Chapter 6

The entry to record the collection of cash from major credit cards includes a debit to ______.

Credit card discount

A $250 bank deposit made on the last day of the month did not appear on this month's bank statement. How would this item be treated on the bank reconciliation?

It would be added to the bank balance.

This month's bank statement shows interest earned of $45. How would this item be treated on the bank reconciliation?

It would be added to the book balance

___ ___ written by the company should be deducted from the bank balance on the company's bank reconciliation

Outstanding Checks

When a customer returns a product for a refund, in which of the seller's accounts is the entry recorded?

Sales Returns and Allowances

Which of the following are typically netted against sales to arrive at net sales?

Sales returns and allowances Credit card discounts Sales discounts

Who normally pays for shipping when the shipping terms are FOB destination?

Seller

Deposits in transit are ______.

added to the bank balance

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 ______.

$2,100

An analyst sees the line item Trade accounts receivable, net of allowances of $2,040,000, with a balance of $19,500,000. Which of the following statements is correct.

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

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

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:

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

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

Allowances Returns

The line item Trade accounts receivable, net of allowances will be found on the ______.

balance sheet

A bank reconciliation is needed in order to determine the ______.

correct cash balance

The entry to record the collection of $9,600 from a customer whose account had previously been written off includes a ______.

credit to Allowance for doubtful accounts of $9,600

The entry to record NSF checks per the bank statement include a ______.

credit to Cash debit to Receivables

A contra-asset account, such as Allowance for Doubtful Accounts or Accumulated Depreciation, has a normal balance of a ______ and causes total assets to ______.

credit;decrease

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 ______.

credits

A customer that was written off now pays. The journal entry recorded to reverse this previously written-off amount is recorded as a ______.

debit Accounts receivable and credit Allowance for doubtful accounts

Beckers, Inc. accepts major credit cards from its customers. The credit card companies charge 2%. The entry to record the collection of $1,000 in credit card sales includes a ______.

debit to Credit card discount of $20 credit to Sales of $1,000 debit to Cash of $980

In a bank reconciliation, an outstanding check is ______.

deducted from the bank balance

A bank service charge should be a(n) ______ on a bank reconciliation.

deduction from the book balance

Which of the following would be added to the cash balance per the bank statement when preparing a bank reconciliation?

deposits in transit

A company's Bad Debt Expense reports the ______.

estimated amount of this period's credit sales that customers will fail to pay

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

estimates

Given the unadjusted Allowance for Doubtful Accounts has a $50 debit balance, the amount of receivables written off was ______ than the amount estimated in the prior period. This will cause Bad Debt Expense to be ______ in the current period than had the unadjusted balance been a credit balance.

greater;greater

When the allowance method is used, the write-off of an uncollectible account ______.

has no effect on net income

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

The ____ of credit sales is the method that estimates bad debt expense using credit sales and the _____ of accounts receivable method estimates the allowance for doubtful accounts based on the time each account receivable has been outstanding.

percentage aging

Preparing a bank reconciliation ______.

provides a comparison of the bank balance and the company's cash balance is a sound internal control procedure helps a company to determine the correct cash balance

NSF checks written by customers are ______.

subtracted from the company's cash balance No sufficient fund checks

What information is provided by the receivables turnover ratio?

that a higher ration means faster (better) turnover The number of times the average receivables balance is collected during the period

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 ______.

1000

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 ______.

4900

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 ______.

784000

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

Beckers, Inc. accepts major credit cards from its customers. The credit card companies charge 2%. How much should Becker report as net sales on its income statement if credit card sales were $1,000,000 during the year?

980,000

Select all of the following that are properly defined.

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

Accounts receivable, net on the balance sheet refers to ______.

Accounts Receivable minus the Allowance for Uncollectible Accounts

Which of the following are contra-asset accounts?

Accumulated depreciation Allowance for doubtful accounts

On January 1, goods were picked up by a FedUp Delivery, Inc. The goods arrived at the customer's place of business on January 12. If the seller recorded the sale on January 1, then the terms must have been FOB ______.

Shipping point

The days to collect ratio provides what kind of information?

The average number of days from sale on account to collection That a higher number of days means a longer (worse) time for collection

In a bank reconciliation, interest revenue earned on the bank account balance is ______.

added to the book balance

Bad Debt Expense ______.

is a cost of extending credit to customers is an estimate

Given the unadjusted Allowance for Doubtful Accounts has a $50 credit balance, the amount of receivables written off was ______ than the amount estimated in the prior period. This will cause Bad Debt Expense to be ______ in the current period than had the unadjusted balance been a debit or $0 unadjusted balance.

less;less

What does FOB shipping point mean?

Goods are owned by the buyer when they leave the seller's place of business.