. 
D) Days to Collect will increase as the receivables turnover increases.

Question 15

Purrfect Pets,Inc. ,had the following transactions.Prepare the required journal entries.
a.October 1: Sold $10,000 of merchandise on account,1/10,n/30 to Fabulous Felines.
b.November 1: Accepted a $10,000,90-day,10% promissory note from Fabulous Felines in exchange for its account receivable.
c.December 31: Accrued interest on the note.Round to the nearest whole dollar amount.
d.January 31: Received payment in full of principal and interest on the note from Fabulous Felines.

Accepted Answer

The answer of Purrfect Pets,Inc. ,had the following transactions.Prepare the...

Question 16

Which of the following statements is true concerning the allowance for doubtful accounts?

Accepted Answer

A) The allowance for doubtful accounts is a contra-revenue account. 
B) The allowance for doubtful accounts has a normal debit balance. 
C) The allowance for doubtful accounts is not used in the direct write-off method. 
D) The allowance for doubtful accounts is reported on the Income Statement.

Question 17

The Grass is Greener Corporation provides $6,000 worth of lawn care on account during the month.Experience suggests that about 2% of net credit sales will not be collected.According to the revenue recognition principle and the matching principle,the company should:

Accepted Answer

A) record an estimate of bad debt expense in the same period as the lawn care is provided. 
B) not report the sales revenue until it collects payment. 
C) increase the value of its liabilities with an adjustment. 
D) wait until the accounts are determined to be uncollectible before making an entry for bad debt expense.

Question 18

When the allowance method is used,the entry to record the write-off of specific uncollectible accounts would decrease

Accepted Answer

A) the allowance for doubtful accounts. 
B) net income. 
C) the net realizable value of accounts receivable. 
D) bad debt expense.

Question 19

The percentage of credit sales method is simpler but less accurate than the aging method for calculating bad debts.

Accepted Answer

A) True 
 B)False

Question 20

Allowance for doubtful accounts is a temporary account which is closed to retained earnings at the end of the accounting period.

Accepted Answer

A) True 
 B)False

Exam 8: Receivables, Bad Debt Expense, and Interest Revenue

In reviewing the accounts receivable,the net receivables value is $17,000 before writing off a $1,500 account.What is the net receivables value after the write-off?

Bad Debt Expense is classified as

Companies A and B both report net income growth of 12% per year.Company A has a receivables turnover ratio of 5.6,which is smaller than its previous year.Company B has a receivables turnover ratio of 11.3,which is higher than its previous year.All other things being equal:

A company reported a receivables turnover ratio of 8.0.Cost of goods sold was $350,000 and net sales were $480,000.The average accounts receivable must have been

Use the information above to answer the following question.Assuming the entry to record bad debt expense was $8,250,what is the balance in the allowance for doubtful accounts after this entry was made?

The Grass is Greener Corporation uses the allowance method and learns that a customer who owes $350 has gone bankrupt and payment will not be made.The Grass is Greener Corporation should:

The accounts receivable account for each customer is called a subsidiary account.

Use the information above to answer the following question.Assuming the company uses the aging of receivables method and estimates the uncollectible amount at 5% of accounts receivable,what is the required adjusting entry to record bad debt expense for the year?

A high accounts receivable turnover ratio indicates:

The direct write-off method:

When the direct write-off method is used,the entry to write-off a specific account would

Which of the following is true?

Which of the following statements is true concerning the allowance for doubtful accounts?

The Grass is Greener Corporation provides $6,000 worth of lawn care on account during the month.Experience suggests that about 2% of net credit sales will not be collected.According to the revenue recognition principle and the matching principle,the company should:

When the allowance method is used,the entry to record the write-off of specific uncollectible accounts would decrease

The percentage of credit sales method is simpler but less accurate than the aging method for calculating bad debts.

Allowance for doubtful accounts is a temporary account which is closed to retained earnings at the end of the accounting period.