Question 1

In 2015, Warehouse 13 had net credit sales of $750,000. On January 1, 2015, Allowance for Doubtful Accounts had a credit balance of $16,000. During 2015, $29,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage of receivable basis) . If the accounts receivable balance at December 31 was $150,000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2015?

Accepted Answer

A)   $150,000
B)   $29,000
C)   $28,000
D)   $31,000E) C) and D)
F) A) and C)

Question 2

The best managed companies will have

Accepted Answer

A)   no uncollectible accounts.
B)   a very strict credit policy.
C)   a very lenient credit policy.
D)   some accounts that will prove to be uncollectible.E) A) and B)
F) A) and C)

Question 3

Which of the following receivables would not be classified as an "other receivable"?

Accepted Answer

A)   Advance to an employee
B)   Refundable income tax
C)   Notes receivable
D)   Interest receivableE) B) and C)
F) B) and D)

Question 4

On November 1, Gentle Company received a $3,000, 6%, three-month note receivable. The cash to be received by Gentle Company when the note becomes due is:

Accepted Answer

A)   $3,000.
B)   $3,030.
C)   $3,045.
D)   $3,180.E) B) and D)
F) A) and B)

Question 5

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

Question 6

A note receivable is a negotiable instrument which

Accepted Answer

A)   eliminates the need for a bad debts allowance.
B)   can be transferred to another party by endorsement.
C)   takes the place of checks in a business firm.
D)   can only be collected by a bank.E) C) and D)
F) A) and D)

Question 7

If a company uses the allowance method to account for uncollectible accounts, the entry to write off an uncollectible account only involves balance sheet accounts.

Accepted Answer

A) True 
 B)False

Question 8

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) A) and B)
F) B) and C)

Question 9

Which receivables accounting and reporting issue is not essentially the same for IFRS and GAAP?

Accepted Answer

A)   The use of allowance accounts and the allowance method.
B)   How to record discounts.
C)   How to record factoring.
D)   All of these are essentially the same for IFRS and GAAP.E) A) and B)
F) B) and D)

Question 10

Under the direct write-off method of accounting for uncollectible accounts

Accepted Answer

A)   the allowance account is increased for the actual amount of bad debt at the time of write-off.
B)   a specific account receivable is decreased for the actual amount of bad debt at the time of write-off.
C)   balance sheet relationships are emphasized.
D)   bad debt expense is always recorded in the period in which the revenue was recorded.E) All of the above
F) B) and D)

Question 11

The balance of Allowance for Doubtful Accounts prior to making the adjusting entry to record estimated uncollectible accounts

Accepted Answer

A)   is relevant when using the percentage of receivables basis.
B)   is relevant when using the percentage of sales basis.
C)   is relevant to both bases of adjusting for uncollectible accounts.
D)   will never show a debit balance at this stage in the accounting cycle.E) A) and B)
F) All of the above

Question 12

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)   that is identified on the formal instrument of credit.
D)   remaining after a service charge has been deducted.E) A) and C)
F) A) and B)

Question 13

The financial statements of Danielle Manufacturing Company report net sales of $750,000 and accounts receivable of $60,000 and $90,000 at the beginning and end of the year, respectively. What is the accounts receivable turnover for Danielle?

Accepted Answer

A)   5 times
B)   8.3 times
C)   10 times
D)   12.5 timesE) None of the above
F) A) and B)

Question 14

If a company sells its accounts receivables to a factor,

Accepted Answer

A)   the seller pays a commission to the factor.
B)   the factor pays a commission to the seller.
C)   there is a gain on the sale of the receivables.
D)   the seller defers recognition of sales revenue until the account is collected.E) C) and D)
F) None of the above

Question 15

The maturity date of a 1-month note receivable dated June 30 is July 30.

Accepted Answer

A) True 
 B)False

Question 16

The percentage of receivables basis of estimating expected uncollectible accounts emphasizes income statement relationships.

Accepted Answer

A) True 
 B)False

Question 17

A reasonable amount of uncollectible accounts is evidence

Accepted Answer

A)   that the credit policy is too strict.
B)   that the credit policy is too lenient.
C)   of a sound credit policy.
D)   of poor judgments on the part of the credit manager.E) A) and C)
F) None of the above

Question 18

The receivable that is usually evidenced by a formal instrument of credit is a(n)

Accepted Answer

A)   trade receivable.
B)   note receivable.
C)   accounts receivable.
D)   income tax receivable.E) None of the above
F) All of the above

Question 19

Which of the following would be considered as an unlikely occurrence?

Accepted Answer

A)   Manufacturer offers a cash discount to a wholesaler.
B)   Wholesaler offers a cash discount to a retailer.
C)   Retailer offers a cash discount to a customer.
D)   All of these answers are correct.E) B) and C)
F) A) and C)

Question 20

Schwartzman Co., makes a credit card sale to a customer for $800. The credit card sale has a grace period of 30 days and then an interest charge of 1.5% per month is added to the balance. If the unpaid balance on the above sale is $640 at the end of the grace period, the interest charge is

Accepted Answer

A)   $6.40.
B)   $9.60.
C)   $11.00.
D)   $16.00.E) A) and B)
F) None of the above

Exam 8: Accounting for Receivables

Correct Answer
verified

The financial statements of Danielle Manufacturing Company report net sales of $750,000 and accounts receivable of $60,000 and $90,000 at the beginning and end of the year, respectively. What is the accounts receivable turnover for Danielle?

Correct Answer
verified

Under the direct write-off method of accounting for uncollectible accounts

Correct Answer
verified

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

Correct Answer
verified

The receivable that is usually evidenced by a formal instrument of credit is a(n)

Correct Answer
verified

The maturity date of a 1-month note receivable dated June 30 is July 30.

Correct Answer
verified

A reasonable amount of uncollectible accounts is evidence

Correct Answer
verified

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

Correct Answer
verified

Schwartzman Co., makes a credit card sale to a customer for $800. The credit card sale has a grace period of 30 days and then an interest charge of 1.5% per month is added to the balance. If the unpaid balance on the above sale is $640 at the end of the grace period, the interest charge is

Correct Answer
verified

Which of the following receivables would not be classified as an "other receivable"?

Correct Answer
verified

The best managed companies will have

Correct Answer
verified

The face value of a note refers to the amount

Correct Answer
verified

Which receivables accounting and reporting issue is not essentially the same for IFRS and GAAP?

Correct Answer
verified

If a company uses the allowance method to account for uncollectible accounts, the entry to write off an uncollectible account only involves balance sheet accounts.

Correct Answer
verified

On November 1, Gentle Company received a $3,000, 6%, three-month note receivable. The cash to be received by Gentle Company when the note becomes due is:

Correct Answer
verified

Which of the following would be considered as an unlikely occurrence?

Correct Answer
verified

The balance of Allowance for Doubtful Accounts prior to making the adjusting entry to record estimated uncollectible accounts

Correct Answer
verified

The percentage of receivables basis of estimating expected uncollectible accounts emphasizes income statement relationships.

Correct Answer
verified

A note receivable is a negotiable instrument which

Correct Answer
verified

If a company sells its accounts receivables to a factor,

Correct Answer
verified

Exam 8: Accounting for Receivables

Correct AnswerverifiedShow Answer

The financial statements of Danielle Manufacturing Company report net sales of $750,000 and accounts receivable of $60,000 and $90,000 at the beginning and end of the year, respectively. What is the accounts receivable turnover for Danielle?

Correct AnswerverifiedShow Answer

Under the direct write-off method of accounting for uncollectible accounts

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The receivable that is usually evidenced by a formal instrument of credit is a(n)

Correct AnswerverifiedShow Answer

The maturity date of a 1-month note receivable dated June 30 is July 30.

Correct AnswerverifiedShow Answer

A reasonable amount of uncollectible accounts is evidence

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Schwartzman Co., makes a credit card sale to a customer for $800. The credit card sale has a grace period of 30 days and then an interest charge of 1.5% per month is added to the balance. If the unpaid balance on the above sale is $640 at the end of the grace period, the interest charge is

Correct AnswerverifiedShow Answer

Which of the following receivables would not be classified as an "other receivable"?

Correct AnswerverifiedShow Answer

The best managed companies will have

Correct AnswerverifiedShow Answer

The face value of a note refers to the amount

Correct AnswerverifiedShow Answer

Which receivables accounting and reporting issue is not essentially the same for IFRS and GAAP?

Correct AnswerverifiedShow Answer

If a company uses the allowance method to account for uncollectible accounts, the entry to write off an uncollectible account only involves balance sheet accounts.

Correct AnswerverifiedShow Answer

On November 1, Gentle Company received a $3,000, 6%, three-month note receivable. The cash to be received by Gentle Company when the note becomes due is:

Correct AnswerverifiedShow Answer

Which of the following would be considered as an unlikely occurrence?

Correct AnswerverifiedShow Answer

The balance of Allowance for Doubtful Accounts prior to making the adjusting entry to record estimated uncollectible accounts

Correct AnswerverifiedShow Answer

The percentage of receivables basis of estimating expected uncollectible accounts emphasizes income statement relationships.

Correct AnswerverifiedShow Answer

A note receivable is a negotiable instrument which

Correct AnswerverifiedShow Answer

If a company sells its accounts receivables to a factor,

Correct AnswerverifiedShow Answer

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