Chapter 9

Doer Company reports year-end credit sales in the amount of $390,000 and accounts receivable of $85,500. Doer uses the income statement method to report bad debt estimation. The estimation percentage is 3.5%. What is the estimated balance uncollectible using the income statement method?

$13,650

Michelle Company reports $345,000 in credit sales and $267,500 in accounts receivable at the end of 2019. Michelle currently uses the income statement method to record bad debt estimation at 4%. To manage earnings more efficiently, Michelle changes bed debt estimation to the balance sheet method at 4%. How much is the difference in net income between the income statement and balance sheet methods?

$13,800

A car dealership sells a car to a customer for $35,000. The customer makes a 10% down payment, and the dealership finances the remaining 90% in-house. How much will the car dealership record in Accounts Receivable for this customer?

$31,500

Tines Commerce computes bad debt based on the allowance method. They determine their current year's balance estimation to be a credit of $45,000. The previous period had a credit balance in Allowance for Doubtful Accounts of $12,000. What should be the reported figure in the adjusting entry for the current period?

$33,000

Orion Rentals is unable to collect on a note worth $25,000 and has accumulated interest of $250. It convert this note and interest to accounts receivable. After some time, Orion is still unable to collect the debt and it decides to sell the converted note to a collection agency. The collection agency will pay only 20% of the value of accounts receivable to Orion. What is the amount of cash paid to Orion from the collection agency?

$5,050

Balloons Plus computes bad debt based on the allowance method. They determine their current year's balance estimation to be a credit of $84,000. The previous period had a credit balance in Allowance for Doubtful Accounts of $26,000. What should be the reported figure in the adjusting entry for the current period?

$58,000

Conner Pride reports year-end credit sales in the amount of $567,000 and accounts receivable of $134,000. Conner uses the balance sheet method to report bad debt estimation. The estimation percentage is 4.6%. What is the estimated balance uncollectible using the balance sheet method?

$6,164

A customer takes out a loan of $130,000 on January 1, with a maturity date of 36 months, and an annual interest rate of 11%. If 6 months have passed since note establishment, what would be the recorded interest figure at that time?

$7,150

Which of the following is true about earnings management?

Both A and C Earnings management works within GAAP constraints to improve stakeholders' views of the company's financial position.

Which of the following is not a criterion to recognize revenue under GAAP?

Cash must be collected.

Which of the following is not a way to manage earnings?

Change the dates of common stock issuance.

A company collects an honored note with a maturity date of 24 months from establishment, a 10% interest rate, and an initial loan amount of $30,000. Which accounts are used to record collection of the honored note at maturity date?

Interest Receivable, Cash, Notes Receivable

Which of the following is true of a maturity date?

It is the date when principal and interest on a note are to be repaid to the lender.

Which of the following best represents the matching principle criteria?

Revenue and expenses are matched based on when expenses are paid.

If a customer pays with a credit card and the service has been provided, which of the following accounts will be used to record the sales entry for this transaction?

Sales Revenue, Credit Card Expense, Accounts Receivable

Which of the following estimation methods considers the amount of time past due when computing bad debt?

balance sheet aging of receivables method

Which of the following best represents a positive product of a lower number of days' sales in receivables ratio?

collection of receivables is quick, and cash can be used for other business expenditures

What information can best be elicited from a receivable ratio?

company performance with current debt collection

Which method delays recognition of bad debt until the specific customer accounts receivable is identified?

direct write-off method

Which statement is most directly affected by a change to net income?

income statement

Mark Industries issues a note in the amount of $45,000 on August 1, 2018 in exchange for the sale of merchandise. Which of the following is the correct journal entry for this sale?

notes receivable: mark 45,000 sales rev: 45,000