Question 1

When calculating interest on a promissory note with the maturity date stated in terms of days, the

Accepted Answer

A)   maker pays more interest if 365 days are used instead of 360.
B)   maker pays the same interest regardless if 365 or 360 days are used.
C)   payee receives more interest if 360 days are used instead of 365.
D)   payee receives less interest if 360 days are used instead of 365.E) None of the above
F) All of the above

Question 2

Under the direct write-off method, no attempt is made to match bad debts expense to sales revenues in the same accounting period.

Accepted Answer

A) True 
 B)False

Question 3

Deborah Company's account balances at December 31 for Accounts Receivable and Allowance for Doubtful Accounts were $2,100,000 and $50,000 (Cr.) , respectively. An aging of accounts receivable indicated that $180,000 are expected to become uncollectible. The amount of the adjusting entry for bad debts at December 31 is

Accepted Answer

A)   $130,000.
B)   $180,000.
C)   $210,000.
D)   $230,000.E) A) and B)
F) B) and C)

Question 4

In order to accelerate the receipt of cash from receivables, owners may sell the receivables to another company for cash.

Accepted Answer

A) True 
 B)False

Question 5

The maturity value of a $70,000, 8%, 3-month note receivable is

Accepted Answer

A)   $70,467.
B)   $70,560.
C)   $71,400.
D)   $75,600.E) C) and D)
F) All of the above

Question 6

A cash discount is usually granted to all of the following except

Accepted Answer

A)   retail customers.
B)   retailers.
C)   wholesalers.
D)   All of these answers are correct.E) C) and D)
F) A) and D)

Question 7

In 2015, Chandler Company had net credit sales of $1,125,000. On January 1, 2015, Allowance for Doubtful Accounts had a credit balance of $27,000. During 2015, $42,000 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 $380,000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2015?

Accepted Answer

A)   $23,000
B)   $38,000
C)   $53,000
D)   $97,500E) A) and B)
F) A) and C)

Question 8

Notes or accounts receivables that result from sales transactions are often called

Accepted Answer

A)   sales receivables.
B)   non-trade receivables.
C)   trade receivables.
D)   merchandise receivables.E) A) and D)
F) A) and C)

Question 9

When an account becomes uncollectible and must be written off,

Accepted Answer

A)   Allowance for Doubtful Accounts should be credited.
B)   Accounts Receivable should be credited.
C)   Bad Debt Expense should be credited.
D)   Sales Revenue should be debited.E) All of the above
F) A) and D)

Question 10

Jeff Retailers accepted $75,000 of Citibank Visa credit card charges for merchandise sold on July 1. Citibank charges 2% for its credit card use. The entry to record this transaction by Jeff Retailers will include a credit to Sales Revenue of $75,000 and a debit(s)  to

Accepted Answer

A)   Cash $73,500 and Service Charge Expense $1,500.
B)   Accounts Receivable $73,500 and Service Charge Expense $1,500.
C)   Cash $73,500 and Interest Expense $1,500.
D)   Accounts Receivable $75,000.E) A) and D)
F) A) and C)

Question 11

When the due date of a note is stated in months, the time factor in computing interest is the number of months divided by 360 days.

Accepted Answer

A) True 
 B)False

Question 12

Retailers generally consider sales from the use of national credit card sales as a

Accepted Answer

A)   credit sale.
B)   collection of an accounts receivable.
C)   cash sale.
D)   collection of a note receivable.E) A) and B)
F) A) and C)

Question 13

If a department store fails to make the entry to accrue the finance charges due from customers,

Accepted Answer

A)   accounts receivable will be overstated.
B)   interest revenue will be understated.
C)   interest expense will be overstated.
D)   interest expense will be understated.E) B) and C)
F) A) and C)

Question 14

To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a

Accepted Answer

A)   debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts.
B)   debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts.
C)   debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable.
D)   debit to Loss on Credit Sales Revenue and a credit to Accounts Receivable.E) B) and C)
F) All of the above

Question 15

Which one of the following is not a primary problem associated with accounts receivable?

Accepted Answer

A)   Depreciating accounts receivable
B)   Recognizing accounts receivable
C)   Valuing accounts receivable
D)   Disposing of accounts receivableE) None of the above
F) B) and D)

Question 16

Using the percentage of receivables method for recording bad debt expense, estimated uncollectible accounts are $14,000. If the balance of the Allowance for Doubtful Accounts is $2,000 debit before adjustment, what is the amount of bad debt expense?

Accepted Answer

A)   $2,000
B)   $12,000
C)   $14,000
D)   $16,000E) B) and C)
F) A) and D)

Question 17

A debit balance in the Allowance for Doubtful Accounts

Accepted Answer

A)   is the normal balance for that account.
B)   indicates that actual bad debt write-offs have exceeded previous provisions for bad debts.
C)   indicates that actual bad debt write-offs have been less than what was estimated.
D)   cannot occur if the percentage of sales method of estimating bad debts is used.E) B) and D)
F) A) and B)

Question 18

Bad Debt Expense is considered

Accepted Answer

A)   an avoidable cost in doing business on a credit basis.
B)   an internal control weakness.
C)   a necessary risk of doing business on a credit basis.
D)   avoidable unless there is a recession.E) C) and D)
F) All of the above

Question 19

When a note receivable is dishonored,

Accepted Answer

A)   interest revenue is never recorded.
B)   bad debts expense is recorded.
C)   the maturity value of the note is written off.
D)   Accounts Receivable is debited if eventual collection is expected.E) None of the above
F) B) and C)

Question 20

A customer charges a treadmill at Annie's Sport Shop. The price is $4,000 and the financing charge is 6% per annum if the bill is not paid in 30 days. The customer fails to pay the bill within 30 days and a finance charge is added to the customer's account. What is the amount of the finance charge?

Accepted Answer

A)   $8
B)   $20
C)   $80
D)   $240E) B) and C)
F) C) and D)

Exam 8: Accounting for Receivables

Which one of the following is not a primary problem associated with accounts receivable?

Correct Answer
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When a note receivable is dishonored,

Correct Answer
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When an account becomes uncollectible and must be written off,

Correct Answer
verified

Correct Answer
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A customer charges a treadmill at Annie's Sport Shop. The price is $4,000 and the financing charge is 6% per annum if the bill is not paid in 30 days. The customer fails to pay the bill within 30 days and a finance charge is added to the customer's account. What is the amount of the finance charge?

Correct Answer
verified

Correct Answer
verified

To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a

Correct Answer
verified

Jeff Retailers accepted $75,000 of Citibank Visa credit card charges for merchandise sold on July 1. Citibank charges 2% for its credit card use. The entry to record this transaction by Jeff Retailers will include a credit to Sales Revenue of $75,000 and a debit(s) to

Correct Answer
verified

In order to accelerate the receipt of cash from receivables, owners may sell the receivables to another company for cash.

Correct Answer
verified

A debit balance in the Allowance for Doubtful Accounts

Correct Answer
verified

When the due date of a note is stated in months, the time factor in computing interest is the number of months divided by 360 days.

Correct Answer
verified

Bad Debt Expense is considered

Correct Answer
verified

Notes or accounts receivables that result from sales transactions are often called

Correct Answer
verified

If a department store fails to make the entry to accrue the finance charges due from customers,

Correct Answer
verified

Retailers generally consider sales from the use of national credit card sales as a

Correct Answer
verified

Under the direct write-off method, no attempt is made to match bad debts expense to sales revenues in the same accounting period.

Correct Answer
verified

Using the percentage of receivables method for recording bad debt expense, estimated uncollectible accounts are $14,000. If the balance of the Allowance for Doubtful Accounts is $2,000 debit before adjustment, what is the amount of bad debt expense?

Correct Answer
verified

When calculating interest on a promissory note with the maturity date stated in terms of days, the

Correct Answer
verified

A cash discount is usually granted to all of the following except

Correct Answer
verified

The maturity value of a $70,000, 8%, 3-month note receivable is

Correct Answer
verified

Exam 8: Accounting for Receivables

Which one of the following is not a primary problem associated with accounts receivable?

Correct AnswerverifiedShow Answer

When a note receivable is dishonored,

Correct AnswerverifiedShow Answer

When an account becomes uncollectible and must be written off,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A customer charges a treadmill at Annie's Sport Shop. The price is $4,000 and the financing charge is 6% per annum if the bill is not paid in 30 days. The customer fails to pay the bill within 30 days and a finance charge is added to the customer's account. What is the amount of the finance charge?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a

Correct AnswerverifiedShow Answer

Jeff Retailers accepted $75,000 of Citibank Visa credit card charges for merchandise sold on July 1. Citibank charges 2% for its credit card use. The entry to record this transaction by Jeff Retailers will include a credit to Sales Revenue of $75,000 and a debit(s) to

Correct AnswerverifiedShow Answer

In order to accelerate the receipt of cash from receivables, owners may sell the receivables to another company for cash.

Correct AnswerverifiedShow Answer

A debit balance in the Allowance for Doubtful Accounts

Correct AnswerverifiedShow Answer

When the due date of a note is stated in months, the time factor in computing interest is the number of months divided by 360 days.

Correct AnswerverifiedShow Answer

Bad Debt Expense is considered

Correct AnswerverifiedShow Answer

Notes or accounts receivables that result from sales transactions are often called

Correct AnswerverifiedShow Answer

If a department store fails to make the entry to accrue the finance charges due from customers,

Correct AnswerverifiedShow Answer

Retailers generally consider sales from the use of national credit card sales as a

Correct AnswerverifiedShow Answer

Under the direct write-off method, no attempt is made to match bad debts expense to sales revenues in the same accounting period.

Correct AnswerverifiedShow Answer

Using the percentage of receivables method for recording bad debt expense, estimated uncollectible accounts are $14,000. If the balance of the Allowance for Doubtful Accounts is $2,000 debit before adjustment, what is the amount of bad debt expense?

Correct AnswerverifiedShow Answer

When calculating interest on a promissory note with the maturity date stated in terms of days, the

Correct AnswerverifiedShow Answer

A cash discount is usually granted to all of the following except

Correct AnswerverifiedShow Answer

The maturity value of a $70,000, 8%, 3-month note receivable is

Correct AnswerverifiedShow Answer

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