Accounting LearnSmart 6 Module 2

Lani Co. uses the allowance method to account for bad debts. At the end of the year their unadjusted trial balance shows an accounts receivable balance of $400,000; allowance for doubtful accounts balance of $400 (debit); and sales of $1,200,000. Based on history, Lani estimates that bad debts will be 1% of accounts receivable. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of: Multiple choice question. $4,000 $4,400 $11,600 $12,400 $3,600 $12,000

$4,400

Leo Co. uses the allowance method to account for bad debts. At the end of the year, Leo Co.'s accounts receivable balance is $25,000; allowance for doubtful accounts balance of $100 (credit); and sales of $500,000. Based on history, Leo estimates that bad debts will be 2% of accounts receivable. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of: Multiple choice question. $400 $10,000 $9,900 $600 $10,100 $500

$400

Determine which of the items below would appear in the Deposits and Credits column of a bank statement and would cause an increase in the account's balance. (Check all that apply.) Multiple select question. A returned NSF customer check A note collected by the bank on behalf of the account owner Interest paid by the bank on the bank account balance Checks written by the account owner Deposits made during the month

A note collected by the bank on behalf of the account owner Interest paid by the bank on the bank account balance Deposits made during the month

Ace Company sells merchandise to a customer in the amount of $200 on credit, terms n/30. The entry to record this sale would include a debit to the ____________ account: Multiple choice question. Cash Accounts Receivable Accounts Payable Sales

Accounts Receivable

In July, Lane Co. sells merchandise to Avery Co. on account. In August, Avery pays the balance in full. The entry that Lane will make to record the receipt of cash will include a credit to the _______ account. Multiple choice question. Sales Accounts Payable Accounts Receivable Cash Unearned Sales

Accounts Receivable

A 60-day note is signed on February 15 (and it's not leap year). The due date of the note is: Multiple choice question. April 14 April 16 April 15

April 16

The two most common receivables are receivables and receivables.

Blank 1: accounts or account Blank 2: notes or note

The (maker/signer) of the note is the one that signed the note and promised to pay at maturity. The (maker/payee) of the note is the person to whom the note is payable.

Blank 1: maker Blank 2: payee

Show your understanding of what a bank reconciliation is by completing the following sentence. A bank reconciliation is a(n) (entry/charge/report) explaining any differences between the (checking/subsidiary/sales) account balance according to the depositor's records and the balance reported on the (income/financial/bank) statement.

Blank 1: report Blank 2: checking Blank 3: bank

Review the items below and determine which would cause an increase in the monthly bank statement balance. Multiple choice question. -A customer's NSF check -Checks written during the month -Cash deposits made by the account owner -Service fees charged by the bank

Cash deposits made by the account owner

On March 14, Teal Co. accepted a 120-day, 6% note in the amount of $10,000 from AZC Co., a customer. On the due date of the note, AZC honors the note and pays in full. The journal entry that Teal would make to record payment of this note would include a credit to: Multiple choice question. Interest Receivable for $200. Interest Revenue for $200. Cash for $10,000. Note Receivable for $10,200.

Interest Revenue for $200.

Identify the item below that would be added to the book balance. Multiple choice question. -NSF check -Bank service charge Interest earned -Outstanding checks

Interest earned

A 90-day note is signed on October 21. The due date of the note is: Multiple choice question. January 20 January 18 January 21 January 19

January 19

Select the items below that would cause the bank statement balance to differ from the depositor's book balance. Multiple choice question. Bank Service charges, Deposit in transit, Cleared checks NSF check, Deposit in transit, interest paid by bank NSF check, Outstanding checks, Supplies expenses Cleared checks, Bank service charge, NSF check

NSF check, Deposit in transit, interest paid by bank

Choose the items below that would be added to the book balance on a bank reconciliation. (Check all that apply.) Multiple select question. Monthly check charges assessed by the bank Note collected by the bank for the depositor NSF customer check Interest earned on the depositor's account Monthly bank service charge Deposit in transit

Note collected by the bank for the depositor Interest earned on the depositor's account

DonCo, Inc. sold merchandise on January 14, and accepted a 90-day, 5% promissory note in the amount of $5,000. On January 14, the entry to record this transaction would include a debit to: Multiple choice question. Notes Receivable in the amount of $5,000 Cash in the amount of $5,000 Accounts Receivable in the amount of $5,000 Sales in the amount of $5,00

Notes Receivable in the amount of $5,000

Review the following statements regarding a petty cash fund used in a business. Select the one that is correct.

Only the petty cashier is responsible for paying cash from the fund.

Review the following statements regarding a petty cash fund used in a business. Select the one that is correct. Multiple choice question. A petty cash fund is controlled by top management. Only the petty cashier is responsible for paying cash from the fund. The cashier of a fund will write checks for small payments like postage, supplies and deliveries. A check written against the fund is cashed when the fund is replenished.

Only the petty cashier is responsible for paying cash from the fund.

Identify the factors that cause the bank statement balance to differ from the depositor's book balance by matching each to its definition on the right. Instructions Outstanding check Outstanding check drop zone empty. Deposit in transit Deposit in transit drop zone empty. NSF check NSF check drop zone empty. Bank charges Bank charges drop zone empty.

Outstanding check matches Choice A check written by the depositor that has not yet been received by the bank for payment Deposit in transit matches Choice Deposit made and recorded by the depositor, but not yet recorded on the bank statement NSF check matches Choice A check written by a customer who does not have enough money in his account to cover the check Bank charges matches Choice Service fees charged by the bank

Match the following terms to the appropriate definitions. Instructions Promissory note Promissory note drop zone empty. Principal Principal drop zone empty. Interest Interest drop zone empty. Maker Maker drop zone empty. Payee Payee drop zone empty. Maturity date Maturity date drop zone empty.

Promissory note matches Choice Written promise to pay a specified amount of money Principal matches Choice Amount that the signer agrees to pay back, not including interest Interest matches Choice Charge from using money loaned from one entity to another Maker matches Choice One who signed the note and promised to pay at maturity Payee matches Choice The person to whom the note is payable Maturity date matches Choice Day that the principal and interest must be paid

A company sells merchandise to a customer on credit. The journal entry to record this transaction would include a debit entry to the Accounts account.

Receivable

Determine which of the statements below is true regarding the adjusted bank balance and the adjusted book balance on a bank reconciliation. Multiple choice question. -The adjusted bank balance must equal the adjusted cash balance per books. -The cash balance on the bank statement must equal the cash balance in the general ledger before the bank reconciliation. -The adjusted book balance will rarely equal the adjusted bank balance. -he adjusted balance per books must equal the cash balance printed on the bank statement.

The adjusted bank balance must equal the adjusted cash balance per books

The asset account that tracks "amounts due from customers for credit sales" is commonly called: Multiple choice question. notes payable accounts receivable unearned fees accounts payable

accounts receivable

When a company makes a sale on credit, it records the amount due from the customer in ____________. Multiple choice question. unearned fees accounts payable accounts receivable prepaid sales

accounts receivable

The of accounts receivable method uses several percentages to estimate the allowance.

aging

The __________ method of estimating bad debts uses both past and current receivables information to estimate the allowance amount. Specifically, each receivable is classified by how long it is past its due date. Multiple choice question. percentage of sales percentage of receivables aging of receivables

aging of receivables

The (allowance/direct write-off) method of accounting for bad debts matches the estimated loss from uncollectible accounts receivables against the sales they helped produce.

allowance

A company sells merchandise to a customer on credit. The journal entry that the company makes to record this sale would include a (debit/credit) to the sales account.

credit

In September, DK Company sells merchandise to Lions Company on credit. In October, Lions Company pays the balance in full. The entry to record the collection of cash by DK Company in October will include a (debit/credit) to Accounts Receivable.

credit

A _________________ is an amount due from another party. Multiple choice question. receivable payable sale return

receivable

Companies sometimes convert receivables to cash before they are due by selling them or using them as security for a loan. The reasons that a company may convert receivables before their due date include: (Check all that apply.) Multiple select question. to quickly increase profit. to reduce risk of nonpayment. to satisfy customer's needs. to quickly generate cash.

to reduce risk of nonpayment. to quickly generate cash.

True or false: The adjusted book balance and the adjusted bank balance must equal each other on a bank reconciliation; otherwise, the cash account is not reconciled.

true

Yates Co. uses the allowance method to account for bad debts. At the end of the period, Yate's unadjusted trial balance shows an accounts receivable balance of $10,000; allowance for doubtful accounts balance of $400 (credit); and sales of $500,000. Based on history, Yates estimates that bad debts will be 1% of sales. The entry to record estimated bad debts will include a debit to bad debts expense in the amount of: Multiple choice question. $600 $4,600 $5,000 $1,400 $5,400

$5,000

Finish Co. uses the allowance method to account for bad debts. At the end of 2010, Finish Co.'s unadjusted trial balance shows an accounts receivable balance of $30,000; allowance for doubtful accounts balance of $200 (credit); and sales of $600,000. Based on history, Finish estimates that bad debts will be 1% of sales. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of: Multiple choice question. $5,800 $500 $6,000 $6,200 $100

$6,000

Determine the statements below that are true regarding why a bank reconciliation is used. (Check all that apply.)

-Timing differences between the bank statement and the depositor's records are reflected in the bank reconciliation. -We must reconcile the balance of the bank's records and the Cash account in the general ledger and explain or account for any differences in the two. -The bank reconciliation is useful in proving the accuracy of the Cash account in the general ledger.

On March 14, Zest Co. accepted a 120-day, 6% note in the amount of $5,000 from AZC Co., a customer. On the due date of the note, AZC dishonors the note and fails to pay. The journal entry that Zest would make to record the failure to pay this note on the due date would include a debit to: Multiple choice question. Notes Receivable for $5,000 Cash for $5,100 Accounts Receivable - AZC for $5,000 Accounts Receivable - AZC for $5,100 Cash for $5,000 Notes Receivable for $5,100

Accounts Receivable - AZC for $5,100

On September 1, Horn Co. accepted a 60-day, 5% note in the amount of $3,000 from a customer. On the due date of the note, the customer dishonors the note and fails to pay. The journal entry that Horn would make on the due date would include debit to: Multiple choice question. Cash for $3,025 Cash for $3,000 Accounts Receivable for $3,000 Accounts Receivable for $3,025 Cash for $3,150 Accounts Receivable for $3,150

Accounts Receivable for $3,025

Match the definitions to the appropriate terms. Instructions Accounts receivable Accounts receivable drop zone empty. Notes receivable Notes receivable drop zone empty. Receivable Receivable drop zone empty.

Accounts receivable matches Choice Amounts due from customers for credit sales Notes receivable matches Choice An asset consisting of a written promise to receive a definite sum of money on demand or on specific future dates Receivable matches Choice Amount due from another party

On January 1, JC Co. accepted a 60-day, 6%, note in the amount of $10,000 from a customer. On March 2, the due date of the note, the customer honors the note and pays in full. The journal entry that JC would make to record the receipt of payment of this note would include a debit to: Multiple choice question. Cash in the amount of $10,100 Notes Receivable in the amount of $10,100 Cash in the amount of $10,000 Notes Receivable in the amount of $10,000

Cash in the amount of $10,100

Recall the preparation of a bank reconciliation by selecting the correct items below. (Check all that apply.) Multiple select question. Compute the adjusted bank balance. Add the deposits in transit to the balance per books. Subtract any outstanding checks from the balance per bank. Add any unrecorded bank fees to the balance per bank. Add deposits in transit to the balance per bank. Compute the adjusted book balance.

Compute the adjusted bank balance. Subtract any outstanding checks from the balance per bank. Add deposits in transit to the balance per bank. Compute the adjusted book balance.

True or false: The direct write-off method of accounting for bad debts matches the estimated loss from uncollectible accounts receivable against the sales they helped produce.

False

Determine which of the statements below describes a petty cash receipt. (Check all that apply.) Multiple select question. A petty cash receipt is rarely prenumbered. All petty cash receipts are turned in to the company cashier at the end of each day. The petty cashier must present all paid receipts to the company cashier in order to replenish the fund. Any person wishing to withdraw funds from a petty cash fund must complete a petty cash receipt. A petty cash receipt is sometimes called a petty cash ticket. A petty cash receipt will have a signature line for the person receiving a disbursement from the fund.

The petty cashier must present all paid receipts to the company cashier in order to replenish the fund. Any person wishing to withdraw funds from a petty cash fund must complete a petty cash receipt. A petty cash receipt is sometimes called a petty cash ticket. A petty cash receipt will have a signature line for the person receiving a disbursement from the fund.

Determine which of the statements below are accurate regarding how a petty cash fund is created and used in a business. (Check all that apply.) Multiple select question. The sum of all petty cash receipts plus the remaining cash should equal the total of the fund amount at any given time. A check is drawn by the company cashier to establish the petty cash fund. The petty cashier is responsible for making payments from the petty cash fund. The petty cashier is responsible for keeping the cash in the fund safe. When the fund is replenished, the Petty Cash fund account is debited. Any employee may disburse cash from the fund as long as they bring back a receipt for their purchase.

The sum of all petty cash receipts plus the remaining cash should equal the total of the fund amount at any given time. A check is drawn by the company cashier to establish the petty cash fund. The petty cashier is responsible for making payments from the petty cash fund. The petty cashier is responsible for keeping the cash in the fund safe.

To record a customer's check in full payment for a sale that was made the prior month, the company should debit the ____________ account. Multiple choice question. Accounts Receivable Sales Unearned Sales Cash Accounts Payable

cash

On November 1, Eli Co. received a $6,000, 60-day, 6% note from a customer as payment on his $6,000 account. Eli's journal entry to record this transaction on November 1, would include a: (Check all that apply.) Multiple select question. credit to Accounts Receivable for $6,000. debit to Notes Receivable for $6,000. debit to Accounts Receivable for $6,060. credit to Notes Receivable for $6,060.

credit to Accounts Receivable for $6,000. debit to Notes Receivable for $6,000.

On January 1, Franz Co. accepted a 30-day, 6% note in the amount of $5,000 from Bria Co., a customer. On January 31, the due date of the note, Bria honors the note and pays in full. The journal entry that Franz would make to record payment of this note would include a: (Check all that apply.) Multiple select question. credit to Interest Revenue for $25. debit to Interest Revenue for $25. credit to Note Receivable for $5,025. credit to Note Receivable for $5,000. debit to Cash for $5,025.

credit to Interest Revenue for $25. credit to Note Receivable for $5,000. debit to Cash for $5,025.

Zion Company sells merchandise on account to BRC, Inc. in the amount of $1,200. The entry to record this sale would include a: (Check all that apply.) Multiple select question. debit to Accounts Receivable. credit to Sales. credit to Cash. debit to Sales. debit to Cash. credit to Accounts Receivable.

debit to Accounts Receivable. credit to Sales.

True or false: The two methods companies can use to convert receivables to cash before they are due includes selling them and pledging them. True false question.

true