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If a company factors its receivables,its receivables turnover ratio will be lower than it would have been if the receivables had not been factored.

A) True
B) False

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Consider each of the following transactions. Required: Indicate how each transaction will affect the elements of the accounting equation by answering increase,decrease,or no effect. Consider each of the following transactions. Required: Indicate how each transaction will affect the elements of the accounting equation by answering increase,decrease,or no effect.

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What effect does the adjusting entry for interest earned but yet not received have on the accounting equation?


A) It results in an increase in assets and stockholders' equity.
B) It results in a decrease in assets and stockholders' equity.
C) It results in an increase in assets and liabilities.
D) It results in an increase in assets and decrease in stockholders' equity.

E) B) and D)
F) C) and D)

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The entry that includes a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable is a(n) :


A) write-off of a specific customer's account
B) adjusting entry to allow for estimated bad debts
C) subsidiary entry to increase a customer's account for credit sales
D) net realizable entry to report the amount expected to be collected

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

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When a company has earned interest in the current period but has not yet recorded the interest,what type of adjustment is the company required to make?


A) Make an adjusting entry at the end of the current period to accrue the interest earned.
B) Make no adjusting entry at the end of the period because interest has not been earned yet.
C) Make an adjusting entry at the end of the next period to accrue interest earned.
D) No adjustment is necessary until the cash is collected.

E) C) and D)
F) B) and D)

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Mills Corporation's balance sheet included the following information: Mills Corporation's balance sheet included the following information: If the Allowance account had a credit balance of $27,500 immediately before the year-end adjustment for bad debts and no accounts were written-off or allowed for during the year,what was the amount of Bad Debt Expense recognized during the year? A) $65,000 B) $27,500 C) $32,500 D) $37,500 If the Allowance account had a credit balance of $27,500 immediately before the year-end adjustment for bad debts and no accounts were written-off or allowed for during the year,what was the amount of Bad Debt Expense recognized during the year?


A) $65,000
B) $27,500
C) $32,500
D) $37,500

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

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The following summarizes the aging of accounts receivable for Johnston Supplies,Inc.as of July 31,2016: The following summarizes the aging of accounts receivable for Johnston Supplies,Inc.as of July 31,2016: Required: Part a.The unadjusted balance of the Allowance for Doubtful Accounts of Johnston Supplies,Inc.is a credit balance in the amount of $28,947 on July 31,2016.Prepare the required adjusting entry to record Bad Debt Expense for the year. Part b.Johnston Supplies,Inc.writes off $3,081 of uncollectible accounts during on August 15,2016.Prepare the required adjusting entry to record the write-off. Part c.Use a T-account to determine the account balance in the Allowance for Doubtful Accounts on August 15,2016. Required: Part a.The unadjusted balance of the Allowance for Doubtful Accounts of Johnston Supplies,Inc.is a credit balance in the amount of $28,947 on July 31,2016.Prepare the required adjusting entry to record Bad Debt Expense for the year. Part b.Johnston Supplies,Inc.writes off $3,081 of uncollectible accounts during on August 15,2016.Prepare the required adjusting entry to record the write-off. Part c.Use a T-account to determine the account balance in the Allowance for Doubtful Accounts on August 15,2016.

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Part a
Estimated amount uncollectible is...

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Why are estimates of bad debts used to record uncollectible amounts of accounts receivable?


A) Doing so avoids violating the expense recognition ("matching") principle.
B) It is an easier method than waiting for accounts to actually become uncollectible.
C) Because the actual amount of uncollectible accounts can never be known.
D) It is the most conservative approach.

E) C) and D)
F) B) and C)

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The balance of the Allowance for Doubtful Accounts was $12,656 at the beginning of the year and $14,348 at the end of the year.Bad Debt Expense was $3,879 for the year.Recoveries in the amount of $100 were recorded during the year.Which of the following statements is correct?


A) The Allowance for Doubtful Accounts account was retroactively debited for $2,187 to record additional bad debts that became apparent in a future time period.
B) The Allowance for Doubtful Accounts account was debited for $2,287 to record write-offs during the year.
C) The Allowance for Doubtful Accounts account was credited $2,287 for payments from customer whose account balances were previously written off.
D) The Allowance for Doubtful Accounts account was credited $2,187 for the difference between the percent of credit sales method and the aging of accounts receivable method.

E) A) and B)
F) B) and D)

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Factoring refers to an arrangement in which a company sells its receivables to another company and receives cash immediately.

A) True
B) False

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On November 1,2015,Lendem,Inc.loaned an employee $100,000 at 6% with both the interest and principal due in one year.The adjusting entry to record the interest earned but not received as of December 31,2015 includes a:


A) debit to Interest Receivable of $6,000
B) debit to Interest Payable of $6,000
C) debit to Cash of $5,000
D) debit to Interest Receivable of $1,000
E) debit to Interest Revenue of $1,000

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

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On January 1,a company lends a corporate customer $80,000 at 6% interest.The amount of interest revenue that should be recorded for the quarter ending March 31 equals:


A) $4,800
B) $1,200
C) $400
D) $1,600

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

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Wechsler Company uses the aging of accounts receivable method.The company performed an aging of accounts receivable on December 31 and gathered the following information: Wechsler Company uses the aging of accounts receivable method.The company performed an aging of accounts receivable on December 31 and gathered the following information: What is the amount of Accounts Receivable,Net that will be reported on the balance sheet at December 31? A) $505,000 B) $496,000 C) $467,000 D) $516,000 What is the amount of Accounts Receivable,Net that will be reported on the balance sheet at December 31?


A) $505,000
B) $496,000
C) $467,000
D) $516,000

E) All of the above
F) A) and D)

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Which of the following is recorded with a debit to Cash and a credit to Notes Receivable?


A) The adjusting entry to record interest owed
B) The receipt of an interest payment
C) The receipt of the principal payment
D) The issuance of a note

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

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Daley Company uses the allowance method.At December 31,2015,the company's balance sheet reports Accounts Receivable,Net in the amount of $17,000.On January 2,2016,Daley writes off a $1,500 customer account balance when it becomes clear that the customer will never pay.What is the amount of Accounts Receivable,Net after the write-off?


A) $17,000
B) $1,500
C) $18,500
D) $15,500

E) All of the above
F) A) and B)

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The direct write-off method for uncollectible accounts is required:


A) by the IRS.
B) by GAAP
C) by IFRS.
D) for external financial reporting.

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

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To ensure that the Allowance for Doubtful Accounts account does not become materially misstated over time,companies revise overestimates of prior periods by:


A) recording a retroactive correcting entry.
B) lowering estimates in the current period.
C) increasing estimates in the current period.
D) notifying the users of its financial statements of the error.

E) B) and C)
F) B) and D)

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All of the following will likely be incurred by a company that extends credit except:


A) increased revenues.
B) increased wage costs.
C) increased advertising expenses.
D) a delay in the receipt of cash.

E) All of the above
F) A) and D)

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On October 1,a company lends $10,000 to an employee who signs a 9%,6-month promissory note.The company is preparing its year-end financial statements on December 31.No adjusting entries have been recorded in connection with this note.What adjusting entry should be recorded before the financial statements are prepared?


A) Debit Interest Revenue and credit Interest Receivable for $225
B) Debit Interest Receivable and credit Interest Revenue for $450
C) Debit Interest Revenue and credit Interest Receivable for $450
D) Debit Interest Receivable and credit Interest Revenue for $225

E) B) and C)
F) C) and D)

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Which of the following statements about extending credit is not correct?


A) It is common for companies to sell on account to other companies.
B) Some companies extend credit to individual consumers.
C) Bad debts arise from credit sales to individual consumers, but not from credit sales to other companies.
D) When credit is available, customers often buy more products and services.

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

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