Chapter 6 A-304

Pataasin ang iyong marka sa homework at exams ngayon gamit ang Quizwiz!

Libby Inc. sells $5,000 of goods to a customer. The customer pays with a VISA credit card. VISA charges a 3% fee on the sale. Recording the sale would include a debit to Cash of Blank______. Multiple choice question. $150 $3,500 $5,000 $4,850 $5,150

4850

Using the aging approach, management estimates that $1,000 of Accounts Receivable will be uncollectible. The Allowance for Doubtful Accounts has a $100 unadjusted credit balance. The adjusting entry to record estimated bad debts includes a Blank______. (Check all that apply.) Multiple select question. credit to Allowance for Doubtful Accounts of $1,000 debit to Bad Debt Expense of $1,100 debit to Bad Debt Expense of $1,000 credit to Allowance for Doubtful Accounts of $1,100 credit to Allowance for Doubtful Accounts of $900 debit to Bad Debt Expense of $900

credit to Allowance for Doubtful Accounts of $900 debit to Bad Debt Expense of $900

Since accounting numbers, such as the allowance for doubtful accounts balance, are based on " ", financial statements are susceptible to management manipulation.

estimation or judgement

Short-term highly liquid investments with a maturity of " " months or less that can be readily converted to cash with little risk of loss are classified as cash equivalents

3

Using the aging approach, management estimates that $1,000 of accounts receivable will be uncollectible. The Allowance for Doubtful Accounts has a $100 unadjusted debit balance. The Allowance for Doubtful Accounts on the balance sheet will equal Blank______. Multiple choice question. $1,100 $900 $1,000

$1,000

Using the aging approach, management estimates that $1,000 of accounts receivable will be uncollectible. The Allowance for Doubtful Accounts has a $100 unadjusted debit balance. The Allowance for Doubtful Accounts on the balance sheet will equal Blank______. Multiple choice question. $900 $1,100 $1,000

$1,000

Accounts receivable has a $2,300 balance, and the Allowance for doubtful accounts has a $200 credit balance. An $80 account receivable is written off. The net book value of receivables on the balance sheet after the write-off equals Blank______. Multiple choice question. $2,180 $2,020 $2,100 $2,220

$2,100

XYZ Company sold merchandise for $5,000, with payment terms of 2/10,n/30. If the customer pays within the discount period and takes the discount, XYZ will receive Blank______. Multiple choice question. $3,500 $4,900 $100 $5,000

$4,900

When merchandise is returned for a refund or for credit to be applied to other purchases, the account called Sales " " and " " is debited.

1. returns 2. allowances

Brewed Awakenings, Inc., sold $100,000 of coffee to Java the Hut with sales terms of 1/7, n/30. Given Java paid within the discount period, the amount of the sales discount equals $

1000

***** Cellar's Inc. sold $800,000 of merchandise with sales terms of 2/10, n/30 and the customers paid within 10 days. The net sales equals Blank______. Multiple choice question. ***** $816,000 $16,000 $800,000 $784,000

784000 why would this be more expensive if you get a discount

Libby Inc. sells $3,000 of goods to a customer. The customer pays with a VISA credit card. VISA charges a 3% fee on the sale. The amount of the credit card fee (that is netted against Sales Revenue) equals $

90

During the month, Cellum, Inc. sold 100 cells at a price of $100 each. Each cell was sold at a 1% sales discount. Cellum had returns of $198 (net of discounts) and incurred bank service charges of $20. Net sales for the month ended equals $

9702 don't count the service charges because they are incurred and come after the net sales

Accounts receivable, net on the balance sheet refers to Blank______. Multiple choice question. Sales minus Cost of Goods Sold Sales minus Accounts Receivable Sales minus Sales Discounts minus Sales Returns and Allowances Accounts Receivable minus the Allowance for Uncollectible Accounts

Accounts Receivable minus the Allowance for Uncollectible Accounts

Although there are some clear disadvantages associated with extending credit to customers, such as bad debt costs, most managers believe a particular advantage outweighs the costs. To which primary advantage do they refer? Multiple choice question. Increased labor costs Increased bad debt expense Additional sales revenue

Additional sales revenue

Companies may use which of the following to motivate sales and collections? (Select all that apply.) Multiple select question. Allow customers to purchase on credit Provide discounts for early collection Sell merchandise FOB shipping point Allow customers to pay in advance

Allow customers to purchase on credit Provide discounts for early collection

select all of the following that are properly defined. Multiple select question. Allowance for Doubtful Accounts is the amount of receivables estimated to be uncollectible. Accounts Receivable (Net) reports the amount of receivables expected to be collected. Accounts Receivable (Net) is the net realizable value. Accounts Receivable (Gross) includes only the collectible receivables. Accounts Receivable (Gross) includes both collectible and uncollectible receivables.

Allowance for Doubtful Accounts is the amount of receivables estimated to be uncollectible. Accounts Receivable (Net) reports the amount of receivables expected to be collected. Accounts Receivable (Net) is the net realizable value. Accounts Receivable (Gross) includes both collectible and uncollectible receivables.

ABC, Inc.'s unadjusted trial balance included Accounts receivable of $80,000; Allowance for doubtful accounts as a $750 credit balance; and Credit sales of $400,000. ABC uses the aging-of-receivables method and estimates that $8,000 of its receivables will be uncollectible. After the adjusting entry is made, ABC's financial statements will report: (Check all that apply.) Multiple select question. Allowance for doubtful accounts of $8,000 on the balance sheet. Allowance for doubtful accounts of $7,250 on the balance sheet. Bad debt expense of $7,250 on the income statement. Bad debt expense of $7,250 on the balance sheet. Bad debt expense of $8,000 on the income statement. Allowance for doubtful accounts of $8,000 on the income statement.

Allowance for doubtful accounts of $8,000 on the balance sheet. Bad debt expense of $7,250 on the income statement.

ABC, Inc.'s unadjusted trial balance included Accounts receivable of $80,000; Allowance for doubtful accounts as a $750 credit balance; and Credit sales of $400,000. ABC uses the aging-of-receivables method and estimates that $8,000 of its receivables will be uncollectible. After the adjusting entry is made, ABC's financial statements will report: (Check all that apply.) Multiple select question. Bad debt expense of $7,250 on the balance sheet. Allowance for doubtful accounts of $8,000 on the income statement. Allowance for doubtful accounts of $7,250 on the balance sheet. Bad debt expense of $8,000 on the income statement. Bad debt expense of $7,250 on the income statement. Allowance for doubtful accounts of $8,000 on the balance sheet.

Bad debt expense of $7,250 on the income statement. Allowance for doubtful accounts of $8,000 on the balance sheet.

An analyst sees the line item Accounts receivable, net of allowances of $2,040,000, with a balance of $19,500,000. Which of the following statements is correct. (Select all that apply.) Multiple select question. $19,500,000 is the expected amount to be collected from customers $19,500,000 is the sum of all of its customers' account balances $2,040,000 is the amount estimated to be uncollectible $21,540,000 is the gross receivables

Correct Answer $19,500,000 is the expected amount to be collected from customers $2,040,000 is the amount estimated to be uncollectible $21,540,000 is the gross receivables

The Allowance for Doubtful Accounts is a contra-asset account. Increases to the account (to record the period's estimated bad debt expense) are recorded with Blank______. Multiple choice question. debits credits

Credit BC it is a contra asset account

What conclusion are managers likely to draw from a constant increase to sales returns and allowances? Multiple choice question. Customers are unhappy with the quality of the merchandise. The company should give fewer cash discounts to customers. The company should increase its inventory purchases.

Customers are unhappy with the quality of the merchandise.

When a customer returns a product for a refund, in which of the seller's accounts is the entry recorded? Multiple choice question. Purchase Discounts Purchase Returns and Allowances Sales Returns and Allowances Sales Discounts

Sales Returns and Allowances

In which situations does a company issue a note receivable? (Check all that apply.) Multiple select question. The company makes an exception for a financially troubled customer and extends the payment period and charges interest. The company lends money to employees or businesses. The company sells to customers on account and expects payment within 30 days.

The company makes an exception for a financially troubled customer and extends the payment period and charges interest. The company lends money to employees or businesses.

Which of these are cash equivalents? (Check all that apply.) Multiple choice question. Treasury bills that mature in 2 months Notes receivable that mature in 5 months Highly-liquid investments whose value is likely to change with original maturities of 3 months or less US Treasury bonds that mature in 1 year

Treasury bills that mature in 2 months

During the year, ABC Corp. realizes that a particular customer will never pay. What action should ABC take? Multiple choice question. Increase Bad Debt Expense. Nothing, as Bad Debt Expense has already been recorded. Write off the uncollectible account and its corresponding allowance from the accounting records.

Write off the uncollectible account and its corresponding allowance from the accounting records.

What does the sales discount 1/7, n/30 mean? Multiple choice question. You can take a 30% discount if you pay within 1 to 7 days You can take a 1% discount if you pay within 7 days, or the full amount is due within 30 days You can take a 10% discount if you pay within 23 days, or a 30% discount if you pay today For every day the bill is overdue past 7 days, you will be charged 1% interest

You can take a 1% discount if you pay within 7 days, or the full amount is due within 30 days

The challenge businesses face when estimating the allowance for doubtful accounts is that Blank______. Multiple choice question. in bad economic times, fewer customers will have problems with their payments past default rates are not a good predictor of future default rates at the time of the sale, it is not known which particular customer will be a "bad" customer

at the time of the sale, it is not known which particular customer will be a "bad" customer

Short-term, highly liquid investments such as money market funds or treasury bills are classified as Blank______. Multiple choice question. liquid securities short-term investments cash equivalents restricted cash

cash equivalents

Credit card companies earn revenues from Blank______. (Check all that apply.) Multiple select question. charging the retailer a fee for each credit card sale charging the credit card holder interest charging the credit card holder a fee for each transaction charging the retailer interest until the purchase is paid

charging the retailer a fee for each credit card sale charging the credit card holder interest

contra-revenue accounts

credit card discounts sales discounts sales returns and allowances

Sales to customers in which the customers pay within 30 days are referred to as Blank______. (Check all that apply.) Multiple select question. credit sales nonaccrued sales deferred sales sales on account

credit sales sales on account

Nim Com Soup, Inc. uses the allowance method to account for bad debt expense. It determines that a customer account of $10,000 should be written off as uncollectible. The write off of the account will include a Blank______. Multiple choice question. credit Sales Returns and Allowances debit Accounts Receivable debit Bad Debt Expense debit Allowance for Doubtful Accounts

debit Allowance for Doubtful Accounts

Nim Com Soup, Inc. uses the allowance method to account for bad debt expense. It determines that a customer account of $10,000 should be written off as uncollectible. The write off of the account will include a Blank______. Multiple choice question. credit Sales Returns and Allowances debit Allowance for Doubtful Accounts debit Accounts Receivable debit Bad Debt Expense

debit Allowance for Doubtful Accounts

Nim Com Soup, Inc. uses the allowance method to account for bad debt expense. It determines that a customer account of $10,000 should be written off as uncollectible. The write off of the account will include a Blank______. Multiple choice question. debit Accounts Receivable debit Allowance for Doubtful Accounts debit Bad Debt Expense credit Sales Returns and Allowances

debit Allowance for Doubtful Accounts

Using the aging approach, management estimates that $1,000 of Accounts Receivable will be uncollectible. The Allowance for Doubtful Accounts has a $100 unadjusted credit balance. The adjusting entry to record estimated bad debts includes a Blank______. (Check all that apply.) Multiple select question. credit to Allowance for Doubtful Accounts of $1,100 debit to Bad Debt Expense of $1,100 debit to Bad Debt Expense of $900 credit to Allowance for Doubtful Accounts of $900 debit to Bad Debt Expense of $1,000 credit to Allowance for Doubtful Accounts of $1,000

debit to Bad Debt Expense of $900 credit to Allowance for Doubtful Accounts of $900

Using the aging approach, management estimates that $1,000 of Accounts Receivable will be uncollectible. The Allowance for Doubtful Accounts has a $100 unadjusted credit balance. The adjusting entry to record estimated bad debts includes a Blank______. (Check all that apply.) Multiple select question. debit to Bad Debt Expense of $1,100 debit to Bad Debt Expense of $900 debit to Bad Debt Expense of $1,000 credit to Allowance for Doubtful Accounts of $1,100 credit to Allowance for Doubtful Accounts of $1,000 credit to Allowance for Doubtful Accounts of $900

debit to Bad Debt Expense of $900 credit to Allowance for Doubtful Accounts of $900

The Allowance for Doubtful Accounts, a contra-asset account, is Blank______ when specific uncollectible accounts are written-off. Multiple choice question. not adjusted credited debited

debited

Sales discounts should appear in the financial statements as a(n) Blank______. Multiple choice question. operating expense addition to sales deduction from sales addition to inventory part of current liabilities

deduction from sales

Cash " " are investments with original maturities of three months or less that are readily convertible to cash and whose value is unlikely to change. Examples include bank certificates and US Treasury bills.

equivalents

When the allowance method is used, the write-off of an uncollectible account Blank______. Multiple choice question. increases net income has no effect on net income decreases net income

has no effect on net income

Bad Debt Expense Blank______. (Check all that apply.) Multiple select question. is a cost of extending credit to customers is based on actual events and does not require estimation should exceed the revenue generated from incurring the cost is an estimate

is a cost of extending credit to customers is an estimate

On the income statement, Sales revenue less Credit card discounts less Sales discounts less Sales returns and allowances equals the line item called

net sales

Identify two benefits to the seller of offering sales discounts to its customers. Multiple select question. prompt receipt of cash increases the likelihood the seller will receive the cash before the customer runs out of funds decreases the seller's cost of goods sold increases the seller's net sales relative to its sales

prompt receipt of cash increases the likelihood the seller will receive the cash before the customer runs out of funds

Offering customers Blank______ increases the likelihood the seller will receive the cash before the customer runs out of funds and encourages prompt payment. Multiple choice question. sales discounts free shipping allowances for uncollectible accounts sales on credit

sales discounts

An individual customer's accounts receivable is recorded in the customer's Blank______ account and then summarized with all other customers' accounts on the balance sheet as Accounts receivable. Multiple choice question. allowance for uncollectible uncollectible sales discount subsidiary nontrade receivable

subsidiary

Delectable, Inc.'s unadjusted trial balance includes Accounts receivable of $10,000; Allowance for doubtful accounts as a $50 credit balance; and Credit sales of $100,000. Based on an aging of its receivable, management estimates that $1,000 of receivables will be uncollectible. Delectable's financial statements will show Blank______. (Check all that apply.) Multiple select question. Allowance for Doubtful Accounts of $1,050 Allowance for Doubtful Accounts of $1,000 Allowance for Doubtful Accounts of $950 Bad Debt Expense of $1,000 Bad Debt Expense of $950

xxAllowance for Doubtful Accounts of $1,000 Bad Debt Expense of $950


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