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

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Question 61

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During 2016, 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, 2016, the appropriate bad debt expense adjustment was recorded for the year 2016 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, 2016, the appropriate bad debt expense adjustment was recorded for the year 2016 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.

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A. Accounts receivables turnover, 15.7 =...

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Question 62

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Which of the following journal entries correctly records the collection of an account receivable for which a 1% sales discount was recorded at the time of collection?

A)
B)
C)
D)

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

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Question 63

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Redwing Company sold inventory costing $500 to a customer on account for $700. Which of the following does not correctly describe the collection of $686 cash when the customer takes advantage of a sales discount?

The year-end journal entry to record bad debt expense reduces current assets and net income.

When a particular account receivable is determined to be uncollectible, the journal entry to write off the account reduces net income.

The Ward Company has provided the following information: • Net sales totaled $750,000. • Beginning net accounts receivable was $65,000. • Ending net accounts receivable was $85,000. What was Ward's receivables turnover ratio?

The Soft Company has provided the following information after year-end adjustments: • Allowance for doubtful accounts was $11,000 at the beginning of the year and $30,000 at the end of the year. • Accounts receivable were $80,000 at the beginning of the year and $420,000 at the end of the year. • Accounts written off as uncollectible totaled $20,000. • Net sales totaled $2,700,000. • Sales discounts were $100,000. What was the amount of Soft's bad debt expense for the year?

On July 10, 2016, Rex Company sold merchandise at an invoice price of $5,000 with terms of 2/10, n/30. - Required: 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.

Which of the following statements is correct?

Which of the following does not correctly describe the effect of recording a credit sale of inventory for a profit?

The Conner Company's August 31, 2016 cash balance on its books was $90,000. As of August 31, outstanding checks total $44,000 and deposits in transit total $30,000. What was the August 31, 2016 cash balance on Conner's bank statement?

The Ward Company has provided the following information: • Net sales totaled $750,000. • Beginning net accounts receivable was $65,000. • Ending net accounts receivable was $85,000. What was Ward's average collection period?

Oakwood Company had accounts receivable of $750,000 and an allowance for doubtful accounts of $21,500 just prior to writing off as worthless a customer's $5,000 account receivable. The net realizable value of Oakwood's accounts receivable as shown by the accounting records before and after the write off was as follows:

Cyclone Inc. reported the following figures from its financial statements for the years 2015 through 2017: Required: A.Calculate the accounts receivable turnover for 2017 and 2016. B.Calculate the average collection period for 2017 and 2016.

Newark Company has provided the following information: • Cash sales, $450,000 • Credit sales, $1,350,000 • Selling and administrative expenses, $330,000 • Sales returns and allowances, $90,000 • Gross profit, $1,360,000 • Increase in accounts receivable, $55,000 • Bad debt expense, $33,000 • Sales discounts, $43,000 • Net income, $1,030,000 How much are Newark's net sales?

Deposits in transit are deducted from the bank balance when preparing the bank reconciliation.

The Rye Corporation has provided the following information: • Total sales were $1,200,000. • Beginning net accounts receivable was $45,000. • Ending net accounts receivable was $65,000. • Sales returns and allowances totaled $100,000. What was Rye's receivables turnover ratio?

The Tanner Company has provided the following information after year-end adjustments: • Allowance for doubtful accounts increased $19,000. • Accounts receivable increased $390,000 during the year. • Accounts written off as uncollectible totaled $20,000. • Sales totaled $2,500,000. • Sales discounts were $100,000. What was the amount of Tanner's net sales?

The Rye Corporation has provided the following information: • Total sales were $1,200,000. • Beginning net accounts receivable was $45,000. • Ending net accounts receivable was $65,000. • Sales returns and allowances totaled $100,000. What was Rye's average collection period?

Which of the following does not correctly describe the effect of a credit card discount?