Exam One Wiley Plus Chapter 7

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Consider the following: Cash in Bank - checking account of $19900, Cash on hand of $540, Post-dated checks received totaling $3440, and certificates of deposit totaling $124000. How much should be reported as cash in the balance sheet?

$20440.

Bramble Corp. made a $24800 sale on account with the following terms: 2/15, n/30. If the company uses the net method to record sales made on credit, how much should be recorded as revenue?

$24304.

Swifty Corporation has outstanding accounts receivable totaling $1.25 million as of December 31 and sales or credit during the year of $6.44 million. There is also a debit balance of $5900 in the allowance for doubtful accounts. If the company estimates that 2% of its accounts receivable will be uncollectible, what will be the balance in the allowance for doubtful accounts after the year-end adjustment to record bad debt expense?

25000

Bonita Industries sold toys listed at $355 per unit to Sandhill Co. for $302, a trade discount of 15 percent. Sandhill Co. in turn sells the toys in the market at $318. Bonita should record the receivable and related sales revenue (per unit) at:

302

Karen had net sales (all on account) in 2020 of $730000. At December 31, 2020, before adjusting entries, the balances in selected accounts were: accounts receivable $980000 debit, and allowance for doubtful accounts $2370 debit. Karen estimates that 4% of its accounts receivable will prove to be uncollectible. What is the net amount expected to be collected of the receivables reported on the financial statements at December 31, 2020?

940800

Which of the following is a generally accepted method of determining the amount of the adjustment to bad debt expense? Actual losses from uncollectible accounts. An amount derived from aging accounts receivable and not adjusted for the balance in the allowance. A percentage of accounts receivable adjusted for the balance in the allowance. A percentage of accounts receivable not adjusted for the balance in the allowance.

A percentage of accounts receivable adjusted for the balance in the allowance.

Which of the following concepts relates to using the allowance method in accounting for accounts receivable? Bad debt expense is management's determination of which accounts will be sent to the attorney for collection .Bad debt expense is an estimate that is based only on an analysis of the receivables aging. Bad debt expense is based on the actual amounts determined to be uncollectible. Bad debt expense is an estimate that is based on historical and prospective information.

Bad debt expense is an estimate that is based on historical and prospective information.

On July 22, Mark sold $23900 of inventory items on credit with the terms 3/15, net 30. Payment on $15300 sales was received on August 1 and the remaining payment was received on August 12. Assuming Mark uses the gross method of accounting for sales discounts, which one of the following entries was made on August 1 to record the cash received?

Cash 14841 Sales 459 Accounts Recievable. 15300

How can accounting for bad debts be used for earnings management? Determining which accounts to write-off. Reversing previous write-offs. Using an aging of the accounts receivable balance to determine bad debt expense. Changing the percentage of receivables recorded as bad debt expense.

Changing the percentage of receivables recorded as bad debt expense.

Which of the following methods of determining bad debt expense does not properly match expense and revenue? Charging bad debts as accounts are written off as uncollectible. Charging bad debts with a percentage of sales under the allowance method. Charging bad debts with an amount derived from a percentage of accounts receivable under the allowance method. Charging bad debts with an amount derived from aging accounts receivable under the allowance method.

Charging bad debts as accounts are written off as uncollectible.

Bramble Corp. made a $26200 sale on account with the following terms: 3/10, n/30. If the company uses the gross method to record sales made on credit, what is/are the debit(s) in the journal entry to record the sale? Debit Accounts Receivable for $26200 and Sales Discounts for $786. Debit Accounts Receivable for $25414 and Sales Discounts for $786. Debit Accounts Receivable for $26200. Debit Accounts Receivable for $25414.

Debit Accounts Receivable for $26200.

What is the normal journal entry when writing-off an account as uncollectible under the allowance method? Debit Allowance for Doubtful Accounts, credit Accounts Receivable. Debit Accounts Receivable, credit Allowance for Doubtful Accounts .Debit Allowance for Doubtful Accounts, credit Bad Debt Expense.Debit Bad Debt Expense, credit Allowance for Doubtful Accounts.

Debit Allowance for Doubtful Accounts, credit Accounts Receivable.

What is the normal journal entry for recording bad debt expense under the allowance method? Debit Allowance for Doubtful Accounts, credit Accounts Receivable. Debit Allowance for Doubtful Accounts, credit Bad Debt Expense. Debit Bad Debt Expense, credit Allowance for Doubtful Accounts. Debit Accounts Receivable, credit Allowance for Doubtful Accounts.v

Debit Bad Debt Expense, credit Allowance for Doubtful Accounts.

Which of the following is an appropriate reconciling item to the balance per bank in a bank reconciliation? Bank service charge. Bank interest. Chargeback for NSF check. Deposit in transit.

Deposit in transit.

Why is the allowance method preferred over the direct write-off method of accounting for bad debts? Determining worthless accounts under direct write-off method is difficult to do. Improved matching of bad debt expense with revenue. Allowance method is used for tax purposes. Estimates are used.

Improved matching of bad debt expense with revenue.

Which of the following statements is correct regarding receivables? Receivables are claims held against customers and others for money, goods, or services. Receivables that are expected to be collected within a year are classified as noncurrent. Receivables are written promises of the purchaser to pay for goods or services. Receivables are non-financial assets.

Receivables are claims held against customers and others for money, goods, or services.

Which of the following statements is correct regarding receivables? Receivables are claims held against customers and others for money, goods, or services. Receivables that are expected to be collected within a year are classified as noncurrent. Receivables are written promises of the purchaser to pay for goods or services. Receivables are non-financial assets.

Receivables are claims held against customers and others for money, goods, or services.

Which of the following statements is true? The Petty Cash account is debited when the fund is replenished. An imprest petty cash system is more impractical than disbursement by check. If cash proves out short the company credits the shortage to Cash Over and Short. The company closes Cash Over and Short only at the end of the year.

The company closes Cash Over and Short only at the end of the year.

Which of the following is true when accounts receivable are factored without recourse? The factor assumes the risk of collectibility and absorbs any credit losses in collecting the receivables. The receivables are used as collateral for a promissory note issued to the factor by the owner of the receivables. The transaction may be accounted for either as a secured borrowing or as a sale, depending upon the substance of the transaction. The financing cost (interest expense) should be recognized ratably over the collection period of the receivables.

The factor assumes the risk of collectibility and absorbs any credit losses in collecting the receivables.

What is "recourse" as it relates to selling receivables?

The obligation of the seller of the receivables to pay the purchaser in case the debtor fails to pay.

Of the following conditions, which is the only one that is not required if the transfer of receivables with recourse is to be accounted for as a sale? The transferor surrenders control of the future economic benefits of the receivables. The transferor is obligated to make a genuine effort to identify those receivables that are uncollectible. The transferee cannot require the transferor to repurchase the receivables. The transferor's obligation under the recourse provisions can be reasonably estimated.

The transferor is obligated to make a genuine effort to identify those receivables that are uncollectible.

When should a transfer of receivables be recorded as a sale? The buyer surrenders control of the receivables to the seller. The transferor maintains effective control over the transferred assets through an agreement to repurchase or redeem them prior to their maturity. The transferred assets are isolated from the transferor. The transferor does not maintain effective control over the transferred assets through an agreement to repurchase or redeem them prior to their maturity.

The transferred assets are isolated from the transferor.

Why would a company sell receivables to another company? To accelerate access to amounts collected. To comply with customer agreements.To improve the quality of its credit granting process. To limit its legal liability.

To accelerate access to amounts collected.

If a company employs the gross method of recording accounts receivable from customers, then sales discoun taken should be reported as a deduction from sales in the income statement. an item of "other expense" in the income statement.sales discounts forfeited in the cost of goods sold section of the income statement. a deduction from accounts receivable in determining the accounts receivable amount expected to be collected.

a deduction from sales in the income statement.

On April 2, Kelvin sold $31500 of inventory items on credit with the terms 3/10, net 30. Payment on $18900 sales was received on April 8 and the remaining payment on $12600 sales was received on April 27. Assuming Kelvin uses the net method of accounting for sales discounts, the entry recorded on April 27 would include a:

debit to Cash for $12600 and credit to Sales Discounts Forfeited for $378.

The advantage of relating a company's bad debt expense to its outstanding accounts receivable is that this approach is the only generally accepted method for valuing accounts receivable. best relates bad debt expense to the period of sale. makes estimates of uncollectible accounts unnecessary. gives a reasonably correct statement of receivables in the balance sheet.

gives a reasonably correct statement of receivables in the balance sheet.


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