Question 1

When posting a dishonored note to a customer's account, an explanation is included so as not to misinterpret the debit as a sale on account.

Accepted Answer

A) True 
 B)False

Question 2

Woods Co. uses a perpetual inventory system, and accepts the World Express credit card from its customers. World Express charges a 3.5% service fee and all credit card receipts deposited are credited to the company account on the day of deposit. On February 28, Woods sold $24,000 worth of merchandise to customers (that had cost $14,400)using the World Express charge card. Prepare the journal entries to record February 28 sales.

Accepted Answer

The answer of Woods Co. uses a perpetual inventory system,...

Question 3

Match between columns
                        Premises: Amounts owed by customers from credit sales for which payment is required in periodic payments over an extended period of time.
A measure of both the quality and liquidity of accounts receivable that indicates how often, on average, receivables are received and collected during the period.
A method of accounting for bad debts that records the loss from an uncollectible account receivable immediately upon determining it is uncollectible.
Selling all or a portion of accounts receivable to a finance company or bank.
A method of accounting for bad debts that matches the estimated loss from uncollectible accounts receivable against the sales they helped to produce.
The accounting principle that requires financial statements (including the notes)to report all relevant information about operations and financial condition.
Committing accounts receivable as security for a loan.
The accounting constraint that states that an amount can be ignored if its effect on the financial statements is unimportant to its users.
The amount that the signer of a note agrees to pay back when the note matures, not including interest.
Refers to a note maker's inability or refusal to pay a note at maturity.

Accepted Answer

The Answer of Installment accounts receivable and Full disclosure principle is...

Question 4

Craigmont uses the allowance method to account for uncollectible accounts. Its year-end unadjusted trial balance shows Accounts Receivable of $104,500, allowance for doubtful accounts of $665 (credit) and sales of $925,000. If uncollectible accounts are estimated to be 0.5% of sales, what is the amount of the bad debts expense adjusting entry?

Accepted Answer

A)  $5,290
B)  $4,625
C)  $4,750
D)  $4,825
E)  $3,960F) A) and D)
G) B) and E)

Question 5

The aging of accounts receivable involves classifying each account receivable by how long it is past its due date and estimating the percent of each uncollectible class.

Accepted Answer

A) True 
 B)False

Question 6

Installment Accounts Receivable are classified as non-current assets if the installment period is more than one year, even if the seller regularly offers customers such terms.

Accepted Answer

A) True 
 B)False  False

Question 7

The period of a note is the time from the note's (contract)date to its maturity date.

Accepted Answer

A) True 
 B)False  True

Question 8

On December 31 of the current year, the unadjusted trial balance of a company using the percent of receivables method to estimate bad debt included the following: Accounts Receivable, debit balance of $95,250; Allowance for Doubtful Accounts, credit balance of $921. What amount should be debited to Bad Debts Expense, assuming 6% of outstanding accounts receivable at the end of the current year are estimated to be uncollectible?

Accepted Answer

A)  $6,636.
B)  $5,715.
C)  $5,660.
D)  $4,794.
E)  $5,770.F) A) and B)
G) D) and E)

Question 9

On February 1, a customer's account balance of $2,300 was deemed to be uncollectible. What entry should be recorded on February 1 to record the write-off assuming the company uses the allowance method?

Accepted Answer

A)  Debit Accounts Receivable $250; credit Allowance for Doubtful Accounts $2,300.
B)  Debit Bad Debts Expense $2,300; credit Accounts Receivable $2,300.
C)  Debit Bad Debts Expense $2,300; credit Allowance for Doubtful Accounts $2,300.
D)  Debit Allowance for Doubtful Accounts $2,300; credit Bad Debts Expense $2,300.
E)  Debit Allowance for Doubtful Accounts $2,300; credit Accounts Receivable $2,300.F) A) and B)
G) None of the above

Question 10

Uniform Supply accepted a $4,800, 90-day, 10% note from Tracy Janitorial on October 17. What entry should Uniform Supply make on January 15 of the next year when the note is paid? (Assume reversing entries are not made.) (Use 360 days a year.)

Accepted Answer

A)  Debit Cash $4,920; credit Interest Revenue $100; credit Interest Receivable $20; credit Notes Receivable $4,800.
B)  Debit Notes Receivable $4,800; debit Interest Receivable $120; credit Sales $4,920.
C)  Debit Cash $4,920; credit Notes Receivable $4,920.
D)  Debit Cash $4,920; credit Interest Revenue $20; credit Interest Receivable $100; credit Notes Receivable $4,800.
E)  Debit Cash $4,920; credit Interest Revenue $120; credit Notes Receivable $4,800.F) C) and E)
G) A) and E)

Question 11

Companies follow both the expense recognition (matching)principle and the materiality constraint when applying the direct write-off method.

Accepted Answer

A) True 
 B)False

Question 12

A company borrowed $10,000 by signing a 180-day promissory note at 9%. The total interest due on the maturity date is: (Use 360 days a year.)

Accepted Answer

A)  $450
B)  $1,800
C)  $900
D)  $300
E)  $75F) A) and E)
G) C) and D)

Question 13

If a customer owes interest on accounts receivable, Interest Receivable is debited and Accounts Receivable is credited.

Accepted Answer

A) True 
 B)False

Question 14

Companies can report credit card expense as a reduction in net sales or as a selling expense.

Accepted Answer

A) True 
 B)False

Question 15

Factoring receivables is beneficial to a seller for all of the following reasons except:

Accepted Answer

A)  There are no fees for factoring.
B)  Passes ownership of the receivables to the factor.
C)  Allows firms to receive cash earlier.
D)  May transfer the risk of bad debts to the factor.
E)  Seller avoids the cost of billing and accounting for receivables.F) A) and D)
G) D) and E)

Question 16

Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. The amount of interest that Jasper will collect on the loan is: (Use 360 days a year.)

Accepted Answer

A)  $437.50.
B)  $875.00.
C)  $145.83.
D)  $19.44.
E)  $1,750.F) B) and D)
G) C) and E)

Question 17

Sellers allow customers to use credit cards for all of the following reasons except:

Accepted Answer

A)  To speed up receipt of cash from the credit sale.
B)  To lessen the risk of extending credit to customers who cannot pay.
C)  To avoid having to evaluate a customer's credit standing for each sale.
D)  To be able to charge more due to fees and interest.
E)  To increase total sales volume.F) A) and D)
G) A) and B)

Question 18

A promissory note:

Accepted Answer

A)  Is another name for an installment receivable.
B)  Is a short-term investment for the maker.
C)  Is a written promise to pay a specified amount of money at a certain date.
D)  Is a liability to the payee.
E)  Cannot be used in payment of an account receivable.F) A) and D)
G) C) and D)

Question 19

On October 12 of the current year, a company determined that a customer's account receivable was uncollectible and that the account should be written off. Assuming the direct write-off method is used to account for bad debts, what effect will this write-off have on the company's net income and total assets?

Accepted Answer

A)  Decrease in net income; decrease in total assets.
B)  Decrease in net income; no effect on total assets.
C)  Increase in net income; no effect on total assets.
D)  No effect on net income; no effect on total assets.
E)  No effect on net income; decrease in total assets.F) B) and D)
G) A) and E) A

Question 20

Uniform Supply accepted a $4,800, 90-day, 10% note from Tracy Janitorial on October 17. If the note is dishonored, but Uniform Supply intends to continue collection efforts, what entry should Uniform Supply make on January 15 of the next year? (Assume no reversing entries are made.) (Use 360 days a year.)

Accepted Answer

A)  Debit Cash $4,920; credit Interest Revenue $100; credit Interest Receivable $20, credit Notes Receivable $4,800.
B)  Debit Notes Receivable $4,800; debit Interest Receivable $120; credit Sales $4,920.
C)  Debit Accounts Receivable $4,920; credit Interest Revenue $20; credit Interest Receivable $100, credit Notes Receivable $4,800.
D)  Debit Cash $4,920; credit Notes Receivable $4,920.
E)  Debit Cash $4,920; credit Interest Revenue $20; credit Interest Receivable $100, credit Notes Receivable $4,800.F) B) and C)
G) A) and D)

Exam 9: Accounting for Receivables

When posting a dishonored note to a customer's account, an explanation is included so as not to misinterpret the debit as a sale on account.

Correct Answer
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Correct Answer
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Match each of appropriate definitions with correct terms.

Correct Answer
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The aging of accounts receivable involves classifying each account receivable by how long it is past its due date and estimating the percent of each uncollectible class.

Correct Answer
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Installment Accounts Receivable are classified as non-current assets if the installment period is more than one year, even if the seller regularly offers customers such terms.

Correct Answer
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False

The period of a note is the time from the note's (contract)date to its maturity date.

Correct Answer
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True

Correct Answer
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On February 1, a customer's account balance of $2,300 was deemed to be uncollectible. What entry should be recorded on February 1 to record the write-off assuming the company uses the allowance method?

Correct Answer
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Uniform Supply accepted a $4,800, 90-day, 10% note from Tracy Janitorial on October 17. What entry should Uniform Supply make on January 15 of the next year when the note is paid? (Assume reversing entries are not made.) (Use 360 days a year.)

Correct Answer
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Companies follow both the expense recognition (matching)principle and the materiality constraint when applying the direct write-off method.

Correct Answer
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A company borrowed $10,000 by signing a 180-day promissory note at 9%. The total interest due on the maturity date is: (Use 360 days a year.)

Correct Answer
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If a customer owes interest on accounts receivable, Interest Receivable is debited and Accounts Receivable is credited.

Correct Answer
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Companies can report credit card expense as a reduction in net sales or as a selling expense.

Correct Answer
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Factoring receivables is beneficial to a seller for all of the following reasons except:

Correct Answer
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Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. The amount of interest that Jasper will collect on the loan is: (Use 360 days a year.)

Correct Answer
verified

Sellers allow customers to use credit cards for all of the following reasons except:

Correct Answer
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A promissory note:

Correct Answer
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Correct Answer
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A

Correct Answer
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Exam 9: Accounting for Receivables

When posting a dishonored note to a customer's account, an explanation is included so as not to misinterpret the debit as a sale on account.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Match each of appropriate definitions with correct terms.

Correct AnswerverifiedShow Answer

The aging of accounts receivable involves classifying each account receivable by how long it is past its due date and estimating the percent of each uncollectible class.

Correct AnswerverifiedShow Answer

Installment Accounts Receivable are classified as non-current assets if the installment period is more than one year, even if the seller regularly offers customers such terms.

Correct AnswerverifiedFalse

The period of a note is the time from the note's (contract)date to its maturity date.

Correct AnswerverifiedTrue

Correct AnswerverifiedShow Answer

On February 1, a customer's account balance of $2,300 was deemed to be uncollectible. What entry should be recorded on February 1 to record the write-off assuming the company uses the allowance method?

Correct AnswerverifiedShow Answer

Uniform Supply accepted a $4,800, 90-day, 10% note from Tracy Janitorial on October 17. What entry should Uniform Supply make on January 15 of the next year when the note is paid? (Assume reversing entries are not made.) (Use 360 days a year.)

Correct AnswerverifiedShow Answer

Companies follow both the expense recognition (matching)principle and the materiality constraint when applying the direct write-off method.

Correct AnswerverifiedShow Answer

A company borrowed $10,000 by signing a 180-day promissory note at 9%. The total interest due on the maturity date is: (Use 360 days a year.)

Correct AnswerverifiedShow Answer

If a customer owes interest on accounts receivable, Interest Receivable is debited and Accounts Receivable is credited.

Correct AnswerverifiedShow Answer

Companies can report credit card expense as a reduction in net sales or as a selling expense.

Correct AnswerverifiedShow Answer

Factoring receivables is beneficial to a seller for all of the following reasons except:

Correct AnswerverifiedShow Answer

Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. The amount of interest that Jasper will collect on the loan is: (Use 360 days a year.)

Correct AnswerverifiedShow Answer

Sellers allow customers to use credit cards for all of the following reasons except:

Correct AnswerverifiedShow Answer

A promissory note:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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False

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True

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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A

Correct Answer
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