Accounting Chapter 9 Quiz
A company issues a 140-day, 14% note for $17,000. What is the principal amount of the note? (Round your answer to the nearest dollar.) A. $17,000 B. $19,380 C. $17,926 D. $16,074
A
Which of the following is a disadvantage when a business accepts credit cards or debit cards from customers? A. The business pays a processing fee. B. The business bears the risk of nonpayment by the customer. C. The business bears the responsibility of collecting cash from the customer. D. The business checks customers' credit ratings.
A
Which of the following is not a method of estimating the amount of bad debt expense at the end of the accounting period? A. direct write-off method B. aging-of-receivables method C. percent-of-sales method D. percent-of-receivables method
A
A company with significant amounts of accounts receivable experiences uncollectible accounts from time to time. If the company uses the direct write-off method, the effect of writing off an uncollectible receivable will be ________. A. negligible on net income B. a reduction in net income C. an increase in total assets D. a generation of positive cash flow
B
GAAP requires companies to use the ________ method to record bad debts expense. A. 360-day B. allowance C. amortization D. direct write-off
B
The following information is from the 2017 records of Armand Music Shop: Accounts receivable, December 31, 2017 $44,000 (debit) Allowance for Bad Debts, December 31, 2017 prior to adjustment 1,500 (debit) Net credit sales for 2017 179,000 Accounts written off as uncollectible during 2017 16,000 Cash sales during 2017 26,000 Bad debts expense is estimated by the percent-of-sales method. Management estimates that 6% of net credit sales will be uncollectible. Calculate the amount of bad debts expense for 2017. A. $8,100 B. $10,740 C. $9,240 D. $12,300
B
The two methods of accounting for uncollectible receivables are ________. A. the direct write-off method and the liability method B. the allowance method and the direct write-off method C. the asset method and the sales method D. the allowance method and the liability method
B
On July 7, Landview Bank lent $530,000 to Classical Music Shop on a 60 day, 6% note. What is the maturity value of the note? (Use a 360-day year and round answers to the nearest dollar.) A. $535,227 B. $530,000 C. $535,300 D. $561,800
C
On July 7, Smithview Bank lent $440,000 to Andrews Retail Shop on a 90 day, 8% note. What is the maturity date of the note? A. October 6 B. October 7 C. October 5 D. October 8
C
On October 1, 2017, Ealys Jewelers accepted a 4-month, 11% note for $7,000 in settlement of an overdue account receivable. The accounting period ends on December 31. Calculate the accrued interest on the note at December 31, 2017. (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.) A. $257 B. $770 C. $193 D. $385
C
The following information is from the records of Armadillo Camera Shop: Accounts receivable, December 31, 2017 $81,000 (debit) Net credit sales for 2017 160,000 Accounts written off as uncollectible during 2017 17,000 Cash sales during 2017 41,000 The company uses the direct writeminus−off method for bad debts. What is the amount of bad debts expense? A. $62,000 B. $41,000 C. $17,000 D. $81,000
C
Which of the following statements is true? A. Notes receivable are always classified as current assets. B. Accounts receivable are more liquid than cash. C. Notes receivable usually have longer collection terms than accounts receivable. D. Accounts receivable are liabilities.
C
Which of the following is an example of exercising internal control over receivables? A. allowing credit department employees to collect cash from customers B. combining the duties of the credit and accounting departments C. extending credit to all customers who apply for credit D. separating cash collection and credit approval duties Your answer is correct.
D
Which of the following is true of the balance sheet presentation of the Allowance for Bad Debts? A. It is reported as a separate, independent line item under current assets. B. It is reported as a current liability. C. It is reported as an operating expense. D. It is shown as a contra account related to accounts receivable.
D
Accounts Receivable has a balance of $32,000, and the Allowance for Bad Debts has a credit balance of $3,400. The allowance method is used. What is the net realizable value of Accounts Receivable before and after a $2,300 account receivable is written off? A. $28,600; $28,600 B. $26,300; $30,900 C. $26,300; $26,300 D. $28,600; $26,300
A
Customer A. Smith owed Stonebridge Electronics $225. On April 27, 2016, Stonebridge determined this account receivable to be uncollectible and wrote off the account. The company uses the direct write−off method. On July 15, 2016, Stonebridge received a check for $225 from the customer. How should the July 15, 2016 transaction be recorded? A. July 15 Accounts Receivable− A. Smith 225 Bad Debt Expense 225 July 15 Cash 225 Accounts Receivable− A. Smith 225 B. July 15 Accounts Receivable− A. Smith 225 Bad Debt Revenue 225 July 15 Cash 225 Accounts Receivable− A. Smith 225 C. July 15 Cash 225 Accounts Receivable− A. Smith 225 D. July 15 Cash 225 Bad Debt Expense 225
A
Grabbe Enterprises uses the allowance method to account for uncollectible receivables. When an uncollectible account is written off, ________. A. the write off has no effect on net income B. the Bad Debt Expense account is debited C. no entry is required because bad debt expense is estimated at the end of the accounting period D. the Allowance for Bad Debts account is credited
A
On January 1, Davidson Services has the following balances: Accounts Receivable $24,000 Bad Debts Expense $0 Davidson has the following transactions during January: Credit sales of $140,000, collections of credit sales of $85,000, and write−offs of $20,000. Davidson uses the direct write−off method. The amount of Bad Debts Expense for January is ________. Do not round until the final answer. Then round to the nearest whole dollar. A. $20,000 B. $12,143 C. $32,941 D. $24,000
A
The Allowance for Bad Debts has a credit balance of $9,000 before the adjusting entry for bad debts expense. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging-of-receivables method, the company's management estimates that uncollectible accounts will be $15,000. What will be the amount of Bad Debts Expense reported on the income statement? A. $6,000 B. $15,000 C. $9,000 D. $24,000
A
The following information is from the records of Pangolin Camera Shop: Accounts Receivable, December 31, 2017 $22,000 (debit) Allowance for Bad Debts, December 31, 2017 prior to adjustment 1,000 (debit) Net credit sales for 2017 92,000 Accounts written off as uncollectible during 2017 500 Bad expense is estimated by the aging-of-receivables method. Management estimates that $2,850 of accounts receivable will be uncollectible. Calculate the amount of net accounts receivable after the adjustment for bad debts. A. $19,150 B. $20,150 C. $18,150 D. $17,650
A
For a company with significant uncollectible receivables, the direct write-off method is unsuitable because ________. A. companies are not able to track customer payment histories B. it violates the matching principle C. it uses estimates for determining the bad debt expense D. it overstates liabilities on the balance sheet
B
The Allowance for Bad Debts account has a credit balance of $3,000 before the adjusting entry for bad debts expense. The company's management estimates that 3% of net credit sales will be uncollectible for the year 2017. Net credit sales for the year amounted to $260,000. What is the amount of Bad Debts Expense reported on the income statement for 2017? A. $10,800 B. $7,800 C. $4,800 D. $3,900
B
The Allowance for Bad Debts account has a credit balance of $3,000 before the adjusting entry for bad debts expense. The company's management estimates that 4% of net credit sales will be uncollectible for the year 2017. Net credit sales for the year amounted to $270,000. What will be the balance of Allowance for Bad Debts on the December 31, 2017 balance sheet? A. $3,000 B. $13,800 C. $10,680 D. $10,800
B
Which of the following is the result of the maker of a promissory note failing to pay the note on the due date? A. an amortized note B. a dishonored note C. a depreciated note D. a discounted note
B
A company reports net accounts receivable of $154,000 on its December 31, 2017 balance sheet. The Allowance for Bad Debts has a credit balance of $16,000. What is the balance of Accounts Receivable? A. $159,000 B. $138,000 C. $170,000 D. $154,000
C
On April 1, 2017, Banne Services received a 9-month note for $15,000 at 12%. Calculate the amount of interest due at maturity. (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.) A. $1,485 B. $1,800 C. $1,350 D. $1,215
C
On January 1, A Plus Services has the following balances: Accounts Receivable $28,000 (debit) Bad Debts Expense $0 A Plus Services has the following transactions during January: Credit sales of $110,000, collections of credit sales of $89,000, and write−offs of $20,000. A Plus Services uses the direct write−off method. At the end of January, the balance of Accounts Receivable is ________. Do not round until the final answer. Then round to the nearest whole dollar. A. $16,182 B. $24,719 C. $29,000 D. $49,000
C
When a company uses the allowance method to measure bad debts, ________. A. the Allowance for Bad Debts account balance is added to the balance of the Accounts Receivable account to arrive at the net realizable value B. the Allowance for Bad Debts account is debited when the bad debts expense is estimated C. the amount of bad debts expense is estimated at the end of the accounting period D. the Bad Debts Expense account is debited when an account is written off
C
When the credit card processor deposits the gross proceeds from credit and debit card sales ________. A. the total sales less the processing fee assessed equals the net amount of cash deposited B. there will be no fee charged for the transaction C. the processing fees are deducted from the company's bank account by the processor D. the deposit is made on the last day of the month Your answer is not correct.
C
Charms, Inc. has determined that an account receivable of $125 is uncollectible. The company uses the direct write-off method. Which of the following entries is required to record the write-off? A. Allowance for Bad Debts 125 Accounts Receivable 125 B. Cash 125 Accounts Receivable 125 C. Bad Debts Expense 125 Accounts Receivable 125 D. Accounts Receivable 125 Bad Debts Expense 125
C
A business maintains subsidiary accounts for each of its customers. On May 15, the business sells services on account: $2,300 to customer J. Simmons; $4,500 to customer A. Jones; and $1,800 to customer J. Williams. Which journal entry is needed to record this sales transaction? A. May 15 Accounts Receivable 8,600 Service Revenue 8,600 B. May 15 Service Revenue 8,600 Accounts Receivable 8,600 C. May 15 Accounts Receivable Control 8,600 Sales Revenue 8,600 May 15 Accounts Receivable− J. Simmons 2,300 Accounts Receivable− A. Jones 4,500 Accounts Receivable− J. Williams 1,800 Accounts Receivable− Control 8,600 D. May 15 Accounts Receivable− J. Simmons 2,300 Accounts Receivable− A. Jones 4,500 Accounts Receivable− J. Williams 1,800 Service Revenue 8,600
D
On October 1, 2017, Android, Inc. made a loan to one of its customers. The customer signed a 4-month note for $150,000 at 10%. How much interest revenue did the company record in the year 2017? (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.) A. $5,000 B. $1,500 C. $1,250 D. $3,750
D
The Allowance for Bad Debts account has a credit balance of $8,700 before the adjusting entry for bad debts expense. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging-of-receivables method, the company's management estimates that uncollectible accounts will be $14,300. What will be the balance of the Allowance for Bad Debts reported on the balance sheet? A. $12,870 B. $5,600 C. $23,000 D. $14,300
D
The Allowance for Bad Debts account has a debit balance of $7,000 before the adjusting entry for bad debts expense. After analyzing the accounts in the accounts receivable subsidiary ledger, the company's management estimates that uncollectible accounts will be $13,000. What will be the amount of the adjustment in the Allowance for Bad Debts account? A. $19,250 B. $13,000 C. $18,900 D. $20,000
D