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230 Cards in this Set
- Front
- Back
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On June 15, Kersee Company sold merchandise on account to Eng Co. for $1,000, terms 2/10, n/30. On June 20, Eng Co. returns merchandise worth $300 to Kersee Company. On June 24, payment is received from Eng Co. for the balance due. What is the amount of cash received on June 24? |
The amount received on June 24 is $686. Because payment is made within the discount period of 10 days, the amount received is $700 ($1,000 - return of $300) minus the discount of $14 ($700 × 2%), for a cash amount of $686.
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Which of the following should be classified as an "other" receivable?
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Interest receivable
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What type of receivables result from sales transactions?
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Trade receivables
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When is a receivable recorded by a service organization?
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When service is provided on account
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Receivables are reported on the balance sheet at the cash amount owed by customers. (true or False)
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False
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Net credit sales for the month are $4,000,000 for Marx Clothiers. Its accounts receivable balance is $160,000. The allowance is calculated as 7.5% of the receivables balance using the percentage of receivables basis. The Allowance for Doubtful Accounts has a credit balance of $5,000 before adjustment. How much is the balance of the allowance account after adjustment?
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Because the estimate is based on a percentage of receivables, the $800 balance in the Allowance accounts must be considered. The amount by which the allowance account will be increased is 7.5% times $160,000, which is $12,000. Since there is already a balance of $5,000 in the allowance account, the difference of $7,000 should be added, giving a balance of $12,000.
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Obama Company has identified that Bill Clinton's receivable account of $100 is uncollectible. What is the journal entry needed to write off the account under the allowance method?
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Allowance for Doubtful Accounts 100
Accounts Receivable 100 |
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When an uncollectible account is recovered after it has been written off, which of the following accounts will be credited in the process?
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Accounts Receivable and Allowance for Doubtful Accounts
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RyTronics uses the percentage of receivables method for estimating bad debts expense. The Accounts Receivable balance is $100,000 at year-end and the total credit sales were $800,000. Management estimates that 4% of receivables will be uncollectible. What adjusting entry will be recorded if the Allowance for Doubtful Accounts has a credit balance of $800 before adjustment?
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Bad Debts Expense 3,200
Allowance for Doubtful Accounts 3,200 |
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Which of the following is one effect of recording thewrite off of an account under the allowance method?
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Allowance for Doubtful Accounts is debited.
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The direct write-off method violates the matching principle (True or False)
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True
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Allowance for Doubtful Accounts is written off at the end of the fiscal year.(True or False)
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False
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Under the allowance method, the write off of an account receivable leaves the net realizable value of the receivables unchanged.(True or False)
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true
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Which one of the following is not one of the three basic issues in accounting for notes receivable?
-Realizing notes receivable -Recognizing notes receivable -Disposing of notes receivable -Valuing notes receivable |
Realizing notes receivable
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At what amount is a short-term notes receivable recorded on the issue date?
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Face Value
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Michael Co. accepts a $4,000, 3-month, 12% promissory note in settlement of an account with Tani Co. The entry to record this transaction is:
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Notes Receivable 4,000
Accounts Receivable 4,000 |
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Which one of these statements about promissory notes is incorrect?
-A promissory note is more liquid than an account receivable. -A promissory note is more liquid than an account receivable. -The party making the promise to pay is called the maker. -A promissory note is not a negotiable instrument. -The party to whom payment is to be made is called the payee. |
A promissory note is not a negotiable instrument
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A 90-day promissory note is issued on September 15. What is the note's maturity date?
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December 14
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An analysis and aging of the accounts receivable of Raja Company at December 31 reveal these data:
Accounts receivable $800,000 Allowance for doubtful accounts per books before adjustment (credit) 12,000 Amounts expected to become uncollectible 65,000 How much is the cash realizable value of the accounts receivable at December 31, after adjustment? |
735,000
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Ryan Leaf Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $60,000 at year-end and the total credit sales were $2,300,000 for the year. Management estimates that 3% of receivables will be uncollectible. What adjusting entry should be made if the Allowance for Doubtful Accounts has a credit balance of $200 before adjustment?
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Bad Debts Expense 1,600
Allowance for Doubtful Accounts 1,600 |
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If a company uses the allowance method for uncollectible accounts, then the entry to record $800 of estimated uncollectibles is
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Bad Debts Expense 800
Allowance for Doubtful Accounts 800 |
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During 2012, Patterson Wholesale Company had net credit sales of $750,000. On January 1, 2012, Allowance for Doubtful Accounts had a credit balance of $18,000. During 2012, $30,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage of receivables basis). If the accounts receivable balance at December 31 was $200,000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2012?
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After the write-offs are recorded, Allowance for Doubtful Accounts will have a debit balance of $12,000 ($18,000 credit beginning balance combined with a $30,000 debit for the write-offs). The desired balance, using the percentage of receivables basis, is a credit balance of $20,000 ($200,000 × 10%). In order to have an ending balance of $20,000, a credit entry of $32,000 must be made to Allowance for Doubtful Accounts. Thus, the amount of the adjusting entry must be $32,000.
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Which of the following is the debit effect of the journal entry to record the dishonor of a note receivable?
-Allowance for Doubtful Accounts -Loss on Notes Receivable -Bad Debts Expense -Accounts Receivable |
Accounts Receivable
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When a note receivable is paid on time and no interest has been previously accrued, what will the journal entry to record the transaction contain?
a. Two debits and one credit b. Two credits and one debit c. One debit and one credit d. None of the above |
Two credits and one debit
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Schleis Co. holds Murphy Inc.'s $10,000, 120-day, 9% note. What is the entry to be made by Schleis Co. when the note is collected, assuming no interest has previously been accrued?
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Cash 10,300
Notes Receivable 10,000 Interest Revenue 300 |
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A company holds a 120-day, 10%, $21,000 note which was not paid in full on the maturity date. Which of the following will the journal entry on the maturity date include?
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Debit to Accounts Receivable for $21,700
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Which statement is true about reporting receivables on the balance sheet?
-Bad Debts Expense is is shown as a deduction from Accounts Receivable on the balance sheet. -Allowance for Doubtful Accounts is shown as a deduction from Accounts Receivable on the balance sheet. -Bad Debts Expense and Allowance for Doubtful Accounts are shown as a deduction from Accounts Receivable on the balance sheet. - Bad Debts Expense is subtracted from Accounts Receivable and is then shown as a deduction from Accounts Receivable on the balance sheet. |
Allowance for Doubtful Accounts is shown as a deduction from Accounts Receivable on the balance sheet
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Which one of the following is the correct presentation of Accounts Receivable and its contra account on the balance sheet?
Accounts Receivable $642,000 Less: Bad Debt Expense (17,000) $625,000 Accounts Receivable $642,000 Less: Bad Debt Expense (17,000) Less: Allowance for Doubtful Accounts (2,000) $623,000 Accounts Receivable $642,000 Less: Allowance for Doutful Accounts 2,000 $644,000 Accounts Receivable $642,000 Less: Allowance for Doutful Accounts (2,000) $640,000 |
Accounts Receivable $642,000
Less: Allowance for Doutful Accounts (2,000) $640,000 |
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What is often the most critical part of managing receivables?
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Determining who gets credit and who doesn't
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Which of the following is a threat of nonpayment from a single customer or class of customers that could adversely affect the financial health of a company?
-Payment risk -Credit risk -A concentration of credit risk -Concentration risk |
A concentration of credit Risk
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Which one of the following is not one of the principles of managing accounts receivable?
-Determining which vendor from which credit should be requested -Monitoring collections -Establishing a payment period -Accelerating cash receipts from receivables when necessary |
etermining which vendor from which credit should be requested
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Eddy Corporation had net credit sales during the year of $800,000 and cost of goods sold of $500,000. The balance in receivables at the beginning of the year was $100,000 and at the end of the year was $150,000. How much is the receivables turnover ratio?
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$800,000/[($100,000 + $150,000)/2] = 6.4.
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Prall Corporation sells its goods on terms of 2/10, n/30. It has a receivables turnover ratio of 7.00. What is its average collection period (days)?
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365/7 = 52 days
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What type of receivable is evidenced by a formal instrument and normally requires the payment of interest? |
A note receivable (A note receivable represent claims for which formal instruments of credit are issued as evidence of the debt. The note normally requires the payment of the principal and interest on a specific date.)
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On June 15, Kersee Company sold merchandise on account to Eng Co. for $1,000, terms 2/10, n/30. On June 20, Eng Co. returns merchandise worth $300 to Kersee Company. On June 24, payment is received from Eng Co. for the balance due. What is the amount of cash received on June 24?
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686
(The amount received on June 24 is $686. Because payment is made within the discount period of 10 days, the amount received is $700 ($1,000 - return of $300) minus the discount of $14 ($700 × 2%), for a cash amount of $686.) |
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Which of the following should be classified as an "other" receivable?
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Interest receivable
(Trade, accounts, and notes receivables are financial instruments typically accepted from customers for the value of a transaction. Interest receivable results because of the time value of money.) |
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What type of receivables result from sales transactions?
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Trade receivables (Accounts receivable and notes receivable resulting from sales transactions are called trade receivables.)
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At what value are accounts receivable reported on the balance sheet?
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Net cash realizable value (Accounts receivable are reported at net realizable value. This value is the total amount due less an estimate for doubtful accounts.)
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Under the allowance method, the write off of an account receivable leaves the net realizable value of the receivables unchanged.
t or f |
True (When an account is written off, the entry is a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable. This reduces the accounts receivable and the allowance for doubtful accounts by the same amount, so that the difference between the two,orthe net realizable value, does not change.)
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The direct write-off method violates the matching principle.
t or f |
True (The direct write-off method waits until a receivable has declined in value and is determined to be uncollectible before it is written off. This usually occurs after the end of the fiscal period of the related sale, which violates the matching principle.)
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RyTronics uses the percentage of receivables method for estimating bad debts expense. The Accounts Receivable balance is $100,000 at year-end and the total credit sales were $800,000. Management estimates that 4% of receivables will be uncollectible. What adjusting entry will be recorded if the Allowance for Doubtful Accounts has a credit balance of $800 before adjustment?
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Bad Debts Expense 3,200
Allowance for Doubtful Accounts 3,200 (Allowance for Doubtful Accounts needs an ending credit balance of 4% of $100,000 or $4,000. To increase the current credit balance of $800 to the required amount of $4,000, the account requires a credit of $3,200. The entry to estimate bad debts is a debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts for $3,200.) |
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When an uncollectible account is recovered after it has been written off, which of the following accounts will be credited in the process?
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Accounts Receivable and Allowance for Doubtful Accounts (When an uncollectible account is recovered after its has been written off, Allowance for Doubtful Accounts will be credited and Accounts Receivable will be debited in the first entry. The second entry requires a credit to Accounts Receivable and a debit to Cash.)
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Which one of the following statements is true?
Bad Debts Expense is a real account and remains open at the end of the fiscal period, while Allowance for Doubtful Accounts is a nominal account and is closed at the end of the fiscal period. Bad Debts Expense and Allowance for Doubtful Accounts are both nominal accounts and are closed at the end of the fiscal period. Bad Debts Expense is a nominal account and is closed at the end of the fiscal period, while Allowance for Doubtful Accounts is a real account and remains open at the end of the fiscal period. Bad Debts Expense and Allowance for Doubtful Accounts are both real accounts and neither are closed at the end of the fiscal period. |
Bad Debts Expense is a nominal account and is closed at the end of the fiscal period, while Allowance for Doubtful Accounts is a real account and remains open at the end of the fiscal period.
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Obama Company has identified that Bill Clinton's receivable account of $100 is uncollectible. What is the journal entry needed to write off the account under the allowance method?
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Allowance for Doubtful Accounts 100
Accounts Receivable 100 (he proper journal entry debits Allowance for Doubtful Accounts and credits Accounts Receivable. Bad debt expense is recognized only when doubtful accounts are estimated, not when they are written off.) |
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Net credit sales for the month are $4,000,000 for Marx Clothiers. Its accounts receivable balance is $160,000. The allowance is calculated as 7.5% of the receivables balance using the percentage of receivables basis. The Allowance for Doubtful Accounts has a credit balance of $5,000 before adjustment. How much is the balance of the allowance account after adjustment?
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$12,000
(Because the estimate is based on a percentage of receivables, the $800 balance in the Allowance accounts must be considered. The amount by which the allowance account will be increased is 7.5% times $160,000, which is $12,000. Since there is already a balance of $5,000 in the allowance account, the difference of $7,000 should be added, giving a balance of $12,000.) |
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An analysis and aging of the accounts receivable of Raja Company at December 31 reveal these data:
Accounts receivable $800,000 Allowance for doubtful accounts per books before adjustment (credit) 12,000 Amounts expected to become uncollectible 65,000 How much is the cash realizable value of the accounts receivable at December 31, after adjustment? |
$735,000 (The cash realizable value of the accounts receivable is accounts receivable less the ending balance in the Allowance for Doubtful Accounts. In this case, accounts receivable is $800,000 and the ending balance in Allowance for Doubtful Accounts is $65,000. This results in cash realizable value of $800,000 less $65,000, or $735,000.)
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How much accrued interest should be reported on the payee's December 31 balance sheet ona $5,000, 8%, 9-month note receivable issued on June 1?
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$233
(Interest earned is calculated by multiplying the principal times the interest rate times the portion of the year that has passed since the note was issued.) |
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Butte Co. loaned $25,000 to Beavis Co. on June 1, at 12% interest for 3 months. What adjusting entry will Butte Co. have to make on June 30 before preparing the financial statements on June 30?
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Interest Receivable 250
Interest Revenue 250 (Interest earned is calculated by multiplying the principal times the interest rate times the portion of the year that has passed since the note was issued. $25,000 × 12% × 1/12 = $250) |
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Schleis Co. holds Murphy Inc.'s $10,000, 120-day, 9% note. What is the entry to be made by Schleis Co. when the note is collected, assuming no interest has previously been accrued?
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Cash 10,300
Notes Receivable 10,000 Interest Revenue 300 (When Schleis receives payment, it will increase cash, reduce the note account, and recognize ot interest earned for the term of the note. Interest = $10,000 × 9% × 120/360 = $300) |
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Which statement is true about reporting receivables on the balance sheet?
Bad Debts Expense and Allowance for Doubtful Accounts are shown as a deduction from Accounts Receivable on the balance sheet. Allowance for Doubtful Accounts is shown as a deduction from Accounts Receivable on the balance sheet. Bad Debts Expense is is shown as a deduction from Accounts Receivable on the balance sheet. Bad Debts Expense is subtracted from Accounts Receivable and is then shown as a deduction from Accounts Receivable on the balance sheet. |
Allowance for Doubtful Accounts is shown as a deduction from Accounts Receivable on the balance sheet. (Allowance for Doubtful Accounts is a contra asset account that is shown as a deduction from Accounts Receivble on the balance sheet in the current asset section.)
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Which one of the following is the correct presentation of Accounts Receivable and its contra account on the balance sheet?
Accounts Receivable $642,000 Less: Allowance for Doutful Accounts 2,000 $644,000 Accounts Receivable $642,000 Less: Bad Debt Expense (17,000) $625,000 Accounts Receivable $642,000 Less: Bad Debt Expense (17,000) Less: Allowance for Doubtful Accounts (2,000) $623,000 Accounts Receivable $642,000 Less: Allowance for Doutful Accounts (2,000) $640,000 |
Accounts Receivable $642,000
Less: Allowance for Doutful Accounts (2,000) $640,000 (The contra asset account is deducted from Accounts Receivable to result in the cash (net) realizable value) |
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Which of the following is a threat of nonpayment from a single customer or class of customers that could adversely affect the financial health of a company?
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A concentration of credit risk
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What is the receivables turnover ratio?
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Net credit sales divided by average net receivables
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Good Stuff Retailers accepted $50,000 of Citibank Visa credit card charges for merchandise sold on July 1. Citibank charges 4% for its credit card use. Which of the following is/are the debit entry(ies) required to record this transaction by Good Stuff Retailers?
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Cash $48,000 and Service Charge Expense $2,000 (The entry includes a credit to Sales for $50,000, a $48,000 debit to Cash, and a debit to Service Charge Expense for $2,000)
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Which of the following accounts is debited when a company factors its accounts receivable?
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Service Charge Expense
(Service Charge Expense and Cash are the two accounts debited when accounts receivable are factored) |
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Interest is usually associated with...
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notes receivable
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The receivable that is usually evidenced by a formal instrument of credit is a(n)..
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note receivable
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Receivables are..
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claims that are expected to be collected in cash
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At the end of 2011, Tatham Co. has accounts receivable of $666,316 and an allowance for doubtful accounts of $34,957. On January 24, 2012, it is learned that the company's receivable from Nardin Inc. is not collectible and therefore management authorizes a write-off of $4,443. On March 4, 2012, Tatham Co. receives payment of $4,443 in full from Nardin Inc.
Prepare the journal entries to record the payment... |
...
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Gipson Furniture factors $400,000 of receivables to Kwik Factors, Inc. Kwik Factors assesses a 3% service charge on the amount of receivables sold. Gipson Furniture factors its receivables regularly with Kwik Factors. What journal entry does Gipson make when factoring these receivables?
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Cash 388,000
Service Charge Expense 12,000 Accounts Receivable 400,000 |
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Which receivables accounting and reporting issue is not essentially the same for IFRS and GAAP?
the use of allowance accounts and the allowance method. how to record discounts. how to record factoring. all of the above are essentially the same for IFRS and GAAP. |
all of the above are essentially the same for IFRS and GAAP.
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Corristan Company purchased equipment and incurred these costs:
Cash price $24,000 Sales taxes 1,200 Insurance during transit 200 Annual maintenance costs 400 Total costs $25,800 What amount should be recorded as the cost of the equipment? |
$25,400
(All costs necessary to get the asset ready to use should be included as part of the cost of the equipment because these are the costs that are necessary to acquire, safely transport, and prepare it for its intended use. The annual maintenance costs are expensed, not capitalized. $24,000 + $1,200 + $200 = $25,400) |
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Land improvements are depreciable assets.t or f
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True (Improvements to land are structural additions made to land, such as driveways, parking lots, fences, landscaping, and sprinklers. Land improvements are depreciated to allocate the cost to periods that benefit from the land improvements.)
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Closing costs incurred to purchase a tract of land are included in the cost of the land.
t or f |
True
(Closing costs paid in the purchase of a piece of land are considered part of the cost of the land) |
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Which of the following is not a depreciable asset?
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Land
(Land is not a depreciable asset. Land improvements, equipment, and buildings are depreciated to allocate their costs to the fiscal periods in which they render a benefit.) |
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Which one of the following costs will not be included in the cost of equipment?
Annual insurance Testing Freight Installation |
Annual insurance
(Because annual insurance costs are ongoing and do not benefit multiple periods, they are expensed in the year incurred. Insurance costs incurred while the equipment is in transit can be appropriately included in the cost of the equipment) |
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Coronado Company purchased land for $80,000. The company also paid $12,000 in accrued taxes on the property, incurred $5,000 to remove an old building, and received $2,000 from the salvage of the old building. At what amount will the land be recorded in the accounting records?
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$95,000 (All costs necessary to get the land ready to use should be capitalized as part of the cost of the land. Coronado should include the purchase price of $80,000, the accrued taxes of $12,000, the cost of razing the old building of $5,000 less the payment received for the salvaged materials in the amount of $2,000. This results in an acquisition cost of $95,000.)
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Which of the following costs should not be included in the cost of a building?
Remodeling of office space prior to use Broker's commission Parking lot repaving Closing costs |
Parking lot repaving
(Parking lot repaving costs are considered to be land improvements and are capitalized in an account separate from buildings) |
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What is depreciation?
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A cash accumulation approach
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Book value and market value are synonymous terms as they relate to plant assets.
t or f |
True
(Market value represents a value at which an asset can be sold. Book value is the net amount at which an asset appears on a company's balance sheet. It is equal to acquisition cost less accumulated depreciation) |
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Which depreciation method calculates annual depreciation expense based on book value at the beginning of each year?
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Declining-balance
(All declining-balance methods are affected by the beginning of the year book value.) |
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When there is a change in estimated depreciation...
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current and future years' depreciation should be revised (When estimated depreciation changes, the changes should be reflected in the current and future years, not in prior years.)
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A company has the following asset account balances:
Buildings and equipment $9,200,000 Accumulated depreciation 1,200,000 Patents 750,000 Land Improvements 1,000,000 Land 5,000,000 How much will be reported on the balance sheet under property, plant, & equipment? |
$14,000,000 (Buildings and equipment, land improvements, and land, less accumulated depreciation are included for a total of $14,000,000)
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he contra account to property, plant and equipment is accumulated amortization. t or f
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False (The contra account in the property, plant, and equipment section of the balance sheet is accumulated depreciation)
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A company purchased land for $72,000 cash. Real estate brokers' commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. Proceeds from salvage of the demolished building was $1,200. Under the cost principle, the cost of land would be recorded at
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$82,800.
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Which of the following is not properly classified as property, plant, and equipment?
A truck held for resale by an automobile dealership. Building used as a factory. Land improvement, such as parking lots and fences. Land used in ordinary business operations. |
A truck held for resale by an automobile dealership.
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A characteristic of a plant asset is that it is...
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used in the operations of a business.
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Depreciation is a process of asset valuation, not cost allocation. t or f
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False
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Depreciation provides for the proper matching of expenses with revenues. t or f
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True
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The book value of a plant asset should approximate its fair value. t or f
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false
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Depreciation applies to three classes of plant assets: land, buildings, and equipment. t or f
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false
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Depreciation does not apply to a building because its usefulness and revenue producing ability generally remain intact over time. t or f
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false
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The revenue-producing ability of a depreciable asset will decline due to wear and tear and to obsolescence. t or f
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true
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Recognizing depreciation on an asset results in an accumulation of cash for replacement of the asset. t or f
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False
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The balance in accumulated depreciation represents the total cost that has been charged to expense. t or f
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true
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Depreciation expense and accumulated depreciation are reported on the income statement. t or f
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False
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Four factors affect the computation of depreciation: cost, useful life, salvage value, and residual value. t or f
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false
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Moss County Bank agrees to lend the Sadowski Brick Company $400,000 on January 1. Sadowski Brick Company signs a $400,000, 6%, 9-month note. The entry made by Sadowski Brick Company on January 1 to record the proceeds and issuance of the note is....
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Cash 400,000
Notes Payable 400,000 |
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Moss County Bank agrees to lend the Sadowski Brick Company $400,000 on January 1. Sadowski Brick Company signs a $400,000, 6%, 9-month note. What is the adjusting entry required if Sadowski Brick Company prepares financial statements on June 30?
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Interest Expense 12,000
Interest Payable 12,000 |
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Moss County Bank agrees to lend the Sadowski Brick Company $400,000 on January 1. Sadowski Brick Company signs a $400,000, 6%, 9-month note. What entry will Sadowski Brick Company make to pay off the note and interest at maturity assuming that interest has been accrued to September 30?
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Notes Payable 400,000
Interest Payable 18,000 Cash 418,000 |
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West County Bank agrees to lend Drake Builders Company $100,000 on January 1. Drake Builders Company signs a $100,000, 6%, 6-month note. The entry made by Drake Builders Company on January 1 to record the proceeds and issuance of the note is...
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Cash 100,000
Notes Payable 100,000 |
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West County Bank agrees to lend Drake Builders Company $100,000 on January 1. Drake Builders Company signs a $100,000, 6%, 6-month note. What is the adjusting entry required if Drake Builders Company prepares financial statements on March 30?
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Interest Expense 1,500
Interest Payable 1,500 |
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West County Bank agrees to lend Drake Builders Company $100,000 on January 1. Drake Builders Company signs a $100,000, 6%, 6-month note. What entry will Drake Builders Company make to pay off the note and interest at maturity assuming that interest has been accrued to June 30?
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Notes Payable 100,000
Interest Payable 3,000 Cash 103,000 |
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On October 1, Sam's Painting Service borrows $80,000 from National Bank on a 3-month, $80,000, 4% note. The entry by Sam's Painting Service to record payment of the note and accrued interest on January 1 is...
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Notes Payable 80,000
Interest Payable 800 Cash 80,800 |
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The interest charged on a $200,000 note payable, at the rate of 6%, on a 60-day note would be..
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$2,000.
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The interest charged on a $200,000 note payable, at the rate of 6%, for a year would be..
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$12,000
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The time period for classifying a liability as current is one year or the operating cycle, whichever is...
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longer
(Liabilities are classified as current if they will be paid with current assets within one year or the current operating cycle, whichever is longer, because some companies have operating cycles that are longer than one year.) |
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To be classified as a current liability, how or when must a debt be expected to be paid?
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Either out of existing current assets or by creating other current liabilities
(Current liabilites are those that are expected to be paid out of existing current assets or by creating other current liabilities) |
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Danta Company has a March 31 fiscal year end. What is the maturity value of a $25,000, 12%, 3-month note receivable dated March 1? |
$25,750
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What is the maturity value of a $25,000, 9%, 4-month note receivable issued on December 1 if the company has a fiscal year end on December 31?
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$25,750
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On the date a 90-day note is honored, how much cash will the payee receive?
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Face value plus 90 days of interest
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Which of the following is the debit effect of the journal entry to record the dishonor of a note receivable?
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Accounts Receivable
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When a note receivable is paid on time and no interest has been previously accrued, what will the journal entry to record the transaction contain?
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Two credits and one debit
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Schleis Co. holds Murphy Inc.'s $10,000, 120-day, 9% note. What is the entry to be made by Schleis Co. when the note is collected, assuming no interest has previously been accrued?
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Cash 10,300
Notes Receivable 10,000 Interest Revenue 300 |
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A company holds a 120-day, 10%, $21,000 note which was not paid in full on the maturity date. Which of the following will the journal entry on the maturity date include?
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Debit to Accounts Receivable for $21,700
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Which of the following is the correct sequence to report receivables on the balance sheet?
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Accounts receivable, a 6-month note receivable, other receivables
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|
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Which statement is true about reporting receivables on the balance sheet?
|
Allowance for Doubtful Accounts is shown as a deduction from Accounts Receivable on the balance sheet.
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Which one of the following is the correct presentation of Accounts Receivable and its contra account on the balance sheet?
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Accounts Receivable $642,000
Less: Allowance for Doubtful Accounts (2,000) $640,000 |
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If a company is concerned about lending money to a risky customer, which one of the following would it not want to do?
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Provide the customer a lengthy payment period to increase the chance of paying
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|
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What is often the most critical part of managing receivables?
|
Determining who gets credit and who doesn't
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Which of the following is a threat of nonpayment from a single customer or class of customers that could adversely affect the financial health of a company?
|
A concentration of credit risk
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Which one of the following is not one of the principles of managing accounts receivable?
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Determining from which vendor credit should be requested
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The accounts receivables turnover is computed by dividing net sales by accounts receivable. T or F?
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False
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Eddy Corporation had net credit sales during the year of $800,000 and cost of goods sold of $500,000. The balance in receivables at the beginning of the year was $100,000 and at the end of the year was $150,000. How much is the accounts receivables turnover?
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6.4
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Prall Corporation sells its goods on terms of 2/10, n/30. It has a receivables turnover ratio of 7.00. What is its average collection period (days)?
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52 days
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Net credit sales are $800,000, average net receivables total $150,000, average inventory totals $200,000, and the allowance for doubtful accounts totals $8,000. How much is the average collection period?
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68.5 days
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A captive finance company is one that is owned by the company selling the product. T or F?
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True
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Which of these statements about Visa credit card sales is incorrect?
-The credit card issuer conducts the credit investigation of the customer. -The retailer is not involved in the collection process. -The retailer must wait to receive payment from the issuer. -The retailer receives cash more quickly than it would from individual customers. |
The retailer must wait to receive payment from the issuer.
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Good Stuff Retailers accepted $50,000 of Citibank Visa credit card charges for merchandise sold on July 1. Citibank charges 4% for its credit card use. Which of the following is/are the debit entry(ies) required to record this transaction by Good Stuff Retailers?
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Cash $48,000 and Service Charge Expense $2,000
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Which one of the following is not a method used by companies to accelerate cash receipts?
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Writing off receivables
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Which of the following accounts is debited when a company factors its accounts receivable?
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Service Charge Expense
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Laurel Company factors $300,000 of receivables to Hardy Factors. Hardy assesses a 3% fee on the amount of receivables sold. Laurel Co. factors its receivables to Hardy regularly. What journal entry does Laurel make when the factoring occurs?
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Cash 291,000
Service Charge Expense 9,000 Accounts Receivable 300,000 |
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Kerrison Company sold $6,000 of merchandise to customers who charged their purchases with a bank credit card. Kerrison's bank charges it a 4% fee. Which one of the following is part of the journal entry to record the credit card sales?
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Debit to Cash for $5,760
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Factoring is the process of
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selling accounts receivable at a discount to another party.
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Which of the following is the value at which loans and receivables should be reported under IFRS?
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Amortized cost
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What approach does IFRS require when testing whether the value of loans and receivable are impaired?
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A company should look at specific loans and receivables to determine if impaired, and then evaluate as a group.
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Which issue will the IASB and FASB continue to resolve as they work toward convergence?
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How to recognize fair values of financial instruments
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Which of the following statements about a periodic inventory system is true? |
The increased use of computerized systems has increased the use of the periodic system.
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The operating cycle of a merchandising company is ordinarily ___________________ that of a service firm.
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longer than
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A perpetual inventory system
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provides better control over inventories than does a periodic inventory system.
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Jax Company uses a perpetual inventory system and on November 30 purchased merchandise for which it must pay the shipping charges. Which of the following is one part of the required journal entry when Jax pays the shipping charges of $200?
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A debit to Inventory for $200
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Cosmos Corporation, which uses a perpetual inventory system, purchased $2,000 of merchandise on July 5 on account. Credit terms were 2/10, n/30. It returned $400 of the merchandise on July 9. Which of the following is one effect when Cosmos pays its bill on July 21?
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Credit to Cash for $1,600
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On what amount is a sales discount based?
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Invoice price less returns and allowances
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Myers and Company sold $1,800 of merchandise on account to Oscar, Inc. on March 1 with credit terms of 2/10, n/30. Oscar returned $500 of the merchandise due to poor quality on March 3. If Oscar pays for the purchase on March 11, what entry does Myers make to record receipt of the payment?
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D. Cash 1,274
D. Sales Discounts 26 C. Accounts Receivable 1,300 |
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In a perpetual inventory system, which accounts will the seller credit when merchandise is returned by a customer?
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Accounts Receivable and Cost of Goods Sold
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Which statement is true for the seller?
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The Sales Returns and Allowances account is debited for defective merchandise returned by a customer.
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A retailer makes a $100 sale with terms of 2/10, n/30 on the first of the month. The customer returns $20 of merchandise for credit on account. What journal entry will the retailer record when payment is received within the discount period under a perpetual inventory system?
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D. Cash 78.40
D. Sales Discounts 1.60 C. Accounts Receivable 80.00 |
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A credit sale of $750 is made on June 13, terms 2/10, n/30, on which a return of $50 is granted on June 16. What amount is received as payment in full on June 23?
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686
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Which statement is true when recording the sale of goods for cash in a perpetual inventory system?
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Two journal entries are necessary: one to record the receipt of cash and sales revenue, and one to record the cost of goods sold and to reduce inventory.
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Which of the following is classified in an income statement as a nonoperating activity?
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interest expense
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Which of the following is classified in an income statement as a nonoperating activity?
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Receiving dividend revenue from an investment
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Which of the following would appear on both a single-step and a multiple-step income statement?
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cost of goods sold
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Which one of the following will result in the amount of gross profit?
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Sales revenues less cost of goods sold
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Under what system is cost of goods sold determined at the end of an accounting period?
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Periodic inventory system
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Which of the following would affect the gross profit rate if sales remain constant?
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An increase in cost of goods sold
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Which factor would not affect the gross profit rate?
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An increase in the cost of heating the store
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gross profit fx
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sales revenue-cogs
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net income fx
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gross profit-operating expenses
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gross profit rate fx
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gross profit/net sales
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profit margin ratio
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net income/net sales
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inventory turnover ratio fx
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cogs/avg inventory
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days in inventory fx
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365/inventory turnover ratio
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receivables turnover ratio fx
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net credit sales/avg net receivables
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average collection period
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365/receivables turnover ratio
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When is a physical inventory usually taken?
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when goods arent being sold or received and at the end of the companys fiscal year
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Which of the following should not be included in the physical inventory of a company?
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Goods held on consignment from another company
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Which of the following is not an inventory account?
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equipment
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Which of the following is not a legitimate business reason for taking a physical inventory?
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To verify the profitability of individual inventory items
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Ownership passes to the buyer when purchased goods are received from a public carrier if the goods are shipped
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FOB destination
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Ownership passes to the buyer when the public carrier accepts the goods if the goods are shipped
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FOB shipping point
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Inventory costing methods place primary reliance on assumptions about the flow of
|
costs
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In periods of rising prices, what will LIFO produce?
|
Lower net income than FIFO
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Which one of the following is not a consideration that affects the selection of an inventory costing method?
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Perpetual versus periodic inventory system
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In a period of rising prices which inventory method will result in the greatest amount of income tax expense?
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fifo
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With the assumption of costs and prices generally rising, which of the following is correct?
|
LIFO provides the closest valuation of cost of goods sold to replacement cost of inventory sold.
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|
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In a period of falling prices, which of the following methods will give the largest net income?
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lifo
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Two companies report the same cost of goods available for sale, but each employs a different inventory costing method. If the price of goods has increased during the period, which statement is true?
The company using |
The company using FIFO will have the highest ending inventory.
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Which situation requires a departure from the cost basis of accounting to the lower-of-cost-or-market basis in valuing inventory?
|
A decline in the value of the inventory
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What accounting concept is employed when using the lower-of-cost-or-market valuation?
|
conservatism
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|
|
What is the underlying concept of the lower-of-cost-or-market rule?
|
The conservatism constraint
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Which of these tranasctions would cause the inventory turnover ratio to increase the most?
|
Decreasing the amount of inventory on hand and increasing sales.
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|
Reporting which one of the following allows analysts to make adjustments to compare companies using different cost flow methods?
|
lifo reserve
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What is the LIFO reserve?
|
The difference between the value of the inventory under LIFO and the value under FIFO
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If there is an error in the ending inventory affecting the net income of the current period, what will happen to the net income of the next accounting period?
|
It will have the reverse effect on the net income during the next accounting period.
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|
|
If the ending inventory is overstated, what occurs?
|
Assets are overstated and stockholders' equity is overstated.
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|
Which of the following is not an element of the fraud triangle?
|
segregation of duties
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|
|
Internal auditors
|
evaluate the system of internal controls for the companies that employ them.
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|
Under which of the following do computer programs that limit unauthorized access to certain files fall?
|
Physical, mechanical, and electronic controls
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|
|
Of which of the following is obtaining insurance protection against dishonest employees an example?
|
bonding
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|
|
Reasonable assurance rests on the premise that
|
the costs of establishing controls should not exceed their expected benefit.
|
|
|
For what purpose are physical controls used in a business?
|
To enhance the accuracy and reliability of its accounting records and to safeguard its assets
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|
Handly Inc. permits only designated personnel such as cashiers to handle cash receipts. What principle is being applied?
|
Establishment of responsibility
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|
|
Aptara Construction Supplies has a cashier who is also the accounts receivable clerk for the company. Which internal control principle is violated?
|
Segregation of duties
|
|
|
Which internal control principle is most important in a control system for handling cash receipts?
|
segregation of duties
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|
|
What is an authorization form called which is prepared for each expenditure in most medium and large organizations?
|
voucher
|
|
|
For which item below might a bank issue a credit memorandum to a depositor's account?
|
interest earned
|
|
|
For which of the following might a bank issue a debit memorandum to a depositor's account?
|
Monthly service charges
|
|
|
For which of the following will an adjusting entry be required as the result of a bank reconciliation?
|
nsf checks
|
|
|
As used in a bank reconciliation, how are deposits in transit handled?
|
added to bank balance
|
|
|
Why should a bank reconciliation be prepared?
|
To explain any difference between the depositor's balance per books and the balance per bank
|
|
|
If cash is restricted as to its use, and is expected to be used within the next year, how is it reported?
|
Reported as a current asset separate from Cash and Cash Equivalents on the balance sheet
|
|
|
On which financial statement(s) will cash be reported?
|
Balance sheet and the statement of cash flows
|
|
|
Which statement correctly describes the reporting of cash?
|
Cash is listed first in the current assets section of the balance sheet.
|
|
|
Which of the following would not be an example of good cash management?
|
Investing temporary excess cash into the stock of a small company
|
|
|
With respect to cash management, most companies try to
|
invest idle cash, even if only overnight.
|
|
|
What type of receivable is evidenced by a formal instrument and normally requires the payment of interest?
|
note receivable
|
|
|
Which of the following should be classified as an "other" receivable?
|
interest receivable
|
|
|
What type of receivables result from sales transactions?
|
trade receivables
|
|
|
When is a receivable recorded by a service organization?
|
When service is provided on account
|
|
|
Notes receivable are reported in the current assets section of the balance sheet at
|
cash (net) realizable value.
|
|
|
At what amount are receivables reported on the balance sheet?
|
Cash (net) realizable value
|
|
|
Which of the following is one effect of recording thewrite off of an account under the allowance method?
|
Allowance for Doubtful Accounts is debited.
|
|
|
When an uncollectible account is recovered after it has been written off, which of the following accounts will be credited in the process?
|
Accounts Receivable and Allowance for Doubtful Accounts
|
|
|
Which one of the following is part of the transaction that is recorded when an account is written off under the allowance method?
|
Allowance for Doubtful Accounts is debited.
|
|
|
At what amount is a short-term notes receivable recorded on the issue date?
|
face value
|
|
|
On the date a 90-day note is honored, how much cash will the payee receive?
|
Face value plus 90 days of interest
|
|
|
Which of the following is the debit effect of the journal entry torecord the dishonor of a note receivable?
|
Accounts receivable
|
|
|
When a note receivable is paid on time and no interest has been previously accrued, what will the journal entry to record the transaction contain?
|
Two credits and one debit
|
|
|
Which of the following is the correct sequence to report receivables on the balance sheet?
|
Accounts receivable, a 6-month note receivable, other receivables
|
|
|
Which statement is true about reporting receivables on the balance sheet?
|
Allowance for Doubtful Accounts is shown as a deduction from Accounts Receivable on the balance sheet.
|
|
|
If a company is concerned about lending money to a risky customer, which one of the following would it not want to do?
|
Provide the customer a lengthy payment period to increase the chance of paying
|
|
|
What is often the most critical part of managing receivables?
|
determining who gets the credit and who doesn't
|
|
|
Which of the following is a threat of nonpayment from a single customer or class of customers that could adversely affect the financial health of a company?
|
A concentration of credit risk
|
|
|
Factoring is the process of
|
selling accounts receivable at a discount to another party.
|
|
|
sarbanes-oxley act 4
|
all publicly traded US corps are required to maintain an adequate system of internal control. corporate executives and board of directors must ensure that these controls are reliable and effective. independent outside auditors must atleast to the adequacy of the internal control system. sox created the plublic company acct oversight board
|
|
|
internal contol methods and measures adopted to: 4
|
safeguard assets. enhance accuracy and reliability of acct records. increase efficiency of operations. ensure compliance with laws and regulations
|
|
|
internal control 5 componets
|
control environment. risk assessment. control activities. info and communication. monitoring
|
|
|
principles of internal control activities 5
|
establishment of responsibility. segregation of duties. documentation procedures. ind internal verification. human resource controls
|
|
|
limitations of internal control 3
|
costs should not exceed benefits. human element. size of the business
|
|
|
sales revenue-discounts-returns and allowances |
net sales equation
|
|
|
purchases+freight in-discounts-returns
|
net purchases equation
|
|
|
beginning inventory +net purchases
|
cost of goods available for sale
|
|
|
cost of goods available for sale - end inventory
|
cost of goods sold equation
|
|
|
net sales-cost of goods sold
|
gross profit equation
|
|
|
contra asset
|
what kind of account is allowance for doubtful accounts
|
|
|
bad debt expense debited, allowance for doubtful accounts credited
|
what is the journal entry for estimate and recorded bad debt expense
|
|
|
balance sheet, subtraction
|
where is allowance for doubtful accounts in financial statements, and is it addition or subtraction
|
|
|
allowance for doubtful accounts debited, accounts receivable credited
|
write off journal entry
|
|
|
not
|
write off entry does or does not affect net income or total assets because there is no adjustment to any expense account
|
|
|
estimated uncollectible
|
what is the balance need in the allowance account called
|
