Account Exam 2 Chapter 07

A company has $235,000 in credit sales. The company uses the allowance method to account for uncollectible accounts. The Allowance for Doubtful Accounts now has a $7,250 credit balance. If the company estimates 7% of credit sales will be uncollectible, what will be the amount of the journal entry to record estimated uncollectible accounts? $16,450; $9200; $7,250; $23,700

$16,450 (7% of credit sales)

ACME Corporation lent $25,000 to Hastings, Inc. for 75 days of 7% interest on November 22, 2012. How much interest will have accrued to ACME Corporation on December 31, 2012, assuming a 360 - day year? $364.58; $189.58; $175.00; Some other number

$189.58

A company has $286,000 in credit sales. The company uses the allowance method to account for uncollectible accounts. The Allowance for Doubtful Accounts now has a $2,280 credit balance. If the company estimates $7,640 of accounts will be uncollectible, what will be the amount of the journal entry to record estimated uncollectible accounts? $9920; $4560; $7640; $5360

$5360 (Uncollectable - Credit)

On September 1, 2012, Juno Corp. let $2,400 to Bill Askins on a 6 - month 8% promissory note. The account of interest to be accrued on December 31 will be: $192, $96, $64, $128

$64

The bank statement balance is $6450 and shows a service charge of #30, interest earned of $25, and a NSF check for $475. Deposit in transit total $1850; outstanding checks are $1125. What is the adjusted bank balance? $7,175; $5,725; $5,970; $7,655

$7,175 Balance + (Transit total - outstanding checks)

ABC Company's bank statement shows a bank balance of $263,450. The statement shows a bank service charge of $25 and a note collection of $1100 on ABC Company's behalf. ABC Company's book balance should be adjusted by a total of: +1,075; -$1,075; +$1,125; +$1,100

+$1,075

Jaurez & Co. reported sales of $515,000; beginning net accounts receivable of $212,000 and ending net accounts receivable of $224,000. Juarez & Co's receivable collection period is: 155 106 150 159

155

Juarez & Co. reported sales of $515,000; beginning net accounts receivable of $212,000 and ending net accounts receivable of $224,000. Juarez $ Co s accounts receivable turnover is: 2.30 2.43 2.36 3.44

2.36

Inland Equipment has cash $56,000; net accounts receivable of $67,000; short - term investments of $12,000 and inventory of $40,000. It also has $45,000 in current liabilities and $75,000 in long term liabilities. The quick ratio for Inland equipment is: 2.73; 3.89; 3.00; 2.33

3.00

Inland Equipment has cash of $56000; net accounts receivable of $67,000; short - term investments of $12,000 and inventory of $40,000. It also has $45,000 in current liabilities and $75,000 in long term liabilities. The current ratio for Inland equipment is: 3.89; 3.00; 3.62; 2.73

3.89

If a company has 90 - credit term, you would expect its accounts receivable turnover to be: 12 1 4 2

4

Xenon Company has cash of $143,000; net accounts receivable of $89,000; short - term investments of $35,000 and prepaid expenses of $40,000. It also has $50,000 in current liabilities and $80,000 in long term liabilities. The quick ratio for Xenon equipment is: 5.34; 6.14; 3.34; 4.64

5.34

Xenon Company has cash of $143,000; net accounts receivable of $89,000; short - term investments of $35,000 and prepaid expenses of $40,000. It also has $50,000 in current liabilities and $80,000 in long term liabilities. The current ratio for Xenon equipment is: 6.14; 5.34; 4.64; 5.44

6.14

What type of account is Allowance for Doubtful accounts? A revenue account. A contra - liability account. An expense account. A contra - asset account.

A contra - asset account

How are net realizable receivable calculated? Accounts Receivable less the Allowance for Doubtful Accounts. Accounts Receivable plus the Allowance for Doubtful Accounts. Accounts Receivable divided by the Allowance for Doubtful Accounts. Allowance for Doubtful Accounts plus NSF checks.

Accounts Receivable less the Allowance for Doubtful Accounts

A $450 collection on a note from a customer was reflected on a Columbia Electric's bank statement. When doing the bank reconciliation, Columbia should: Add $450 to the bank balance. Add $450 to their book balance. Subtract $450 from the bank balance. Subtract $450 from their book balance.

Add $450 to their book balance.

Nelson Music deposited a check for $675, but it was recorded on their books as a check for $576. This error of $99 would be: Added to the bank balance. Added to Nelson's book balance. Subtracted from the bank balance. Subtracted from the Nelson's book balance.

Added to Nelson's book balance

Herbert Company deposited $25,000 in its bank on the same day as -but after- the bank prepared Herbert Company's bank statement. The deposit should appear in the bank reconciliation as a(n) ______ and is called a(n) _______. Addition to the bank balance; outstanding deposit. Addition to the bank balance; deposit in transit. Deduction to the bank balance; deposit in transit. The deposit would not appear on the bank reconciliation.

Addition to the bank balance; deposit in transit

The journal entry to write off a customer's account under the allowance method is: Not required. Bad Debt Expense, debit; AR/customer name, credit. Allowance for Uncollectible Accounts, debit; AR/customer name, credit. Bad Debt Expense, debit; Allowance for Uncollectible Account, credit.

Allowance for Uncollectible Accounts, debit; AR/customer name, credit.

The journal entry to write off a customer's account under the direct write - off method is: Bad Debt Expense, debit; AR/customer name, credit. Bad Debit Expense, debit; Allowance for Uncollectible Accounts, credit. Cash, debit; AR/customer name, credit. Not Required.

Bad Debt Expense, debit; Account Receivable/Customer name, credit.

The period end adjusting entry for bad debt expense under the allowance method is: Not required. Bad Debt Expense; AR/customer name, credit. Cash, debit; AR/customer name, credit. Bad Debt Expense, debit; Allowance for Uncollectible accounts, credit.

Bad Debt Expense, debit; Allowance for Uncollectible Accounts, credit.

The aging method is called the: Direct write - off approach. Allowance approach. Income statement Approach. Balance Sheet Approach.

Balance sheet approach

Once an AR is written off, can a business ever collect that money? Only when using the allowance method can a company collect from a customer who has had an account written off. Both the allowance and direct write - methods permit a company to collect from a customer who has had an account written. No, GAAP does not allow a company to collect any amounts from a customer who has had an account written off. Only when using the direct write off method can a company collect from a customer who had an account written off.

Both the allowance and the direct write off methods permit a company to collect from a customer who has had an account written.

Bob is a customer of Tucker inc. His current balance due is $10,560. It has been determined that he defaulted on his account. If the company uses the direct write off method, what entry is necessary to write off the $10,560? Debit Bad Debit Expense; credit Accounts Receivable/Bob. No entry will be necessary. Debit Accounts Receivable/Bob; credit Bad Debit Expense. Debit Bad Debt Expense; credit Allowance for Doubtful Account.

Debit Bad Debit Expense; credit Accounts receivable/Bob

On April 9, Sarah paid $3568 to Advanced Auto to fulfill her promissory note agreement. Of the $3568, $400 is interest. the journal entry Advanced Auto will record is to: Debit Note receivable/Sarah, $3568; credit Cash $3,568. Debit Note Receivable/Sarah, $3568; credit Cash $3169; credit Interested income, $400. Debit Cash, $3568, credit Note Receivable /Sarah, $3568. Debit Cash $3568; Credit Note Receivable/Sarah, $3168; credit interest income, $400.

Debit Cash, $3,568; credit Note Receivable/Sarah, $3168; credit Interest Income, $400.

Cascade Motors deposited $1,000 into their bank, but the bank statement does not show the deposit. This $1,000 is an example of a(n): Bank Error. Outstanding check. Bank collection. Deposit in transit.

Deposit in transit.

Differences between the amount of cash reported on a company's bank statement and the balance in the company s' cash account before the bank reconciliation are primarily due to: Errors made by the bank. Differences between the cash basis and accrual basis accounting. Errors in the accounting process by the company. Timing difference in recording transactions.

Errors in the accounting process by the company.

A company with a quick ratio of 1.23 means that the company: Would have to use inventory to help pay off its current liabilities. Has $1.23 in quick assets for every $1.00 in current liabilities. Has $1.00 in quick assets for every $1.23 in current liabilities. Could not pay off all of its current liabilities using quick assets.

Has $1.23 in quick assets for every $1.00 in current liabilities.

The percent - of - sales method is called the: Direct write - off approach. Income statement approach. Balance sheet approach. Allowance approach.

Income Statement Approach

Accounts Receivable should be reported at _____ in the ______ section of a company's balance sheet. Net realizable value; Long - Term Assets. Market Value; Current Assets. Net realizable value; Current Assets. Market value; Long - Term Assets

Net realizable value; Current assets

The period end adjusting entry for bad debt expense under the direct write - off method is: Not required. Bad Debt Expense, debit; Allowance for Uncollectible Accounts, credit. Bad Debit Expense, debit; AR, credit Cash, debit; AR, credit

Not required.

When preparing a bank reconciliation, which of the following items should be subtracted from the bank balance? EFT cash receipts Bank service charges Outstanding check Deposits in transit

Outstanding Check

Under the allowance method, to record the receipt of cash after an account has previously been written off, you would first: Debit Allowance for Doubtful Accounts. Debit Bad Debt Expense. Reinstate the customer's account. Debit Cash and credit the customer's account.

Reinstate the customer's account.

Under the direct write - off method, to record the receipt of cash after an account has previously being written off, you would first: Reinstate the customer's account. Debit Bad Debit Expense. Debit Cash and credit the customer's account. Debit Allowance for Doubtful accounts.

Reinstate the customer's account.

Outstanding checks are: Added to the bank balance. Subtracted from the book balance. Subtracted from the bank balance. Added to the book balance.

Subtracted from the bank balance.

When a customer fails to pay on their account, it creates a(n): Uncollectible account. Note receivable. Decrease in revenue. Account receivable.

Uncollectible account.

A company with an accounts receivable turn of 11.78 would be collecting its receivables about: once a month. once a year. once a week. Once a quarter

once a month