Question 1

Which of the following is not true regarding a credit card expense?

Accepted Answer

A)   Credit card expense may be classified as a "discount" deducted from sales to get net sales.
B)   Credit card expense may be classified as a selling expense.
C)   Credit card expense may be classified as an administrative expense.
D)   Credit card expense is not recorded by the seller.
E)   Credit card expense is a fee the seller pays for services provided by the card company.F) C) and D)
G) D) and E)

Question 2

At December 31,Yarrow Company reports the following results for its calendar year from the adjusted trial balance.
 $$\begin{array} { | l | r | } 
\hline \text { Credit sales } & \$ 2,300,000 \
\hline\text { Cash sales } & 1,050,000 \
\hline \text { Accounts Receivable } & 295,000 \
\hline \text { Allowance for doubtful accounts (credit balance) } & 750 \
\hline
\end{array}$$
 
a.Prepare the adjusting entry to record Bad Debts Expense assuming uncollectibles are estimated to be 1.1% of credit sales.
b.Prepare the adjusting entry to record Bad Debts Expense assuming uncollectibles are estimated to be .8% of total sales.
c.Prepare the adjusting entry to record Bad Debts Expense assuming uncollectibles are estimated to be 7.0% of year-end accounts receivable.

Accepted Answer

a.
$295,...

Question 3

The allowance method of accounting for bad debts requires an estimate of bad debt expense at the end of each accounting period.The two common methods to determine the estimate amount are the percent of sales method and the percent of receivables method.Explain the basic differences between the two methods.

Accepted Answer

The percent of sales method emphasizes t...

Question 4

Flax had net sales of $7,875 and its average accounts receivables is $1,250.Calculate Flax's accounts receivable turnover:

Accepted Answer

Accounts Receivable Turnover =...

Question 5

Prepare general journal entries for the following transactions for the current year:

Accepted Answer

The answer of Prepare general journal entries for the following...

Question 6

Giorgio Italian Market bought $4,000 worth of merchandise from Food Suppliers and signed a 90-day,6% promissory note for the $4,000.Food Supplier's journal entry to record the sales transaction is:

Accepted Answer

A)   Debit Accounts Receivable $4,000; credit Sales $4,000
B)   Debit Notes Receivable $4,000; credit Sales $4,000
C)   Debit Accounts Receivable $4,060; credit Sales $4,060
D)   Debit Notes Receivable $4,060; credit Sales $4,060
E)   Debit Notes Receivable $4,000; debit Interest Receivable $60; credit Sales $4,060F) B) and D)
G) A) and C)

Question 7

All of the following statements regarding valuation of receivables under U.S.GAAP and IFRS are true except:

Accepted Answer

A)   Both require the allowance method for uncollectibles unless uncollectibles are immaterial.
B)   Both require that receivables be reported net of estimated collectibles.
C)   Both require that the expenses for estimated collectibles be recorded in the same period revenues generated from those receivables are recorded.
D)   Both allow using percent of sales, percent of receivables, or aging of receivables to estimate uncollectibles.
E)   Both require that the expense related to uncollectibles be recorded when the receivable is determined to be uncollectible.F) A) and B)
G) B) and D)

Question 8

The advantage of the allowance method of accounting for bad debts is that it identifies the specific customers who will not pay their bills.

Accepted Answer

A) True 
 B)False

Question 9

The following series of transactions occurred during Year 1 and Year 2,when Foxworth
Co.sold merchandise to Kevin Lewis.Foxworth's annual accounting period ends on December 31.
  
Prepare Foxworth Co.'s journal entries to record the above transactions.The company uses the allowance method to account for its bad debt expense.

Accepted Answer

None...

Question 10

Morgan had net sales of $310,000 and average accounts receivable of $75,600.Its competitor,Stanley,had net sales of $290,000 and average accounts receivables of $61,350.Calculate the accounts receivable turnover for both companies.Which company is doing a better job of managing its accounts receivables?

Accepted Answer

Accounts Receivable Turnover = Net Sales...

Question 11

Match each of the following terms with the appropriate definitions.
-Amounts due from customers for credit sales.

Accepted Answer

A)  Expense recognition (matching)  principle
B)  Realizable value
C)  Interest
D)  Bad debts
E)  Accounts receivableF) Aging of accounts receivableG) Allowance for doubtful accountsH) Promissory noteI) Payee of a noteJ) Maker of a noteK) E) and G)
L) G) and I)

Question 12

The expense recognition (matching)principle requires use of the allowance method of accounting for bad debts.

Accepted Answer

A) True 
 B)False

Question 13

Frederick Company borrows $63,000 from First City Bank and pledges its receivables as security.Which of the following is true regarding this transaction:

Accepted Answer

A)   First City Bank is the factor in this transaction.
B)   Frederick Company's financial statements must disclose the pledging of receivables.
C)   Frederick Company no longer has the risk of bad debts.
D)   First City Bank takes ownership of the receivables at the time of the pledge.
E)   No journal entry is required for this event.F) A) and E)
G) B) and D)

Question 14

A company uses 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 $375,000 debit  Allowance for uncollectible accounts 500 credit  Net Sales 800,000 credit \begin{array} { l l } 	ext { Accounts receivable } & \$ 375,000 	ext { debit } \	ext { Allowance for uncollectible accounts } & 500 	ext { credit } \	ext { Net Sales } & 800,000 	ext { credit }\end{array} Accounts receivable  Allowance for uncollectible accounts  Net Sales ​$375,000 debit 500 credit 800,000 credit ​ 
All sales are made on credit.Based on past experience,the company estimates that 0.6% of net credit sales are uncollectible.What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

Accepted Answer

A)   $1,275
B)   $1,775
C)   $4,500
D)   $4,800
E)   $5,500 F) All of the above
G) A) and E)

Question 15

Gideon Company uses the allowance method of accounting for uncollectible accounts.On May 3,the Gideon Company wrote off the $2,000 uncollectible account of its customer,A.Hopkins.The entry or entries Gideon makes to record the write off of the account on May 3 is:

Accepted Answer

A)     Accounts Receivable-A Hopkins 2,000 Allowance for Doubtfil Accounts 2,000\begin{array} { | l | r | r | } \hline 	ext { Accounts Receivable-A Hopkins } & 2,000 & \\hline 	ext { Allowance for Doubtfil Accounts } & & 2,000 \\hline\end{array} Accounts Receivable-A Hopkins  Allowance for Doubtfil Accounts ​2,000​2,000​​ 
B)     Allowarice for Doubtful Accounts 2,000 Bad debts expense 2,000\begin{array} { | l | r | r | } \hline 	ext { Allowarice for Doubtful Accounts } & 2,000 & \\hline 	ext { Bad debts expense } & & 2,000 \\hline\end{array} Allowarice for Doubtful Accounts  Bad debts expense ​2,000​2,000​​ 
C)     Accounts Receivable-A Hopkins 2,000 Bad debts expense 2,000 Cash 2,000 Accounts Receivable-A Hopkins 2,000\begin{array} { | l | r | r | } \hline 	ext { Accounts Receivable-A Hopkins } & 2,000 & \\hline 	ext { Bad debts expense } & & 2,000 \\hline 	ext { Cash } & 2,000 & \\hline 	ext { Accounts Receivable-A Hopkins } & & 2,000 \\hline\end{array} Accounts Receivable-A Hopkins  Bad debts expense  Cash  Accounts Receivable-A Hopkins ​2,0002,000​2,0002,000​​ 
D)     Allowarice for Doubtful Accounts 2,000 Accounts Receivable-A Hopkins 2,000\begin{array} { | l | r | r | } \hline 	ext { Allowarice for Doubtful Accounts } & 2,000 & \\hline 	ext { Accounts Receivable-A Hopkins } & & 2,000 \\hline\end{array} Allowarice for Doubtful Accounts  Accounts Receivable-A Hopkins ​2,000​2,000​​ 
E)     Cash 2,000 Accounts Receivable-A Hopkins 2,000\begin{array} { | l | r | r | } \hline 	ext { Cash } & 2,000 & \\hline 	ext { Accounts Receivable-A Hopkins } & & 2,000 \\hline\end{array} Cash  Accounts Receivable-A Hopkins ​2,000​2,000​​F) A) and E)
G) None of the above

Question 16

When the maker of a note is unable or refuses to pay at maturity,the note is said to be ________.

Accepted Answer

The answer of When the maker of a note is...

Question 17

When using the allowance method of accounting for uncollectible accounts,the entry to write off Jeannie's uncollectible account is a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable-Jeannie.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is not true about the Allowance for Doubtful Accounts?

Accepted Answer

A)   It is a contra asset account.
B)   It is used instead of reducing accounts receivable directly.
C)   It is debited when uncollectible accounts are written off.
D)   It is a liability account.
E)   It is credited when bad debts expense is estimated and recorded.F) B) and E)
G) A) and E)

Question 19

A promissory note received from a customer in exchange for an account receivable is recorded by the payee as:

Accepted Answer

A)   A cash equivalent.
B)   An account receivable.
C)   A note receivable.
D)   A short-term investment.
E)   A note payable.F) A) and E)
G) A) and D)

Question 20

A company using the percentage of sales method for estimating bad debts has sales of $350,000 and estimates that 1.0% of its sales are uncollectible.
-The estimated amount of bad debts expense is $3,500.

Accepted Answer

A) True 
 B)False

Exam 7: Accounting for Receivables

When using the allowance method of accounting for uncollectible accounts,the entry to write off Jeannie's uncollectible account is a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable-Jeannie.

Correct Answer
verified

The advantage of the allowance method of accounting for bad debts is that it identifies the specific customers who will not pay their bills.

Correct Answer
verified

Correct Answer
verified
Accounts Receivable Turnover = Net Sales...
View Answer

Correct Answer
verified
None...
View Answer

Giorgio Italian Market bought $4,000 worth of merchandise from Food Suppliers and signed a 90-day,6% promissory note for the $4,000.Food Supplier's journal entry to record the sales transaction is:

Correct Answer
verified

Correct Answer
verified
The percent of sales method emphasizes t...
View Answer

Correct Answer
verified

A promissory note received from a customer in exchange for an account receivable is recorded by the payee as:

Correct Answer
verified

Frederick Company borrows $63,000 from First City Bank and pledges its receivables as security.Which of the following is true regarding this transaction:

Correct Answer
verified

Flax had net sales of $7,875 and its average accounts receivables is $1,250.Calculate Flax's accounts receivable turnover:

Correct Answer
verified
Accounts Receivable Turnover =...
View Answer

When the maker of a note is unable or refuses to pay at maturity,the note is said to be ________.

Correct Answer
verified

Match each of the following terms with the appropriate definitions. -Amounts due from customers for credit sales.

Correct Answer
verified

Which of the following is not true about the Allowance for Doubtful Accounts?

Correct Answer
verified

The expense recognition (matching)principle requires use of the allowance method of accounting for bad debts.

Correct Answer
verified

Which of the following is not true regarding a credit card expense?

Correct Answer
verified

A company using the percentage of sales method for estimating bad debts has sales of $350,000 and estimates that 1.0% of its sales are uncollectible. -The estimated amount of bad debts expense is $3,500.

Correct Answer
verified

All of the following statements regarding valuation of receivables under U.S.GAAP and IFRS are true except:

Correct Answer
verified

Prepare general journal entries for the following transactions for the current year:

Correct Answer
verified

Gideon Company uses the allowance method of accounting for uncollectible accounts.On May 3,the Gideon Company wrote off the $2,000 uncollectible account of its customer,A.Hopkins.The entry or entries Gideon makes to record the write off of the account on May 3 is:

Correct Answer
verified

Correct Answer
verified
a.
$295,...
View Answer

Exam 7: Accounting for Receivables

When using the allowance method of accounting for uncollectible accounts,the entry to write off Jeannie's uncollectible account is a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable-Jeannie.

Correct AnswerverifiedShow Answer

The advantage of the allowance method of accounting for bad debts is that it identifies the specific customers who will not pay their bills.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedAccounts Receivable Turnover = Net Sales...View AnswerShow Answer

Correct AnswerverifiedNone...View AnswerShow Answer

Giorgio Italian Market bought $4,000 worth of merchandise from Food Suppliers and signed a 90-day,6% promissory note for the $4,000.Food Supplier's journal entry to record the sales transaction is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe percent of sales method emphasizes t...View AnswerShow Answer

Correct AnswerverifiedShow Answer

A promissory note received from a customer in exchange for an account receivable is recorded by the payee as:

Correct AnswerverifiedShow Answer

Frederick Company borrows $63,000 from First City Bank and pledges its receivables as security.Which of the following is true regarding this transaction:

Correct AnswerverifiedShow Answer

Flax had net sales of $7,875 and its average accounts receivables is $1,250.Calculate Flax's accounts receivable turnover:

Correct AnswerverifiedAccounts Receivable Turnover =...View AnswerShow Answer

When the maker of a note is unable or refuses to pay at maturity,the note is said to be ________.

Correct AnswerverifiedShow Answer

Match each of the following terms with the appropriate definitions. -Amounts due from customers for credit sales.

Correct AnswerverifiedShow Answer

Which of the following is not true about the Allowance for Doubtful Accounts?

Correct AnswerverifiedShow Answer

The expense recognition (matching)principle requires use of the allowance method of accounting for bad debts.

Correct AnswerverifiedShow Answer

Which of the following is not true regarding a credit card expense?

Correct AnswerverifiedShow Answer

A company using the percentage of sales method for estimating bad debts has sales of $350,000 and estimates that 1.0% of its sales are uncollectible. -The estimated amount of bad debts expense is $3,500.

Correct AnswerverifiedShow Answer

All of the following statements regarding valuation of receivables under U.S.GAAP and IFRS are true except:

Correct AnswerverifiedShow Answer

Prepare general journal entries for the following transactions for the current year:

Correct AnswerverifiedShow Answer

Gideon Company uses the allowance method of accounting for uncollectible accounts.On May 3,the Gideon Company wrote off the $2,000 uncollectible account of its customer,A.Hopkins.The entry or entries Gideon makes to record the write off of the account on May 3 is:

Correct AnswerverifiedShow Answer

Correct Answerverifieda. $295,...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Accounts Receivable Turnover = Net Sales...
View Answer

Correct Answer
verified
None...
View Answer

Correct Answer
verified

Correct Answer
verified
The percent of sales method emphasizes t...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Accounts Receivable Turnover =...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a.
$295,...
View Answer