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Exam 5: Receivables and Sales

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Question 51

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Which of the following best describes credit sales?

A) Cash sales to customers that are new to the company.
B) Sales to customers using credit cards.
C) Sales to customers on account.
D) Sales with a high risk that the customer will return the product.

E) All of the above
F) A) and B)

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Question 52

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On July 1,2012,a company loans one of its employees $20,000 and accepts a nine-month,8% note receivable.Calculate the amount of interest revenue the company will recognize in 2012 and 2013.

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2012 = $80...

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Question 53

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On February 1,2012,a company loans one of its employees $20,000 and accepts a nine-month,8% note receivable.Calculate the amount of interest revenue the company will recognize in 2012.

On February 23,a company provides services on account to a customer for $4,500.The customer pays in full for those services on March 4.Record the transactions for the company when the services are provided on February 23 and when the cash is collected on March 4.

On December 31,2012,Andy Inc.has a debit balance of $1,500 for the Allowance for Uncollectible Accounts before any year-end adjustment.Andy Inc.also has the following information for its accounts receivable and the estimated percentages of bad debts for different past-due amounts: $\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Age Group } \\\text { (days past due) }\end{array} & \begin{array} { c } \text { Accounts } \\\text { Receivable }\end{array} & \begin{array} { c } \text { Estimated Percent } \\\text { Uncollectible }\end{array} \\\hline 0 - 30 & \$ 50,000 & 5 \% \\\hline 31 - 60 & \$ 20,000 & 10 \% \\\hline 61 - 90 & \$ 10,000 & 20 \% \\\hline\end{array}$ What is the amount of bad debt expense to be reported on Andy Inc.'s financial statements for 2012?

Suppose that the balance of a company's Allowance for Uncollectible Accounts was $6,200 (credit) at the end of 2012,prior to any adjustments.The company estimated that the total of uncollectible accounts in its accounts receivable was $44,300 at the end of 2012.Total accounts receivable were $150,000 on December 31,2012,and total credit sales for 2012 were $330,000.What amount of bad debt expense would appear in the company's 2012 income statement,assuming the company uses the percentage-of-receivables method?

A credit balance in the Allowance for Uncollectible Accounts before adjustment indicates that last year's estimate of uncollectible accounts may have been too high.

A lower receivables turnover ratio generally indicates more favorable management of accounts receivable by company managers.

On September 1,2012,Middleton Corp.lends cash and accepts a $1,000 note receivable that offers 12% interest and is due in six months.How much interest revenue will Middleton Corp report during 2013?

Barton Health Services provided care to a patient worth $1,200.Because the patient was over the age of 65,Barton granted the patient a 20% discount and the customer paid the correct amount in cash.How would Barton record the service transaction?

McConnell's Bakeries had the following balances on December 31,2012,before any adjustment: Accounts Receivable = $100,000; Allowance for Uncollectible Accounts = $4,100 (credit) .McConnell's estimates uncollectible accounts based on an aging of accounts receivable as shown below: $\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Age Group } \\\text { (days past due) }\end{array} & \begin{array} { c } \text { Accounts } \\\text { Receivable }\end{array} & \begin{array} { c } \text { Estimated Percent } \\\text { Uncollectible }\end{array} \\\hline \text { Not yet due } & \$ 50,000 & 4 \% \\\hline 0 - 30 & \$ 20,000 & 8 \% \\\hline 31 - 60 & \$ 18,000 & 10 \% \\\hline \text { More than } 60 & \$ 12,000 & 40 \% \\\hline\end{array}$ What amount of bad debt expense did McConnell's record in its December 31,2012,adjustment to the allowance account?

A sales discount represents a reduction,not in the selling price of a product or service,but in the amount to be paid by a credit customer if payment is made within a specified period of time.

Which of the following is recorded by a credit to Accounts Receivable?

Below are amounts for two companies: $\begin{array} { l c c c } & \begin{array} { c } \text { Beginning } \\\text { Accounts } \\\text { Receivable (net) }\end{array} & \begin{array} { c } \text { Ending } \\\text { Accounts } \\\text { Receivable } \\\text { (net) }\end{array} & \begin{array} { c } \text { Net } \\\text { Sales }\end{array} \\\hline \text { Company 1 } & \$ 1,500 & \$ 1,200 & \$ 29,700 \\\text { Company 2 } & 3,100 & 3,300 & 80,000\end{array}$ For each company,calculate the receivables turnover ratio.Which company appears more efficient in collecting cash from sales?

When $2,500 of accounts receivable are determined to be uncollectible,which of the following should the company record to write off the accounts using the allowance method?

A company collects an account receivable previously written off.Indicate how this transaction would affect the following five financial statement items: $\begin{array}{llllll}&&& \text { Stockholders' } \\&\text { Assets } &\text { Liabilities } &\underline{\text { Equity }}& \underline{\text { Revenues }} &\underline{\text { Expenses }}\\\text { a. } & \text { Increase } & \text { Decrease } & \text { Increase } & \text { Decrease } & \text { No effect } \\\text { b. } & \text { Increase } & \text { No effect } & \text { Increase } & \text { Increase } & \text { Decrease } \\\text { c. } & \text { Increase } & \text { No effect } & \text { Increase } & \text { Increase } & \text { No effect } \\\text { d. } & \text { No effect } & \text { No effect } & \text { No effect } & \text { No effect } & \text { No effect }\\\end{array}$

Notes receivable typically arise from sales to customers.

The amount of a company's receivables is influenced by several variables,including all of the following except:

At December 31,Amy Jo's Appliances had account balances in Accounts Receivable of $311,000 and $970 (debit) in Allowance for Uncollectible Accounts.An analysis of Amy Jo's December 31 accounts receivable suggests that the allowance for uncollectible accounts should be 2% of accounts receivable.Bad debt expense for the year should be:

Hughes Aircraft sold a four-passenger airplane for $380,000,receiving a $50,000 down payment and a 12% note for the balance.This transaction would include a: