Question 1

Barber Company lends Monroe Company $40,000 on April 1, accepting a four-month, 6% interest note. Barber Company prepares financial statements on April 30. What adjusting entry should be made before the financial statements can be prepared? a.$\begin{array}{c}
\text { Note Receivable } &40,000\
\text { Cash }&&40,000
\end{array}$

b.$\begin{array}{c}
\text {Interest Receivable } &200\
\text { Interest Revenue }&&200
\end{array}$

c.$\begin{array}{c}
\text {Cash } &200\
\text { Interest Revenue }&&200
\end{array}$

d.$\begin{array}{c}
\text {Interest Receivable } &600\
\text { Interest Revenue }&&600
\end{array}$

Accepted Answer

The answer of Barber Company lends Monroe Company $40,000 on...

Question 2

Bad debt losses are a cost of selling on credit.

Accepted Answer

A) True 
 B)False

Question 3

The interest on a $15,000, 6%, 60-day note receivable is

Accepted Answer

A)  $75.
B)  $900
C)  $450.
D)  $150.E) A) and B)
F) A) and C)

Question 4

Allowance for Doubtful Accounts is debited under the direct write-off method when an account is determined to be uncollectible.

Accepted Answer

A) True 
 B)False

Question 5

Using the allowance method, the uncollectible accounts for the year are estimated to be $50,000. 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)  $41,000
C)  $50,000
D)  $59,000E) None of the above
F) All of the above

Question 6

Net credit sales for the month are $900,000. The accounts receivable balance is $192,000. The allowance is calculated as 5% of the receivables balance using the percentage-of-receivables basis. If the Allowance for Doubtful Accounts has a credit balance of $6,000 before adjustment, what is the balance after adjustment?

Accepted Answer

A)  $ 9,600
B)  $ 3,600
C)  $15,600
D)  $ 9,900E) A) and D)
F) A) and C)

Question 7

Allowance for Doubtful Accounts is a contra account that is deducted from Accounts Receivable on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 8

A company sells $800,000 of accounts receivable to a factor for cash less a 2% service charge. The entry to record the sale should not include a

Accepted Answer

A)  debit to Interest Expense for $16,000.
B)  debit to Cash for $784,000.
C)  debit to Service Charge Expense for $16,000.
D)  credit to Accounts Receivable for $800,000.E) C) and D)
F) None of the above

Question 9

Both the gross amount of receivables and the allowance for doubtful accounts should be reported in the balance sheet.

Accepted Answer

A) True 
 B)False

Question 10

Which board(s)  has(have)  faced bitter opposition when working to implement fair value measurement for financial instruments?

Accepted Answer

A)  FASB, but not IASB.
B)  IASB, but not FASB.
C)  Both FASB and IASB.
D)  Neither FASB nor IASB.E) All of the above
F) None of the above

Question 11

An aging of a company's accounts receivable indicates that $9,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $3,200 credit balance, the adjustment to record bad debts for the period will require a

Accepted Answer

A)  debit to Bad Debt Expense for $9,000.
B)  debit to Allowance for Doubtful Accounts for $5,800.
C)  debit to Bad Debt Expense for $5,800.
D)  credit to Allowance for Doubtful Accounts for $9,000.E) B) and D)
F) A) and B)

Question 12

The percentage of receivables basis for estimating uncollectible accounts emphasizes

Accepted Answer

A)  cash realizable value.
B)  the relationship between accounts receivable and bad debts expense.
C)  income statement relationships.
D)  the relationship between sales and accounts receivable.E) A) and B)
F) None of the above

Question 13

Kinsler Company uses the percentage-of-receivables method for recording bad debt expense. The Accounts Receivable balance is $250,000 and credit sales are $1,000,000. Management estimates that 6% of accounts receivable will be uncollectible. What adjusting entry will Kinsler Company make if the Allowance for Doubtful Accounts has a credit balance of $2,500 before adjustment?

Accepted Answer

The answer of Kinsler Company uses the percentage-of-receivables method for...

Question 14

Douglas Company has a $60,000 note that carries an annual interest rate of 10%. If the amount of the total interest on the note is equal to $4,500, then what is the duration of the note in months?

Accepted Answer

A)  6 months
B)  4 months
C)  12 months
D)  9 monthsE) None of the above
F) A) and D)

Question 15

Receivables might be sold to

Accepted Answer

A)  lengthen the cash-to-cash operating cycle.
B)  take advantage of deep discounts on the cash realizable value of receivables.
C)  generate cash quickly.
D)  finance companies at an amount greater than cash realizable value.E) B) and C)
F) A) and D)

Question 16

Nichols Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $250,000 and credit sales are $1,000,000. Management estimates that 4% of accounts receivable will be uncollectible. What adjusting entry will Nichols Company make if the Allowance for Doubtful Accounts has a credit balance of $2,500 before adjustment?

Accepted Answer

The answer of Nichols Company uses the percentage of receivables...

Question 17

The expense recognition principle relates to credit losses by stating that bad debt expense should be recorded

Accepted Answer

A)  in the same period as allowed for tax purposes.
B)  in the period of the sale.
C)  for an exact amount.
D)  in the period of the loss.E) None of the above
F) A) and B)

Question 18

The accounts receivable turnover is needed to calculate

Accepted Answer

A)  the average collection period in days.
B)  market risk.
C)  return on assets.
D)  current ratio.E) None of the above
F) B) and C)

Question 19

When customers make purchases with a national credit card, the retailer

Accepted Answer

A)  is responsible for maintaining customer accounts.
B)  is not involved in the collection process.
C)  absorbs any losses from uncollectible accounts.
D)  receives cash equal to the full price of the merchandise sold from the credit card company.E) None of the above
F) All of the above

Question 20

Which of the following is least likely to help a company minimize losses as credit standards are relaxed?

Accepted Answer

A)  Require potential customers to provide bank guarantees.
B)  Ask a potential customer for references regarding payment history.
C)  Increase the estimate of uncollectible accounts at the end of each period.
D)  Check a potential customer's credit rating.E) None of the above
F) All of the above

Exam 7: Reporting and Analyzing Receivables

The interest on a $15,000, 6%, 60-day note receivable is

Correct Answer
verified

Allowance for Doubtful Accounts is a contra account that is deducted from Accounts Receivable on the balance sheet.

Correct Answer
verified

Douglas Company has a $60,000 note that carries an annual interest rate of 10%. If the amount of the total interest on the note is equal to $4,500, then what is the duration of the note in months?

Correct Answer
verified

The percentage of receivables basis for estimating uncollectible accounts emphasizes

Correct Answer
verified

Correct Answer
verified

Both the gross amount of receivables and the allowance for doubtful accounts should be reported in the balance sheet.

Correct Answer
verified

The expense recognition principle relates to credit losses by stating that bad debt expense should be recorded

Correct Answer
verified

Allowance for Doubtful Accounts is debited under the direct write-off method when an account is determined to be uncollectible.

Correct Answer
verified

Correct Answer
verified

Bad debt losses are a cost of selling on credit.

Correct Answer
verified

Correct Answer
verified

Which of the following is least likely to help a company minimize losses as credit standards are relaxed?

Correct Answer
verified

An aging of a company's accounts receivable indicates that $9,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $3,200 credit balance, the adjustment to record bad debts for the period will require a

Correct Answer
verified

A company sells $800,000 of accounts receivable to a factor for cash less a 2% service charge. The entry to record the sale should not include a

Correct Answer
verified

Using the allowance method, the uncollectible accounts for the year are estimated to be $50,000. If the balance for the Allowance for Doubtful Accounts is a $9,000 credit before adjustment, what is the balance after adjustment?

Correct Answer
verified

When customers make purchases with a national credit card, the retailer

Correct Answer
verified

Which board(s) has(have) faced bitter opposition when working to implement fair value measurement for financial instruments?

Correct Answer
verified

Receivables might be sold to

Correct Answer
verified

Correct Answer
verified

The accounts receivable turnover is needed to calculate

Correct Answer
verified

Exam 7: Reporting and Analyzing Receivables

The interest on a $15,000, 6%, 60-day note receivable is

Correct AnswerverifiedShow Answer

Allowance for Doubtful Accounts is a contra account that is deducted from Accounts Receivable on the balance sheet.

Correct AnswerverifiedShow Answer

Douglas Company has a $60,000 note that carries an annual interest rate of 10%. If the amount of the total interest on the note is equal to $4,500, then what is the duration of the note in months?

Correct AnswerverifiedShow Answer

The percentage of receivables basis for estimating uncollectible accounts emphasizes

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Both the gross amount of receivables and the allowance for doubtful accounts should be reported in the balance sheet.

Correct AnswerverifiedShow Answer

The expense recognition principle relates to credit losses by stating that bad debt expense should be recorded

Correct AnswerverifiedShow Answer

Allowance for Doubtful Accounts is debited under the direct write-off method when an account is determined to be uncollectible.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Bad debt losses are a cost of selling on credit.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is least likely to help a company minimize losses as credit standards are relaxed?

Correct AnswerverifiedShow Answer

An aging of a company's accounts receivable indicates that $9,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $3,200 credit balance, the adjustment to record bad debts for the period will require a

Correct AnswerverifiedShow Answer

A company sells $800,000 of accounts receivable to a factor for cash less a 2% service charge. The entry to record the sale should not include a

Correct AnswerverifiedShow Answer

Using the allowance method, the uncollectible accounts for the year are estimated to be $50,000. If the balance for the Allowance for Doubtful Accounts is a $9,000 credit before adjustment, what is the balance after adjustment?

Correct AnswerverifiedShow Answer

When customers make purchases with a national credit card, the retailer

Correct AnswerverifiedShow Answer

Which board(s) has(have) faced bitter opposition when working to implement fair value measurement for financial instruments?

Correct AnswerverifiedShow Answer

Receivables might be sold to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The accounts receivable turnover is needed to calculate

Correct AnswerverifiedShow Answer

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