Question 1

Purrfect Pets sells a $1,500 aquarium to a customer on account. This would be recorded by an entry that includes a:

Accepted Answer

A)   debit to Accounts Receivable.
B)   debit to Cash.
C)   debit to Sales.
D)   credit to Cost of Goods Sold.E) None of the above
F) C) and D)

Question 2

In reviewing the accounts receivable, the net receivables value is $17,000 before writing off a $1,500 account. What is the net receivables value after the write-off?

Accepted Answer

A)   $17,000.
B)   $1,500.
C)   $18,500.
D)   $15,500.E) None of the above
F) A) and B)

Question 3

The Grass is Greener Corporation uses the allowance method and learns that a customer who owes $350 has gone bankrupt and payment will not be made. The Grass is Greener Corporation should:

Accepted Answer

A)   debit Bad Debt Expense and credit Accounts Receivable for $350.
B)   debit the Allowance for Doubtful Accounts and credit Accounts Receivable for $350.
C)   debit Bad Debt Expense and credit Cash for $350.
D)   debit Accounts Receivable and credit Bad Debt Expense for $350.E) A) and D)
F) C) and D)

Question 4

The unadjusted balance of the allowance for doubtful accounts of Johnstone Supplies, Inc., is a credit balance in the amount of $28,947 on July 31, 2011. Based on the accounts receivable aging report, bad debt expense will be:

Accepted Answer

A)   $34,012.
B)   $5,065.
C)   $62,959.
D)   $50,434.E) C) and D)
F) A) and C)

Question 5

Which of the following statements regarding the receivables turnover ratio is true?

Accepted Answer

A)   The receivables turnover ratio indicates how many times, on average, the process of selling to and collecting from customers occurs during the accounting period.
B)   Companies of similar size operating in the same country tend to have similar receivables turnover ratios.
C)   A high turnover ratio may suggest the company is allowing too much time for customers to pay.
D)   The receivables turnover ratio is used to calculate the days to collect by dividing the turnover ratio by 365E) A) and B)
F) A) and C)

Question 6

The principal of a notes receivable depends on the maturity date.

Accepted Answer

A) True 
 B)False

Question 7

If a company did not extend credit to customers:

Accepted Answer

A)   gross revenue would rise.
B)   costs would rise but so would its revenue.
C)   costs would fall but so would its revenue.
D)   gross profit would rise.E) A) and D)
F) A) and C)

Question 8

A company reported a receivables turnover ratio of 8.0. Cost of goods sold was $350,000 and net sales were $480,000. The average accounts receivable must have been

Accepted Answer

A)   $45,000
B)   $120,000
C)   $60,000
D)   $90,000E) All of the above
F) A) and B)

Question 9

The amount of uncollectible accounts at the end of the year is estimated to be $25,000 using the aging of accounts receivable method. The balance in the Allowance of Doubtful Accounts account is an $8,000 credit before adjustment. Assuming no accounts are written off during the period, what will be the amount of bad debt expense for the period?

Accepted Answer

A)   $8,000.
B)   $17,000.
C)   $25,000.
D)   $33,000.E) None of the above
F) B) and D)

Question 10

Before adjustment, the allowance for doubtful accounts has a credit balance of $2,700. The company had $140,000 of net credit sales during the period and historically fails to collect 4% of credit sales. The company
Uses the percentage of credit sales method of estimating doubtful accounts. After adjusting for estimated bad debts, the new balance in the allowance for doubtful accounts account will be:

Accepted Answer

A)   $8,300.
B)   $5,400.
C)   $2,900.
D)   $5,600E) C) and D)
F) A) and D)

Question 11

On average, 5% of total accounts receivable has been uncollectible in the past. At the end of the year, the current balance of accounts receivable is $100,000. The allowance for doubtful accounts has an unadjusted debit balance of $500. Credit sales during the year were $150,000. The estimated bad debt expense is:

Accepted Answer

A)   $4,500.
B)   $5,000.
C)   $5,500.
D)   $7,000.E) C) and D)
F) All of the above

Question 12

When a company that uses the allowance method writes off an actual bad debt:

Accepted Answer

A)   total assets decrease.
B)   total liabilities increase.
C)   total expenses increase and total revenues increase.
D)   total assets, revenue, and expenses remain the same.E) B) and C)
F) A) and D)

Question 13

The Grass is Greener Corporation's receivables turnover ratio decreases from 14.1 to 11.8. Which of the following statements is true?

Accepted Answer

A)   This indicates that the company is taking longer to collect credit payments.
B)   This is an indication that the company is experiencing falling credit costs.
C)   This could be an indication that the company is using more efficient collection methods.
D)   This is an indication that the company is buying and selling financial assets less rapidly.E) C) and D)
F) A) and D)

Question 14

If an uncollectible account, previously written off, is recovered:

Accepted Answer

A)   net accounts receivable increases.
B)   net accounts receivable decreases.
C)   net accounts receivable stays the same.
D)   total revenues increase.E) C) and D)
F) None of the above

Question 15

When credit card sales occur, the seller may either debit Cash or debit Accounts Receivable depending upon when the credit card company pays the seller.

Accepted Answer

A) True 
 B)False

Question 16

Interest Revenue from notes receivable is reported on a multistep income statement as a part of Income from
Operations.

Accepted Answer

A) True 
 B)False

Question 17

On January 31, 2011, Purrfect Pets receives a $4,680 interest payment on a note receivable representing two months of accumulated interest. One month of this interest accrued and was recorded during the year ended December 31, 2010. Upon receiving the payment, the company would:

Accepted Answer

A)   debit Interest Receivable for $2,340, debit Cash $2,340, and credit Interest Revenue for $4,680.
B)   debit Cash for $4,680, credit Interest Revenue for $2,340, and credit Interest Receivable for $2,340.
C)   debit Cash for $2,340, debit Interest Receivable for $2,340, and credit Interest Revenue for $2,340.
D)   debit Interest Revenue for $2,340 and credit Cash for $2,340.E) A) and D)
F) A) and C)

Question 18

The following information is available for a company at the end of the year:  What was the amount of write-offs during the year?

Accepted Answer

A)   $62,000
B)   $0
C)   $55,000
D)   $40,000E) A) and D)
F) A) and C)

Question 19

The use of the Allowance method is required under the matching principle.

Accepted Answer

A) True 
 B)False

Question 20

Using the allowance method, how would net income and the accounts receivable turnover ratio be affected when a customer's account balance, which is known to be uncollectible, is written off?

Accepted Answer

A)   Option A
B)   Option B
C)   Option C
D)   Option DE) A) and C)
F) B) and D)

Exam 8: Reporting and Interpreting Receivables, Bad Debt Expense, and Interest Revenue

Correct Answer
verified

Interest Revenue from notes receivable is reported on a multistep income statement as a part of Income from Operations.

Correct Answer
verified

The following information is available for a company at the end of the year: What was the amount of write-offs during the year?

Correct Answer
verified

In reviewing the accounts receivable, the net receivables value is $17,000 before writing off a $1,500 account. What is the net receivables value after the write-off?

Correct Answer
verified

The Grass is Greener Corporation uses the allowance method and learns that a customer who owes $350 has gone bankrupt and payment will not be made. The Grass is Greener Corporation should:

Correct Answer
verified

Correct Answer
verified

If an uncollectible account, previously written off, is recovered:

Correct Answer
verified

The principal of a notes receivable depends on the maturity date.

Correct Answer
verified

A company reported a receivables turnover ratio of 8.0. Cost of goods sold was $350,000 and net sales were $480,000. The average accounts receivable must have been

Correct Answer
verified

On January 31, 2011, Purrfect Pets receives a $4,680 interest payment on a note receivable representing two months of accumulated interest. One month of this interest accrued and was recorded during the year ended December 31, 2010. Upon receiving the payment, the company would:

Correct Answer
verified

The Grass is Greener Corporation's receivables turnover ratio decreases from 14.1 to 11.8. Which of the following statements is true?

Correct Answer
verified

When a company that uses the allowance method writes off an actual bad debt:

Correct Answer
verified

Correct Answer
verified

Using the allowance method, how would net income and the accounts receivable turnover ratio be affected when a customer's account balance, which is known to be uncollectible, is written off?

Correct Answer
verified

Purrfect Pets sells a $1,500 aquarium to a customer on account. This would be recorded by an entry that includes a:

Correct Answer
verified

The use of the Allowance method is required under the matching principle.

Correct Answer
verified

Which of the following statements regarding the receivables turnover ratio is true?

Correct Answer
verified

If a company did not extend credit to customers:

Correct Answer
verified

The unadjusted balance of the allowance for doubtful accounts of Johnstone Supplies, Inc., is a credit balance in the amount of $28,947 on July 31, 2011. Based on the accounts receivable aging report, bad debt expense will be:

Correct Answer
verified

When credit card sales occur, the seller may either debit Cash or debit Accounts Receivable depending upon when the credit card company pays the seller.

Correct Answer
verified

Exam 8: Reporting and Interpreting Receivables, Bad Debt Expense, and Interest Revenue

Correct AnswerverifiedShow Answer

Interest Revenue from notes receivable is reported on a multistep income statement as a part of Income from Operations.

Correct AnswerverifiedShow Answer

The following information is available for a company at the end of the year: What was the amount of write-offs during the year?

Correct AnswerverifiedShow Answer

In reviewing the accounts receivable, the net receivables value is $17,000 before writing off a $1,500 account. What is the net receivables value after the write-off?

Correct AnswerverifiedShow Answer

The Grass is Greener Corporation uses the allowance method and learns that a customer who owes $350 has gone bankrupt and payment will not be made. The Grass is Greener Corporation should:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If an uncollectible account, previously written off, is recovered:

Correct AnswerverifiedShow Answer

The principal of a notes receivable depends on the maturity date.

Correct AnswerverifiedShow Answer

A company reported a receivables turnover ratio of 8.0. Cost of goods sold was $350,000 and net sales were $480,000. The average accounts receivable must have been

Correct AnswerverifiedShow Answer

On January 31, 2011, Purrfect Pets receives a $4,680 interest payment on a note receivable representing two months of accumulated interest. One month of this interest accrued and was recorded during the year ended December 31, 2010. Upon receiving the payment, the company would:

Correct AnswerverifiedShow Answer

The Grass is Greener Corporation's receivables turnover ratio decreases from 14.1 to 11.8. Which of the following statements is true?

Correct AnswerverifiedShow Answer

When a company that uses the allowance method writes off an actual bad debt:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Using the allowance method, how would net income and the accounts receivable turnover ratio be affected when a customer's account balance, which is known to be uncollectible, is written off?

Correct AnswerverifiedShow Answer

Purrfect Pets sells a $1,500 aquarium to a customer on account. This would be recorded by an entry that includes a:

Correct AnswerverifiedShow Answer

The use of the Allowance method is required under the matching principle.

Correct AnswerverifiedShow Answer

Which of the following statements regarding the receivables turnover ratio is true?

Correct AnswerverifiedShow Answer

If a company did not extend credit to customers:

Correct AnswerverifiedShow Answer

The unadjusted balance of the allowance for doubtful accounts of Johnstone Supplies, Inc., is a credit balance in the amount of $28,947 on July 31, 2011. Based on the accounts receivable aging report, bad debt expense will be:

Correct AnswerverifiedShow Answer

When credit card sales occur, the seller may either debit Cash or debit Accounts Receivable depending upon when the credit card company pays the seller.

Correct AnswerverifiedShow Answer

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