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Exam 6: Reporting and Interpreting Sales Revenue, Receivables, and Cash

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Question 51

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Flyer Company has provided the following Cash sales,$150,000 Credit sales,$450,000 Selling and administrative expenses,$110,000 Sales returns and allowances,$30,000 Gross profit,$290,000 Accounts receivable,$110,000 Sales discounts,$14,000 Allowance for doubtful accounts credit balance,$1,200 Flyer estimates bad debt expense assuming that 1.5% of credit sales are uncollectible.What is the balance in the allowance for doubtful accounts after bad debt expense is recorded?

A) $7,950
B) $6,750
C) $5,550
D) $7,800

E) A) and D)
F) B) and C)

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Question 52

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If a check received from a customer that has been deposited by the seller is returned with the bank statement as a nonsufficient funds (NSF)check,it would appear on the seller's bank reconciliation as a deduction from the ending bank statement balance.

A) True
B) False

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Question 53

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If the accounts receivable turnover ratio increases,the number of days it takes to collect the receivables also increases.

Which of the following transactions will result in an increase in the receivable turnover ratio?

Sabre Company sold inventory costing $600 to a customer on account for $900 with terms of 3/10,n/30.Which of the following is not correct?

The journal entry to record bad debt expense is made during the year that it is determined that a particular receivable is uncollectible.

When goods are shipped FOB destination,the revenue from the sale is recognized on the shipment date.

Which of the following does not correctly describe the following journal entry? Sales returns and allowances $\quad$$\quad$ Accounts receivable

Which of the following does not correctly describe the following journal entry? Cash Credit card discount $\quad$$\quad$ Accounts receivable

The year-end journal entry to record bad debt expense reduces current assets and net income.

A company had the following partial list of account balances at year-end: $\begin{array} { l r } \text { Sales Returns and Allowances } & \$ 1,000 \\\text { Accounts Receivable } & 38,000 \\\text { Sales Discounts } & 2,100 \\\text { Sales Revenue } & 95,000 \\\text { Allowance for Doubtful Accounts } & 1,200\end{array}$ How much is net sales revenue?

Determine the effect of the following transactions on the financial statement components identified.Code your answers as follows: Transaction 1: The adjusting entry to record bad debt expense was made. Transaction 2: An account receivable was collected for which the customer took advantage of a 2% discount and remitted the payment less the discount.

The cash account and the December bank statement of Gomez Company showed the following: Deposits made by Gomez Company during December $90,000; deposits reflected on the December bank statement,$88,000; and deposits in transit on December 1,$5,000.How much were the deposits in transit at the end of December?

A company purchased goods on credit with credit terms of 3/15,n/45.Although the company does not have cash available to pay within the discount period,the manager of the company is considering borrowing money to take advantage of the discount.In order to make the appropriate decision,the manager computed the annual interest rate associated with the sales discount.Which of the following is the annual interest rate (rounded) ?

On December 31,2011,Colonial Corporation had the following account balances related to credit sales and receivables prior to recording adjusting entries: $\begin{array} { l r r } \text { Accounts receivable } & \$ 25,000 & \\\text { Allowance for doubtful accounts } & 200 & \text { (credit) } \\\text { Sales revenue (all credit sales) } & 400,000 &\end{array}$ Requirements: Present the necessary year-end adjusting entry related to uncollectible accounts for each of the following independent assumptions: A.An aging of accounts receivable is completed.It is estimated that $2,150 of the receivables outstanding at year-end will be uncollectible. B.It is estimated that 1% of credit sales for the year will prove to be uncollectible. C.Assume the same information presented in part A.Except that prior to adjustment,the allowance for doubtful accounts had a debit balance of $200 rather than a credit balance of $200.

The Soft Company has provided the following information: Allowance for doubtful accounts increased $19,000 and accounts receivable increased $390,000 during the year. Accounts written off as uncollectible totaled $20,000. Net sales totaled $2,700,000. The gross profit percentage was 40%. Sales discounts were $100,000. How much was Soft's bad debt expense?

Prior to the year-end adjustment to record bad debt expense the ledger of Stickler Company included the following accounts and balances: $\begin{array}{lccc}\text { Allowance for Doubtful Accounts} & \$1,000 \\ \text { Bad Debt Expense} & 0 \\\text { Accounts Receivable} & 200,000 \\\end{array}$ Cash collections on accounts receivable during 2010 amounted to $450,000.Sales revenue during 2010 amounted to $800,000,of which 75% was on credit,and it was estimated that 2% of the credit sales made in 2010 would ultimately become uncollectible. Determine the balances of the allowance for doubtful accounts and bad debt expense after the adjusting entry to record bad debt expense was made.The allowance for doubtful accounts has a credit balance prior to the adjusting entry.

Which of the following journal entries correctly records bad debt expense?

When preparing the monthly bank reconciliation,the accountant for Farris Corporation discovered that a check correctly written to one of Farris' suppliers for $159 had been incorrectly recorded in the books as $195.Which of the following statements is correct with respect to the bank reconciliation process?

During 2011,Charles Inc.recorded credit sales of $2,000,000.Based on prior experience,it estimates a 1 percent bad debt rate on credit sales.At the beginning of the year,the balance in net accounts receivable was $150,000.At the end of the year,but before the bad debt expense adjustment was recorded and before any bad debts had been written off,the balance in net accounts receivable was $125,000. A.Assume that on December 31, 2011, the appropriate bad debt expense adjustment was recorded for the year 2011 and accounts receivable totaling $10,000 were written off for the year, what was the receivables turnover ratio for the year? B.Assume that on December 31, 2011, the appropriate bad debt expense adjustment was recorded for the year 2011 and accounts receivable totaling $12,000 were written off for the year, what was the receivables turnover ratio for the year? C.Explain why the answers to parts 1 and 2 differ or do not differ.