Question 1

Both accounts receivable and notes receivable represent claims that are expected to be collected in cash.

Accepted Answer

A) True 
 B)False  True

Question 2

Which of the following is not true regarding promissory notes?

Accepted Answer

A)  Promissory notes are not shown at net realizable value on the statement of financial position.
B)  Promissory notes are usually interest-bearing.
C)  Promissory notes give a stronger legal claim to the holder than accounts receivable.
D)  Promissory notes are frequently accepted from customers who need to extend the payment of an outstanding account receivable. A

Question 3

If a company such as Sears sponsors its own credit card, when customers use their Sears card the sale is recorded as a cash sale.

Accepted Answer

A) True 
 B)False  False

Question 4

The net amount expected to be received in cash from receivables is termed the

Accepted Answer

A)  net realizable value.
B)  fair value.
C)  gross cash value.
D)  cash-equivalent value.

Question 5

Bad Debts Expense is considered

Accepted Answer

A)  an avoidable cost in doing business on a credit basis.
B)  an internal control weakness.
C)  a necessary risk of doing business on a credit basis.
D)  avoidable unless there is a recession.

Question 6

Interest revenue is never earned on accounts receivable.

Accepted Answer

A) True 
 B)False

Question 7

The Allowance for Doubtful Accounts is a liability account.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following receivables would not be classified as an "other receivable"?

Accepted Answer

A)  advance to an employee
B)  refundable income tax
C)  notes receivable
D)  interest receivable

Question 9

Under the allowance method for uncollectible accounts, when a year-end adjustment is made for estimated uncollectible accounts,

Accepted Answer

A)  total assets decrease.
B)  total assets are unchanged.
C)  net profit is unchanged.
D)  liabilities decrease.

Question 10

When collecting a previously written-off account

Accepted Answer

A)  Cash is debited and Bad Debts Expense is credited.
B)  Accounts Receivable is debited and Sales is credited.
C)  Accounts Receivable is debited and credited.
D)  Accounts Receivable is not affected.

Question 11

Allowance for Doubtful Accounts is a contra account that is deducted from Accounts Receivable on the statement of financial position.

Accepted Answer

A) True 
 B)False

Question 12

The receivable that is usually evidenced by a formal instrument of credit is a(n)

Accepted Answer

A)  trade receivable.
B)  note receivable.
C)  account receivable
D)  income tax receivable.

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

A receivable is recognized regardless of collection risk.

Accepted Answer

A) True 
 B)False

Question 15

Both the gross amount of receivables and the Allowance for Doubtful Accounts must be reported either in the statement of financial position or notes to the financial statements.

Accepted Answer

A) True 
 B)False

Question 16

If the amount of bad debts expense is understated at year end, then

Accepted Answer

A)  profit will be understated.
B)  shareholders' equity will be understated.
C)  Allowance for Doubtful Accounts will be overstated.
D)  net Accounts Receivable will be overstated.

Question 17

Under the allowance method for uncollectible accounts, the entry to write off an uncollectible account only involves statement of financial position accounts.

Accepted Answer

A) True 
 B)False

Question 18

LeBlanc Corp.signed a document promising to pay First Bank a specified amount of money at a definite future date at a certain interest rate.This transaction is reported as a(n)

Accepted Answer

A)  note receivable on LeBlanc's books and a note payable on First Bank's books.
B)  note payable on LeBlanc's books and a note receivable on First Bank's books.
C)  account receivable on LeBlanc's books and an account payable on First Bank's books.
D)  account payable on LeBlanc's books and an account receivable on First Bank's books.

Question 19

The maker of a promissory note is the party to whom the payment is to be made.

Accepted Answer

A) True 
 B)False

Question 20

If an account is collected after having been previously written off

Accepted Answer

A)  the Allowance account should be debited.
B)  only the control account needs to be credited.
C)  both income statement and statement of financial position accounts will be affected.
D)  there will be both a debit and a credit to Accounts Receivable.

Exam 8: Reporting and Analyzing Receivables

Both accounts receivable and notes receivable represent claims that are expected to be collected in cash.

Which of the following is not true regarding promissory notes?

If a company such as Sears sponsors its own credit card, when customers use their Sears card the sale is recorded as a cash sale.

The net amount expected to be received in cash from receivables is termed the

Bad Debts Expense is considered

Interest revenue is never earned on accounts receivable.

The Allowance for Doubtful Accounts is a liability account.

Which of the following receivables would not be classified as an "other receivable"?

Under the allowance method for uncollectible accounts, when a year-end adjustment is made for estimated uncollectible accounts,

When collecting a previously written-off account

Allowance for Doubtful Accounts is a contra account that is deducted from Accounts Receivable on the statement of financial position.

The receivable that is usually evidenced by a formal instrument of credit is a(n)

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

A receivable is recognized regardless of collection risk.

Both the gross amount of receivables and the Allowance for Doubtful Accounts must be reported either in the statement of financial position or notes to the financial statements.

If the amount of bad debts expense is understated at year end, then

Under the allowance method for uncollectible accounts, the entry to write off an uncollectible account only involves statement of financial position accounts.

LeBlanc Corp.signed a document promising to pay First Bank a specified amount of money at a definite future date at a certain interest rate.This transaction is reported as a(n)

The maker of a promissory note is the party to whom the payment is to be made.

If an account is collected after having been previously written off