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Exam 6: Reporting and Interpreting Sales Revenue,receivables,and Cash

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Question 1

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You are the new manager of West Coast Company.The company distributes goods throughout the Rocky Mountain area.Customers are billed after the shipments are sent.Most customers pay within two weeks.You notice that one employee is responsible for opening all incoming payments,recording them in the accounting records,and depositing all receipts in the bank daily.When asked why this one person performed all of these duties,you were told that it was more efficient for one person to handle cash and to keep track of things.If any cash was missing,responsibility could be easily determined. Do you agree with this arrangement? What changes would you make,and why?

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Question 2

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A company sells a product FOB destination.The product is shipped on December 29,2018 and the customer receives the shipment on January 3,2019.Which of the following is true?

A) The sale will be recorded when the customer's credit card information is received.
B) The sale will be recorded when the shipment is received by the customer.
C) The sale will be recorded when the shipment is shipped.
D) The sale will be recorded when it is known there will be no returns or allowances.

E) A) and C)
F) None of the above

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Question 3

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A customer purchased and received $5,000 of goods on credit from Discount Paper Supply on September 1.The customer received the bill on September 13 and mailed a $5,000 check on September 30.Discount Paper Supply received the check on October 4.On which of the following dates should Discount Paper Supply record sales revenue?

When using the allowance method,the year-end journal entry to record bad debt expense reduces current assets and net income.

The CHS Company has provided the following information: • Accounts receivable written-off as uncollectible during the year amounted to $11,500. • The accounts receivable balance at the beginning of the year was $150,000. • The accounts receivable balance at the end of the year was $210,000. • The allowance for doubtful accounts balance at the beginning of the year was $14,000. • The allowance for doubtful accounts balance at the end of the year after the recording of bad debt expense was $12,900. • Credit sales during the year totaled $900,000. - How much was CHS Company's bad debt expense?

When goods are shipped FOB destination,the revenue from the sale is recognized on the shipment date.

Merchandise was sold on credit for $30,000,terms 3/15,n/30.Which of the following journal entry descriptions correctly describes the cash collection?

When credit terms for a sale are 2/15,n/40,the customer saves by paying early.What percent (rounded) would this savings amount to on an annual basis?

During 2019,Charles Inc.recorded credit sales of $2,000,000.Based on prior experience,it estimates a 1 percent bad debt loss rate on credit sales.At the beginning of the year,the balance in net accounts receivable was $150,000.At the end of the year,but before the bad debt expense adjustment was recorded and before any bad debts had been written off,the balance in net accounts receivable was $125,000. A.Assume that on December 31,2019,the appropriate bad debt expense adjustment was recorded for the year 2019 and accounts receivable totaling $16,000 was written off for the year.What was the accounts receivables turnover ratio for the year? B.Assume that on December 31,2019,the appropriate bad debt expense adjustment was recorded for the year 2019 and accounts receivable totaling $12,000 was written off for the year.What was the accounts receivables turnover ratio for the year? C.Explain why the answers to parts A and B differ or do not differ.

A company is thinking of borrowing money at an 18% annual interest rate in order to pay a $30,000 invoice within the discount period.The invoice terms are 2/10,n/30.They should borrow the money because they will have a net savings of 19.2%.

Flyer Company has provided the following information prior to any year-end bad debt adjustment: • Cash sales,$150,000 • Credit sales,$450,000 • Selling and administrative expenses,$110,000 • Sales returns and allowances,$30,000 • Gross profit,$490,000 • Accounts receivable,$110,000 • Sales discounts,$14,000 • Allowance for doubtful accounts credit balance,$1,200 - Flyer prepares an aging of accounts receivable and the result shows that 5% of accounts receivable is estimated to be uncollectible.What is the balance in the allowance for doubtful accounts after bad debt expense is recorded?

On July 10,2019,Rex Company sold merchandise at an invoice price of $5,000 with terms of 2/10,n/30. Prepare the journal entries required below by indicating the account code of the appropriate account for each debit and credit and enter the dollar amounts for each item.

Why is the reconciliation of a company's cash account to the bank statement so important for effective internal control for cash?

If a check received from a customer has been deposited by the seller and is marked on the bank statement as a nonsufficient funds (NSF)amount,then it would appear on the seller's bank reconciliation as a deduction from the ending bank statement balance.

Asia Company sold $10,000 of goods to Euro Company on credit on May 1.At the time of the sale,Asia recorded a debit to Accounts Receivable and a credit to Sales Revenue for $10,000.Terms were 2/10,n/30. Prepare the journal entries Asia Company would record for each of the following independent situations: A.Euro paid the balance due,less the discount,on May 10. B.Euro returned half of the goods for credit on May 4.Euro paid the balance due,less the discount,on May 10. C.Euro paid its bill on May 30 (there were no sales returns).

What would be incorrect about reporting accounts receivable in the balance sheet?

Which of the following journal entries correctly records bad debt expense?

Cash equivalents on the balance sheet include certificates of deposit with maturities of 90 days or more.

Linetech Company's bank statement showed an ending balance of $8,000.Items appearing in the bank reconciliation included: outstanding checks,$500;deposits in transit,$1,000;bank service charges,$50;and Driver Company's $250 check erroneously deducted from Linetech's bank account by the bank.What is the correct cash balance at the end of the month?

Which of the following is not a reason for the Jones Hardware Store to accept credit cards from customers?