Question 1

Ace Credit Card Company agrees to transfer cash to Seller Company immediately upon deposit of that company's credit card sales receipts. Ace charges a 2% fee for all credit card sales. If Seller Company deposits $57,300 credit card sales receipts, which of the following statements are true?

Accepted Answer

A)   Ace will receive $56,154 cash from Seller Company
B)   Seller Company will receive cash $56,154 from Ace
C)   Ace will receive $57,300 cash from Seller Company
D)   Seller Company will receive $57,300 cash from Ace
E)   Ace will pay Seller Company a $1,146 credit card feeF) A) and B)
G) A) and C)

Question 2

A company borrowed $5,000 by signing a 3-month promissory note at 10%. The total interest on the note is $500.

Accepted Answer

A) True 
 B)False

Question 3

Wallah Company agreed to accept $5,000 in cash along with an $8,000, 90-day, 13.5% note from customer Judith Klemper to settle her $13,000 past-due account. How should Wallah record this transaction?

Accepted Answer

A)    Accounts Receivable - J. Klemper 13,000 Note Receivable 8,000 Cash 5,000\begin{array} { | l | r | r | } \hline 	ext { Accounts Receivable - J. Klemper } & 13,000 & \\hline 	ext { Note Receivable } & & 8,000 \\hline 	ext { Cash } & & 5,000 \\hline\end{array} Accounts Receivable - J. Klemper  Note Receivable  Cash ​13,000​8,0005,000​​ 
B)    Note Receivable 8,000 Sales 8,000\begin{array} { | c | r | r | } \hline 	ext { Note Receivable } & 8,000 & \\hline 	ext { Sales } & & 8,000 \\hline\end{array} Note Receivable  Sales ​8,000​8,000​​ 
C)    Cash 5,000 Note Receivable 8,000 Sales 13,000\begin{array} { | l | r | r | } \hline 	ext { Cash } & 5,000 & \\hline 	ext { Note Receivable } & 8,000 & \\hline 	ext { Sales } & & 13,000 \\hline\end{array} Cash  Note Receivable  Sales ​5,0008,000​13,000​​ 
D)    Cash 5,000 Note Receivable 8,000\multicolumn1∣c∣ Account Receivable - J. Klemper 13,000\begin{array} { | l | r | r | } \hline 	ext { Cash } & 5,000 & \\hline 	ext { Note Receivable } & 8,000 & \\hline \multicolumn{1}{|c|} { 	ext { Account Receivable - J. Klemper } } & & 13,000 \\hline\end{array} Cash  Note Receivable \multicolumn1∣c∣ Account Receivable - J. Klemper ​5,0008,000​13,000​​ 
E)    Sales 13,000 Note Receivable 8,000 Cash 5,000\begin{array} { | l | r | r | } \hline 	ext { Sales } & 13,000 & \\hline 	ext { Note Receivable } & & 8,000 \\hline 	ext { Cash } & & 5,000 \\hline\end{array} Sales  Note Receivable  Cash ​13,000​8,0005,000​​F) B) and C)
G) A) and E)

Question 4

As long as a company accurately records total credit sales information, it is not necessary to have separate accounts for specific customers.

Accepted Answer

A) True 
 B)False

Question 5

TechCom's customer, RDA, paid off an $8,300 balance on its account receivable. TechCom should record the transaction as a debit to Accounts Receivable-RDA and a credit to Cash.

Accepted Answer

A) True 
 B)False

Question 6

When using the allowance method of accounting for uncollectible accounts, the entry to record the bad debts expense is a debit to Bad Debts Expense and a credit to Accounts Receivable.

Accepted Answer

A) True 
 B)False

Question 7

An accounting procedure that (1)  estimates and reports bad debts expense from credit sales during the period of the sales and (2)  reports accounts receivable at the amount of cash to be collected is the:

Accepted Answer

A)   Allowance method of accounting for bad debts
B)   Aging of notes receivable
C)   Adjustment method for uncollectible debts
D)   Direct write-off method of accounting for bad debts
E)   Cash basis method of accounting for bad debtsF) B) and E)
G) A) and D)

Question 8

Companies use two methods to account for uncollectible accounts: the direct write-off method and the allowance method.

Accepted Answer

A) True 
 B)False

Question 9

The matching principle requires use of the direct write-off method of accounting for bad debts.

Accepted Answer

A) True 
 B)False

Question 10

The amount due on the date of maturity for a $6,000, 60-day 8%, note receivable is:

Accepted Answer

A)   $6,000
B)   $6,480
C)   $5,520
D)   $6,080
E)   $5,920F) All of the above
G) A) and B)

Question 11

The _________________________ method uses income statement relationships to estimate bad debts and is based on the idea that a given percent of a company's credit sales for a period are uncollectible.

Accepted Answer

The answer of The _________________________ method uses income statement relationships...

Question 12

A company used the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts:
  Accounts receivable $245,000 debit  Allowance for uncollectible accounts 300 credit  Net Sales 900,000 credit \begin{array} { | l | r | } \hline 	ext { Accounts receivable } & \$ 245,000 	ext { debit } \\hline 	ext { Allowance for uncollectible accounts } & 300 	ext { credit } \\hline 	ext { Net Sales } & 900,000 	ext { credit } \\hline\end{array} Accounts receivable  Allowance for uncollectible accounts  Net Sales ​$245,000 debit 300 credit 900,000 credit ​​ 
 All sales are made on credit. Based on past experience, the company estimates 0.5% of credit sales to be uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

Accepted Answer

A)   $925
B)   $1,225
C)   $4,200
D)   $4,500
E)   $45,000 F) C) and E)
G) B) and D)

Question 13

If a 90-day note receivable is dated June 12, what is the maturity date of the note?

Accepted Answer

The answer of If a 90-day note receivable is dated...

Question 14

Pepsi's accounts receivable turnover was 9.9 for this year and 11.0 for last year. Coke's turnover was 9.3 for this year and 9.3 for last year. These results imply that:

Accepted Answer

A)   Coke has the better turnover for both years
B)   Pepsi has the better turnover for both years
C)   Coke's turnover is improving
D)   Coke's credit policies are too loose
E)   Coke is collecting its receivables more quickly than Pepsi in both yearsF) C) and D)
G) A) and B)

Question 15

A dishonored note receivable is usually reclassified as an account receivable.

Accepted Answer

A) True 
 B)False

Question 16

A company ages its accounts receivables to determine its end of period adjustment for bad debts. At the end of the current year, management estimated that $39,375 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a credit balance of $3,285. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Accepted Answer

A)    Bad Debt Expense 36,090 Allowance for Doubtful Accounts 36,090\begin{array} { | l | r | r | } \hline 	ext { Bad Debt Expense } & 36,090 & \\hline 	ext { Allowance for Doubtful Accounts } & & 36,090 \\hline\end{array} Bad Debt Expense  Allowance for Doubtful Accounts ​36,090​36,090​​ 
B)    Bad Debt Expense 42,660 Allowance for Doubtful Accounts 42,660\begin{array}{|c|c|c|}\hline 	ext { Bad Debt Expense } & 42,660 & \\hline 	ext { Allowance for Doubtful Accounts } & & 42,660 \\hline\end{array} Bad Debt Expense  Allowance for Doubtful Accounts ​42,660​42,660​​ 
C)    Bad Debt Expense 39,375 Allowance for Doubtful Accounts 39,375\begin{array}{|c|r|r|}\hline 	ext { Bad Debt Expense } & 39,375 & \\hline 	ext { Allowance for Doubtful Accounts } & & 39,375 \\hline\end{array} Bad Debt Expense  Allowance for Doubtful Accounts ​39,375​39,375​​ 
D)    Accounts Receivable 39,375 Bad Debt Expense 3,285 Sales 42,660\begin{array} { | l | r | r | } \hline 	ext { Accounts Receivable } & 39,375 & \\hline 	ext { Bad Debt Expense } & 3,285 & \\hline 	ext { Sales } & & 42,660 \\hline\end{array} Accounts Receivable  Bad Debt Expense  Sales ​39,3753,285​42,660​​ 
E)   F) B) and D)
G) A) and B)

Question 17

A payee of a note will always honor a note and pay it in full.

Accepted Answer

A) True 
 B)False

Question 18

The quality of receivables refers to:

Accepted Answer

A)   The creditworthiness of sellers
B)   The speed of collection
C)   The likelihood of collection without loss
D)   Sales turnover
E)   The interest rateF) A) and E)
G) A) and D)

Question 19

A company has sales of $350,000 and estimates that 0.5% of its sales are uncollectible. The company's reported amount of bad debts expense is $1,750.

Accepted Answer

A) True 
 B)False

Question 20

Explain how to record the receipt of a note receivable.

Accepted Answer

The receipt of a note receivable is reco...

Exam 7: Accounts and Notes Receivable

The matching principle requires use of the direct write-off method of accounting for bad debts.

Correct Answer
verified

The _________________________ method uses income statement relationships to estimate bad debts and is based on the idea that a given percent of a company's credit sales for a period are uncollectible.

Correct Answer
verified

As long as a company accurately records total credit sales information, it is not necessary to have separate accounts for specific customers.

Correct Answer
verified

If a 90-day note receivable is dated June 12, what is the maturity date of the note?

Correct Answer
verified

Correct Answer
verified

A payee of a note will always honor a note and pay it in full.

Correct Answer
verified

Wallah Company agreed to accept $5,000 in cash along with an $8,000, 90-day, 13.5% note from customer Judith Klemper to settle her $13,000 past-due account. How should Wallah record this transaction?

Correct Answer
verified

A company borrowed $5,000 by signing a 3-month promissory note at 10%. The total interest on the note is $500.

Correct Answer
verified

Explain how to record the receipt of a note receivable.

Correct Answer
verified
The receipt of a note receivable is reco...
View Answer

An accounting procedure that (1) estimates and reports bad debts expense from credit sales during the period of the sales and (2) reports accounts receivable at the amount of cash to be collected is the:

Correct Answer
verified

Pepsi's accounts receivable turnover was 9.9 for this year and 11.0 for last year. Coke's turnover was 9.3 for this year and 9.3 for last year. These results imply that:

Correct Answer
verified

The quality of receivables refers to:

Correct Answer
verified

When using the allowance method of accounting for uncollectible accounts, the entry to record the bad debts expense is a debit to Bad Debts Expense and a credit to Accounts Receivable.

Correct Answer
verified

The amount due on the date of maturity for a $6,000, 60-day 8%, note receivable is:

Correct Answer
verified

A company has sales of $350,000 and estimates that 0.5% of its sales are uncollectible. The company's reported amount of bad debts expense is $1,750.

Correct Answer
verified

A dishonored note receivable is usually reclassified as an account receivable.

Correct Answer
verified

TechCom's customer, RDA, paid off an $8,300 balance on its account receivable. TechCom should record the transaction as a debit to Accounts Receivable-RDA and a credit to Cash.

Correct Answer
verified

Companies use two methods to account for uncollectible accounts: the direct write-off method and the allowance method.

Correct Answer
verified

Ace Credit Card Company agrees to transfer cash to Seller Company immediately upon deposit of that company's credit card sales receipts. Ace charges a 2% fee for all credit card sales. If Seller Company deposits $57,300 credit card sales receipts, which of the following statements are true?

Correct Answer
verified

Correct Answer
verified

Exam 7: Accounts and Notes Receivable

The matching principle requires use of the direct write-off method of accounting for bad debts.

Correct AnswerverifiedShow Answer

The _________________________ method uses income statement relationships to estimate bad debts and is based on the idea that a given percent of a company's credit sales for a period are uncollectible.

Correct AnswerverifiedShow Answer

As long as a company accurately records total credit sales information, it is not necessary to have separate accounts for specific customers.

Correct AnswerverifiedShow Answer

If a 90-day note receivable is dated June 12, what is the maturity date of the note?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A payee of a note will always honor a note and pay it in full.

Correct AnswerverifiedShow Answer

Wallah Company agreed to accept $5,000 in cash along with an $8,000, 90-day, 13.5% note from customer Judith Klemper to settle her $13,000 past-due account. How should Wallah record this transaction?

Correct AnswerverifiedShow Answer

A company borrowed $5,000 by signing a 3-month promissory note at 10%. The total interest on the note is $500.

Correct AnswerverifiedShow Answer

Explain how to record the receipt of a note receivable.

Correct AnswerverifiedThe receipt of a note receivable is reco...View AnswerShow Answer

An accounting procedure that (1) estimates and reports bad debts expense from credit sales during the period of the sales and (2) reports accounts receivable at the amount of cash to be collected is the:

Correct AnswerverifiedShow Answer

Pepsi's accounts receivable turnover was 9.9 for this year and 11.0 for last year. Coke's turnover was 9.3 for this year and 9.3 for last year. These results imply that:

Correct AnswerverifiedShow Answer

The quality of receivables refers to:

Correct AnswerverifiedShow Answer

When using the allowance method of accounting for uncollectible accounts, the entry to record the bad debts expense is a debit to Bad Debts Expense and a credit to Accounts Receivable.

Correct AnswerverifiedShow Answer

The amount due on the date of maturity for a $6,000, 60-day 8%, note receivable is:

Correct AnswerverifiedShow Answer

A company has sales of $350,000 and estimates that 0.5% of its sales are uncollectible. The company's reported amount of bad debts expense is $1,750.

Correct AnswerverifiedShow Answer

A dishonored note receivable is usually reclassified as an account receivable.

Correct AnswerverifiedShow Answer

TechCom's customer, RDA, paid off an $8,300 balance on its account receivable. TechCom should record the transaction as a debit to Accounts Receivable-RDA and a credit to Cash.

Correct AnswerverifiedShow Answer

Companies use two methods to account for uncollectible accounts: the direct write-off method and the allowance method.

Correct AnswerverifiedShow Answer

Ace Credit Card Company agrees to transfer cash to Seller Company immediately upon deposit of that company's credit card sales receipts. Ace charges a 2% fee for all credit card sales. If Seller Company deposits $57,300 credit card sales receipts, which of the following statements are true?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
The receipt of a note receivable is reco...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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