chapter 8 multiple choice

What type of receivables result from sales transactions? Entry field with correct answer Long-term receivables Other receivables Non-trade receivables Trade receivables

Trade Receivables

Short-term notes receivable are reported at their cash (net) realizable value. Entry field with correct answer True False

True

Which of the following is a threat of nonpayment from a single customer or class of customers that could adversely affect the financial health of a company? Entry field with correct answer A concentration of credit risk Payment risk Credit risk Concentration risk

A concentration of credit risk

What type of receivable is evidenced by a formal instrument and normally requires the payment of interest? A note receivable A trade receivable Past-due accounts receivables An account receivable

A note receivable

Which one of these statements about promissory notes is incorrect? Entry field with correct answer A promissory note is not a negotiable instrument. A promissory note is more liquid than an account receivable. The party making the promise to pay is called the maker. The party to whom payment is to be made is called the payee.

A promissory note is not a negotiable instrument.

Which of the following is the debit effect of the journal entry to record the dishonor of a note receivable? Entry field with correct answer Accounts Receivable Allowance for Doubtful Accounts Loss on Notes Receivable Bad Debts Expense

Accounts Receivable

When an uncollectible account is recovered after it has been written off, which of the following accounts will be credited in the process? Entry field with correct answer Allowance for Doubtful Accounts and Cash Accounts Receivable and Allowance for Doubtful Accounts Cash and Account Receivable Allowance for Doubtful Accounts and Bad Debts Expense

Allowance for Doubtful Accounts Cash and Account Receivable

When uncollectibles are determined, what does the journal entry look like

Allowance for Doubtful Accounts Accounts Receivables

Which one of the following is part of the transaction that is recorded when an account is written off under the allowance method? Entry field with correct answer Loss on Accounts Receivable account is debited. Allowance for Doubtful Accounts is debited. Bad Debts Expense account is debited. Accounts Receivable account is debited.

Allowance for Doubtful Accounts is debited.

When uncollectibles are esimated, what does a journal entry look like?

Bad Debts Expense Allownace for Doubtful Accounts

Which one of the following statements is true? Entry field with correct answer Bad Debts Expense is a real account and remains open at the end of the fiscal period, while Allowance for Doubtful Accounts is a nominal account and is closed at the end of the fiscal period. Bad Debts Expense and Allowance for Doubtful Accounts are both nominal accounts and are closed at the end of the fiscal period. Bad Debts Expense is a nominal account and is closed at the end of the fiscal period, while Allowance for Doubtful Accounts is a real account and remains open at the end of the fiscal period. Bad Debts Expense and Allowance for Doubtful Accounts are both real accounts and neither are closed at the end of the fiscal period.

Bad Debts Expense is a nominal account and is closed at the end of the fiscal period, while Allowance for Doubtful Accounts is a real account and remains open at the end of the fiscal period.

At what value are accounts receivable reported on the balance sheet? Entry field with correct answer Present value Cash (net) realizable value Maturity value Fair market value

Cash (net) realizable value

Which one of the following is not one of the principles of managing accounts receivable? Entry field with correct answer Accelerating cash receipts from receivables when necessary Establishing a payment period Determining from which vendor credit should be requested Monitoring collections

Determining from which vendor credit should be requested

What is often the most critical part of managing receivables? Entry field with correct answer Monitoring the receivables Determining who gets credit and who doesn't Establishing a payment period Determining which method to use to account for bad debts

Determining who gets credit and who doesn't

At what amount is a short-term notes receivable recorded on the issue date? Entry field with correct answer Face value Fair market value Present value Maturity value

Face Value

On the date a 90-day note is honored, how much cash will the payee receive? Entry field with correct answer Face value plus 90 days of interest Maturity value plus 90 days of interest Face value Maturity value less the face value

Face value plus 90 days of interest

Allowance for Doubtful Accounts is closed at the end of the fiscal year. Entry field with correct answer True False

False

Receivables are reported on the balance sheet at the cash amount owed by customers. Entry field with correct answer True False

False

Which of the following should be classified as an "other" receivable? Entry field with correct answer Notes receivable Accounts receivable Trade receivables Interest receivable

Interest Receivable

Entry to Record accepting a promissory note

Notes Receivable Accounts Receivable

Which one of the following is not one of the five basic issues in accounting for notes receivable? Entry field with correct answer Valuing notes receivable Realizing notes receivable Recognizing notes receivable Disposing of notes receivable

Realizing notes receivable

The direct write-off method violates the expense recognition principle. Entry field with correct answer True False

True

Under the allowance method, the write off of an account receivable leaves the net realizable value of the receivables unchanged. Entry field with correct answer True False

True

When a note receivable is paid on time and no interest has been previously accrued, what will the journal entry to record the transaction contain? Entry field with correct answer Two debits and one credit Two credits and one debit One debit and one credit None of the answer choices are correct

Two credits and one debit

When is a receivable recorded by a service organization? Entry field with correct answer When service is provided on account When the related expenses are incurred When the bill is sent to the customer When the customer pays

When service is provided on account

Notes receivable are reported in the current assets section of the balance sheet at Entry field with correct answer cash (net) realizable value. market value. total principal plus interest for the term of the loan. the selling price at which the inventory was sold to the customers.

cash (net) realizable value. market value.