Question 1

The direct write-off method of accounting for bad debts

Accepted Answer

A)   uses an allowance account.
B)   uses a contra asset account.
C)   does not require estimates of bad debt losses.
D)   is the preferred method under generally accepted accounting principles. C

Question 2

Under the allowance method, Bad Debt Expense is recorded

Accepted Answer

A)   when an individual account is written off.
B)   when the loss amount is known.
C)   for an amount that the company estimates it will not collect.
D)   several times during the accounting period. C

Question 3

An aging schedule is prepared only for old accounts receivables that have been past due for more than one year.

Accepted Answer

A) True 
 B)False  False

Question 4

Using the allowance method, the uncollectible accounts for the year are estimated to be $40,000. If the balance for the Allowance for Doubtful Accounts is a $9,000 credit before adjustment, what is the balance after adjustment?

Accepted Answer

A)   $9,000
B)   $31,000
C)   $40,000
D)   $49,000

Question 5

Finney had the following transactions during March 2012. 1. Finney sold and delivered $14,000 of merchandise to LJ Enterprises, terms 2/10, n30. 2. LJ Enterprises also ordered an additional $5,000 worth of goods on the last day of the month. 3. Finney lent $1,000 to its company president who promised to repay the loan on the 15^th day of the next month. 4. Finney sold old storage sheds to Alt Traders on 3/31. Alt Traders gave a $2,500 promissory note to Finney agreeing to pay for the sheds in 3 months. 5. Other current assets totaled $50,000. Finney received no cash arising from the above transactions during March. Based only on the above transactions, and ingnoring beginning balances, compute the percentage Accounts Receivable is of the total current assets as of month end.

Accepted Answer

The answer of Finney had the following transactions during March...

Question 6

The following information is related to December 31, 2013 balances.  During 2014 sales on account were $195,000 and collections on account were $115,000. Also, during 2014 the company wrote off $11,000 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that bad debts should be estimated at $72,000. The change in the cash realizable value from the balance at 12/31/13 to 12/31/14 was

Accepted Answer

A)   $68,000 increase.
B)   $80,000 increase.
C)   $57,000 increase.
D)   $69,000 increase.

Question 7

The following data exists for Mather Company.  Calculate the accounts receivable turnover and the average collection period for accounts receivable in days for 2014.

Accepted Answer

The answer of The following data exists for Mather Company....

Question 8

Which permits partial derecognition of receivables?

Accepted Answer

The answer of Which permits partial derecognition of receivables? ...

Question 9

When an account becomes uncollectible and must be written off

Accepted Answer

A)   Allowance for Doubtful Accounts should be credited.
B)   Accounts Receivable should be credited.
C)   Bad Debt Expense should be credited.
D)   Sales Revenue should be debited.

Question 10

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 11

Trade receivables can be an account receivable or a note receivable.

Accepted Answer

A) True 
 B)False

Question 12

If bad debt losses are significant, the direct write-off method is acceptable for financial reporting purposes.

Accepted Answer

A) True 
 B)False

Question 13

The accounts receivable turnover is computed by dividing

Accepted Answer

A)   total sales by average receivables.
B)   total sales by ending receivables.
C)   net credit sales by average receivables.
D)   net credit sales by ending receivables.

Question 14

What criteria are used to determine how to record a factoring transaction?

Accepted Answer

The answer of What criteria are used to determine how...

Question 15

When an account receivable that was previously written off is collected, it is first necessary to reverse the entry to reinstate the customer's account before recording the collection.

Accepted Answer

A) True 
 B)False

Question 16

Compute the maturity value as indicated for each of the following notes receivable.

Accepted Answer

The answer of Compute the maturity value as indicated for...

Question 17

The Garvey Sign Company uses the allowance method in accounting for uncollectible accounts. Past experience indicates that 6% of accounts receivable will eventually be uncollectible. Selected account balances at December 31, 2013, and December 31, 2014, appear below:  Instructions
(a) Record the following events in 2014.
Aug. 10 Determined that the account of Kurt West for $900 is uncollectible.
Sept. 12 Determined that the account of Jill Lynch for $3,000 is uncollectible.
Oct. 10 Received a check for $300 as payment on account from Kurt West, whose account had previously been written off as uncollectible.
(b) Prepare the adjusting journal entry to record the bad debt provision for the year ended December 31, 2014.
(c) What is the balance of Allowance for Doubtful Accounts at December 31, 2014?

Accepted Answer

The answer of The Garvey Sign Company uses the allowance...

Question 18

When the due date of a note is stated in months, the time factor in computing interest is the number of months divided by 360 days.

Accepted Answer

A) True 
 B)False

Question 19

The face value of a note refers to the amount

Accepted Answer

A)   that can be received if sold to a factor.
B)   borrowed plus interest received at maturity from the maker.
C)   at which the note receivable is recorded.
D)   remaining after a service charge has been deducted.

Question 20

A company regularly sells its receivables to a factor who assesses a 2% service charge on the amount of receivables purchased. Which of the following statements is true for the seller of the receivables?

Accepted Answer

A)   The loss section of the income statement will increase each time receivables are sold.
B)   The credit to Accounts Receivable is less than the debit to Cash when the accounts are sold.
C)   Selling expenses will increase each time accounts are sold.
D)   The other expenses section of the income statement will increase each time accounts are sold.

Exam 8: Reporting and Analyzing Receivables

The direct write-off method of accounting for bad debts

Under the allowance method, Bad Debt Expense is recorded

An aging schedule is prepared only for old accounts receivables that have been past due for more than one year.

Using the allowance method, the uncollectible accounts for the year are estimated to be $40,000. If the balance for the Allowance for Doubtful Accounts is a $9,000 credit before adjustment, what is the balance after adjustment?

The following data exists for Mather Company. Calculate the accounts receivable turnover and the average collection period for accounts receivable in days for 2014.

Which permits partial derecognition of receivables?

When an account becomes uncollectible and must be written off

Trade receivables can be an account receivable or a note receivable.

If bad debt losses are significant, the direct write-off method is acceptable for financial reporting purposes.

The accounts receivable turnover is computed by dividing

What criteria are used to determine how to record a factoring transaction?

When an account receivable that was previously written off is collected, it is first necessary to reverse the entry to reinstate the customer's account before recording the collection.

Compute the maturity value as indicated for each of the following notes receivable.

When the due date of a note is stated in months, the time factor in computing interest is the number of months divided by 360 days.

The face value of a note refers to the amount

A company regularly sells its receivables to a factor who assesses a 2% service charge on the amount of receivables purchased. Which of the following statements is true for the seller of the receivables?