Accounting Chapter 8 Multiple Choice

4.Accounts and notes receivable are reported in the current assets section of the balance sheet at: a)cash (net) realizable value b)net book value. c)lower-of-cost-or-market value. d)invoice cost.

A

4.All of the following are "other receivables" except: a. petty cash. b. interest receivable. c. income taxes refundable. d. advances to employees.

A

5.Net credit sales for the month are $800,000. The accounts receivable balance is $160,000. The allowance is calculated as 7.5% of the receivables balance using the percentage-of-receivables basis. If Allowance for Doubtful Accounts has a credit balance of $5,000 before adjustment, what is the balance after adjustment? a)$12,000. b)$7,000. c)$17,000. d)$31,000.

A

9.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. The entry to record this transaction by Good Stuff Retailers will include a credit to Sales Revenue of $50,000 and a debit(s) to: a)Cash $48,000 and Service Charge Expense $2,000. b)Accounts Receivable $48,000 and Service Charge Expense $2,000. c)Cash $50,000. d)Accounts Receivable $50,000.

A

10.On May 1, Smith Company makes sales of $10,000 to Jones Company. Jones needs longer than the normal 30 days to pay and signs a 90 day 8% note. On May 1, Smith Company should a. credit Interest Revenue for $200. b. debit Notes Receivable for $10,000. c. debit Notes Receivable for $10,200. d. credit Sales Revenue for $10,200.

B

11.Hughes Company has a credit balance of $5,000 in its Allowance for Doubtful Accounts before any adjustments are made at the end of the year. Based on review and aging of its accounts receivable at the end of the year, Hughes estimates that $60,000 of its receivables are uncollectible. The amount of bad debt expense which should be reported for the year is: a)$5,000. b)$55,000. c)$60,000. d)$65,000.

B

14. Michael Co. accepts a $1,000, 3-month, 12% promissory note in settlement of an account with Tani Co. The entry to record this transaction is: a.Notes Receivable= 1,030 Accounts Receivable =1,030 b.Notes Receivable=1000 Accounts Receivable= 1,000 c.Notes Receivable=1,000 Sales Revenue=1,000 d.Notes Receivable=1,020 Accounts Receivable=1,020

B

3.Receivables are often classified as: a. accounts, notes, long-lived. b. accounts, notes, other. c. accounts, notes, inventory. d. none of these answer choices are correct.

B

5.The method of accounting for bad debt expense, which conforms to GAAP is: a. direct write-off method. b. allowance method. c. both the direct write-off method and the allowance method. d. none of these answer choices are correct.

B

7.When the allowance method is used and an account is subsequently written off as uncollectible, the following account is debited: a. Bad Debts Expense. b. Allowance for Doubtful Accounts. c. Accounts Receivable. d. both the Allowance for Doubtful Accounts and Accounts Receivable.

B

1.) A receivable that is evidenced by a formal instrument and that normally requires the payment of interest is: a)an account receivable. b)a trade receivable. c)a note receivable. d)a classified receivable.

C

13.Which of these statements about promissory notes is incorrect? a)The party making the promise to pay is called the maker. b)The party to whom payment is to be made is called the payee. c)A promissory note is not a negotiable instrument. d)A promissory note is more liquid than an account receivable.

C

17.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. What was the accounts receivable turnover and average collection period in days? a)4.0 and 91.3 days. b)5.3 and 68.9 days. c)6.4 and 57 days. d)8.0 and 45.6 days.

C

2.Which of the following is the most liquid asset? a. Unearned revenue. b. Long-lived assets. c. Receivables. d. Intangibles.

C

3.Kersee Company on June 15 sells 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? a)$700. b)$680. c)$686. d)None of the above.

C

6.An aging schedule of accounts receivable a. is only prepared on the last day of the accounting period. b. is only meaningful to the accounting department employees. c. arranges the accounts by the length of time they have been unpaid. d. applies percentages that are determined by the FASB to the totals of each category.

C

6.In 2022, Patterson Wholesale Company had net credit sales of $750,000. On January 1, 2022, Allowance for Doubtful Accounts had a credit balance of $18,000. During 2022, $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 Allowance for Doubtful Accounts at December 31, 2022? a)$20,000. b)$75,000. c)$32,000. d)$30,000.

C

8.Which of these statements about Visa credit card sales is incorrect? a)The credit card issuer conducts the credit investigation of the customer. b)The retailer is not involved in the collection process. c)The retailer must wait to receive payment from the issuer. d)The retailer receives cash more quickly than it would from individual customer

C

Prall Corporation sells its goods on terms of 2/10, n/30. It has an accounts receivable turnover of 7. What is its average collection period (days)? a)2,555 b)30 c)52 d)210

C

1.To ensure receivables are not overstated on the balance sheet, they are reported: a. at gross realizable value. b. at their cash (net) realizable value. c. less estimated uncollectible receivables. d. both at their cash (net) realizable value and less estimated uncollectible receivables.

D

10.A company can accelerate its cash receipts by all of the following except: a)offering discounts for early payment. b)accepting national credit cards for customer purchases. c)selling receivables to a factor. d)writing off receivables.

D

12.Use the same information as in Question 11, except that Hughes has a debit balance of $5,000 in its Allowance for Doubtful Accounts before any adjustments are made at the end of the year. In this situation, the amount of bad debt expense that should be reported for the year is: a)$5,000. b)$55,000. c)$60,000. d)$65,000.

D

15.) Schleis Co. holds Murphy Inc.'s $10,000, 120-day, 9% note. The entry made by Schleis Co. when the note is collected, assuming no interest has previously been accrue a)Cash=10,300 Notes Receivable=10,300 b.Cash=10,000 Notes Receivable=10,000 c.Accounts Receivable=10,300 Notes Receivable=10,000 Interest Revenue=300 d.Cash=10,300 Notes Receivable=10,000 Interest Revenue=300

D

16.If a company is concerned about extending credit to a risky customer, it could do any of the following except: a)require the customer to pay cash in advance. b)require the customer to provide a letter of credit or a bank guarantee. c)contact references provided by the customer, such as banks and other suppliers. d)provide the customer a lengthy payment period to increase the chance of paying

D

2.Receivables are frequently classified as: a)accounts receivable, company receivables, and other receivables. b)accounts receivable, notes receivable, and employee receivables. c)accounts receivable and general receivables. d)accounts receivable, notes receivable, and other receivables.

D

7.An analysis and aging of the accounts receivable of Raja Company at December 31 reveal these data: Accounts receivable $800,000Allowance for doubtful accounts per books before adjustment (credit)50,000Amounts expected to become uncollectible65,000 What is the cash realizable value of the accounts receivable at December 31, after adjustment? a)$685,000. b)$750,000. c)$800,000. d)$735,000.

D

8.When using the allowance method, the balance in the Allowance for Doubtful Accounts: a. can have a debit balance before the end of period adjusting entry is made. b. is a contra asset account and must have a credit balance after the end of period adjusting entry is made. c. equals the total estimated uncollectible accounts, as determined by management at the end of the period. d. all of these answer choices are correct.

D

9.Notes receivable: a. earn interest. b. give the holder a stronger legal claim on assets than accounts receivable. c. are negotiable instruments. d. all of these answer choices are correct.

D