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Exam 5: Receivables and Sales

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Question 21

True/False

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The percentage-of-receivables method for estimating uncollectible accounts is commonly referred to as the balance sheet method,because the estimate of bad debts is based on a balance sheet amount-accounts receivable.

A) True
B) False

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Question 22

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Fleming Corp.provided services on account.The transaction would be recorded with a debit to:

A) Retained Earnings.
B) Service Revenue.
C) Accounts Receivable.
D) Cash.

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

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Question 23

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Lewis Inc.had the following information taken from various accounts at the end of the year: What was Lewis Inc.'s net revenues for the year? $\begin{array} { | l | r | } \hline \text { Sales discounts } & \$ 41,000 \\\hline \text { Deferred revenues } & \$ 32,000 \\\hline \text { Total sales } & \$ 459,000 \\\hline \text { Purchase discounts } & \$ 15,000 \\\hline \text { Sales allowances } & \$ 35,000 \\\hline \text { Accounts receivable } & \$ 205,000 \\\hline\end{array}$

Lail Inc.accounts for bad debts using the allowance method.On June 1,Lail Inc.wrote off Andrew Green's $2,500 account.Based on Lail's estimation,Andrew Green will never pay any portion of the balance in his account.What effect will this write-off have on Lail Inc.'s balance sheet at the time of the write-off?

Boynton Jewelers reported the following amounts at the end of the year: total sales = $550,000;sales discounts = $12,000;sales returns = $44,000;sales allowances = $17,000.What was the company's net revenues for the year?

What is the most likely reason for a company to have an increase in average collection period?

The normal balance of the account "Allowance for Uncollectible Accounts" is a _______ because _______.

Which of the following is recorded upon receipt of a payment on April 7,2018,by a customer who pays a $900 invoice dated March 3,2018,with terms 2/10,n/60?

Tom's Textiles shipped the wrong material to a customer,who refused to accept the order.This is an example of a:

The method of estimating uncollectible accounts based on the length of time the amount is owed by the customer is referred to as the:

Beverage International reports net credit sales for the year of $240,000.The company's accounts receivable balance at the beginning of the year equaled $20,000 and the balance at the end of the year equaled $30,000.What is Beverage International's receivables turnover ratio?

Even though the percentage-of-receivables method and the percentage-of-credit-sales method use different accounts to estimate future uncollectible accounts,the amount of bad debt expense reported in the income statement will always be the same under the two methods.Bad debt expense will typically differ between the two methods.

The direct write-off method involves recording an adjustment at the end of each period to account for the possibility of future uncollectible accounts.The allowance method records an adjustment for future uncollectible accounts.

The income statement approach for estimating bad debts uses a percentage of

Which of the following items are classified as receivables?

A(n) ______ receivable is an informal credit arrangement with trade customers,whereas a(n) ______ receivable is a formal signed credit arrangement between a creditor and a debtor.

The average collection period shows the approximate number of days the average accounts receivable balance is outstanding.

Accounts receivable are normally reported at the:

One advantage of the allowance method for accounting for uncollectible accounts is that the company reports:

The Sales Returns account is an expense account.Sales Returns is a contra revenue account.