Question 1

A company factored $45,000 of its accounts receivable and was charged a 4% factoring fee.The journal entry to record this transaction would include a:

Accepted Answer

A)  Debit to Cash of $45,000,a debit to Factoring Fee Expense of $1,800,and a credit to Accounts Receivable of $46,800.
B)  Debit to Cash of $45,000 and a credit to Accounts Receivable of $45,000.
C)  Debit to Cash of $43,200,a debit to Factoring Fee Expense of $1,800,and a credit to Accounts Receivable of $45,000.
D)  Debit to Cash of $46,800 and a credit to Accounts Receivable of $46,800.
E)  Debit to Cash of $45,000 and a credit to Notes Payable of $45,000.F) C) and D)
G) D) and E)

Question 2

________ is the charge for using borrowed money until its due date.

Accepted Answer

The answer of ________ is the charge for using borrowed...

Question 3

A company that uses the percent of sales to account for its bad debts had credit sales of $740,000 in Year 1,including a $720 sale to Marshall Fresh.On December 31,Year 1,the company estimated its bad debts at 1.5% of its credit sales.On June 1,Year 2,the company wrote off,as uncollectible,the $720 account of Marshall Fresh.On December 21,Year 2,Marshall Fresh unexpectedly paid his account in full.Prepare the necessary journal entries:
(a)On December 31,Year 1,to reflect the estimate of bad debts expense.
(b)On June 1,Year 2,to write off the bad debt.
(c)On December 21,Year 2,to record the unexpected collection.

Accepted Answer

The answer of A company that uses the percent of...

Question 4

Jax Recording Studio purchased $7,800 in electronic components from Music World.Jax signed a 60-day,8% promissory note for $7,800.Music World's journal entry to record the sales transaction is:

Accepted Answer

A)  Debit Accounts Receivable $7,800; credit Sales $7,800
B)  Debit Accounts Receivable $7,904; credit Sales $7,904
C)  Debit Notes Receivable $7,800; credit Sales $7,800
D)  Debit Notes Receivable $7,904; credit Sales $7,904
E)  Debit Notes Receivable $7,800; debit Interest Receivable $104; credit Sales $7,904F) All of the above
G) A) and E)

Question 5

A company using the percentage of sales method for estimating bad debts has sales of $350,000 and estimates that 1.0% of its sales are uncollectible.The unadjusted balance in Allowance for Doubtful Accounts is a $300 credit.The estimated amount of bad debts expense is $3,200

Accepted Answer

A) True 
 B)False

Question 6

The account receivable turnover measures:

Accepted Answer

A)  How long it takes to sell accounts receivable to a factor.
B)  How often,on average,receivables are received and collected during the period.
C)  The relation of cash sales to credit sales.
D)  How long it takes to sell merchandise inventory.
E)  All of the options are correct.F) A) and B)
G) A) and D)

Question 7

Which of the following is not true about the Allowance for Doubtful Accounts?

Accepted Answer

A)  It is a contra asset account.
B)  It is used instead of reducing accounts receivable directly.
C)  It is debited when uncollectible accounts are written off.
D)  It is a liability account.
E)  It is credited when bad debts expense is estimated and recorded.F) A) and E)
G) None of the above

Question 8

The allowance method that assumes a given percent of a company's credit sales for the period is uncollectible is:

Accepted Answer

A)  The percent of sales method.
B)  The percent of accounts receivable method.
C)  The aging of accounts receivable method.
D)  Direct write-off method.
E)  Factoring method.F) B) and E)
G) None of the above

Question 9

The maturity date of a note receivable:

Accepted Answer

A)  Is the day of the credit sale.
B)  Is the day the note was signed.
C)  Is the day the note is due to be repaid.
D)  Is the date of the first payment.
E)  Is the last day of the month.F) B) and E)
G) B) and D)

Question 10

When using the allowance method of accounting for uncollectible accounts,the entry to record the estimated bad debts expense is a debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts.

Accepted Answer

A) True 
 B)False

Question 11

A company reports the following results in its financial statements:
Calculate the company 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 receivable turnover:
$2...

Question 12

Which of the following is an accounting method that (1) estimates and reports bad debts expense from credit sales during the period the sales are recorded,and (2) reports accounts receivable at the estimated amount of cash to be collected?

Accepted Answer

A)  Allowance method of accounting for bad debts.
B)  Aging of notes receivable method.
C)  Adjustment method for uncollectible debts.
D)  Direct write-off method of accounting for bad debts.
E)  Cash basis method of accounting for bad debts.F) B) and C)
G) B) 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

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

Accepted Answer

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

Question 15

Duerr Company makes a $60,000,60-day,12% cash loan to Ryan Co.The note and interest to be collected at maturity is:  (Use 360 days a year.) \bold{	ext{(Use 360 days a year.) }}(Use 360 days a year.)

Accepted Answer

A)  $60,000.
B)  $1,200.
C)  $61,200.
D)  $58,800.
E)  $67,200. F) C) and D)
G) C) and E)

Question 16

Kenai Company sold $600 of merchandise to a customer who used a National Bank credit card.National Bank deducts a 3% service charge for sales on its credit cards.Kenai electronically remits the credit card sales receipts to the credit card company and receives payment immediately.The journal entry to record the collection from the credit card company would be:

Accepted Answer

A)  Debit Cash of $618 and credit Accounts Receivable-National $618.
B)  Debit Cash of $618; credit Credit Card Expense $18 and credit Sales $600.
C)  Debit Accounts Receivable-National $582; debit Credit Card Expense $18 and credit Sales $600.
D)  Debit Cash $582; debit Credit Card Expense $18 and credit Sales $600.
E)  Debit Cash $582 and credit Sales $582.F) None of the above
G) D) and E)

Question 17

Felton Corporation purchased $4,000 in merchandise from Marita Co.Felton signed a 60-day,10%,$4,000 promissory note.Marita should record the sale with a journal entry debiting ________ for $ ________ and crediting ________ for $ ________.

Accepted Answer

notes receivable; $4...

Question 18

Notes receivable are classified as current liabilities regardless of the time to maturity.

Accepted Answer

A) True 
 B)False

Question 19

A Company had net sales of $23,000,and its average account receivables were $5,700.Its accounts receivable turnover is 0.24.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 7: Accounting for Receivables

Correct Answer
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________ is the charge for using borrowed money until its due date.

Correct Answer
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Which of the following is not true about the Allowance for Doubtful Accounts?

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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Duerr Company makes a $60,000,60-day,12% cash loan to Ryan Co.The note and interest to be collected at maturity is: $\bold{\text{(Use 360 days a year.) }}$

Correct Answer
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The account receivable turnover measures:

Correct Answer
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When using the allowance method of accounting for uncollectible accounts,the entry to record the estimated bad debts expense is a debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts.

Correct Answer
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Correct Answer
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The maturity date of a note receivable:

Correct Answer
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Felton Corporation purchased $4,000 in merchandise from Marita Co.Felton signed a 60-day,10%,$4,000 promissory note.Marita should record the sale with a journal entry debiting for $ and crediting for $ .

Correct Answer
verified
notes receivable; $4...
View Answer

The allowance method that assumes a given percent of a company's credit sales for the period is uncollectible is:

Correct Answer
verified

A company using the percentage of sales method for estimating bad debts has sales of $350,000 and estimates that 1.0% of its sales are uncollectible.The unadjusted balance in Allowance for Doubtful Accounts is a $300 credit.The estimated amount of bad debts expense is $3,200

Correct Answer
verified

A company reports the following results in its financial statements: Calculate the company accounts receivable turnover for Year 2 and Year 3.Compare these two results and give a possible explanation for any significant change.

Correct Answer
verified
Year 2: Accounts receivable turnover:
$2...
View Answer

Jax Recording Studio purchased $7,800 in electronic components from Music World.Jax signed a 60-day,8% promissory note for $7,800.Music World's journal entry to record the sales transaction is:

Correct Answer
verified

Notes receivable are classified as current liabilities regardless of the time to maturity.

Correct Answer
verified

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

Correct Answer
verified

A company factored $45,000 of its accounts receivable and was charged a 4% factoring fee.The journal entry to record this transaction would include a:

Correct Answer
verified

Which of the following is an accounting method that (1) estimates and reports bad debts expense from credit sales during the period the sales are recorded,and (2) reports accounts receivable at the estimated amount of cash to be collected?

Correct Answer
verified

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

Correct Answer
verified

A Company had net sales of $23,000,and its average account receivables were $5,700.Its accounts receivable turnover is 0.24.

Correct Answer
verified

Exam 7: Accounting for Receivables

Correct AnswerverifiedShow Answer

________ is the charge for using borrowed money until its due date.

Correct AnswerverifiedShow Answer

Which of the following is not true about the Allowance for Doubtful Accounts?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Duerr Company makes a $60,000,60-day,12% cash loan to Ryan Co.The note and interest to be collected at maturity is: (Use 360 days a year.) \bold{\text{(Use 360 days a year.) }}(Use 360 days a year.)

Correct AnswerverifiedShow Answer

The account receivable turnover measures:

Correct AnswerverifiedShow Answer

When using the allowance method of accounting for uncollectible accounts,the entry to record the estimated bad debts expense is a debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The maturity date of a note receivable:

Correct AnswerverifiedShow Answer

Felton Corporation purchased $4,000 in merchandise from Marita Co.Felton signed a 60-day,10%,$4,000 promissory note.Marita should record the sale with a journal entry debiting ________ for $ ________ and crediting ________ for $ ________.

Correct Answerverifiednotes receivable; $4...View AnswerShow Answer

The allowance method that assumes a given percent of a company's credit sales for the period is uncollectible is:

Correct AnswerverifiedShow Answer

A company using the percentage of sales method for estimating bad debts has sales of $350,000 and estimates that 1.0% of its sales are uncollectible.The unadjusted balance in Allowance for Doubtful Accounts is a $300 credit.The estimated amount of bad debts expense is $3,200

Correct AnswerverifiedShow Answer

A company reports the following results in its financial statements: Calculate the company accounts receivable turnover for Year 2 and Year 3.Compare these two results and give a possible explanation for any significant change.

Correct AnswerverifiedYear 2: Accounts receivable turnover:$2...View AnswerShow Answer

Jax Recording Studio purchased $7,800 in electronic components from Music World.Jax signed a 60-day,8% promissory note for $7,800.Music World's journal entry to record the sales transaction is:

Correct AnswerverifiedShow Answer

Notes receivable are classified as current liabilities regardless of the time to maturity.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A company factored $45,000 of its accounts receivable and was charged a 4% factoring fee.The journal entry to record this transaction would include a:

Correct AnswerverifiedShow Answer

Which of the following is an accounting method that (1) estimates and reports bad debts expense from credit sales during the period the sales are recorded,and (2) reports accounts receivable at the estimated amount of cash to be collected?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A Company had net sales of $23,000,and its average account receivables were $5,700.Its accounts receivable turnover is 0.24.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Duerr Company makes a $60,000,60-day,12% cash loan to Ryan Co.The note and interest to be collected at maturity is: $\bold{\text{(Use 360 days a year.) }}$

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Felton Corporation purchased $4,000 in merchandise from Marita Co.Felton signed a 60-day,10%,$4,000 promissory note.Marita should record the sale with a journal entry debiting for $ and crediting for $ .

Correct Answer
verified
notes receivable; $4...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Year 2: Accounts receivable turnover:
$2...
View Answer

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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