Financial accounting chapter 6, Chapter 6 Homework, Ch.6 Learnsmart
bad debt expense
The expense associated with the estimate of the amount of accounts receivable that may not be collected during the year is referred to as ______.
balance sheet
The line item Trade accounts receivable, net of allowances will be found on the ______.
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. (Select all that apply.)
$2,040,000 is the amount estimated to be uncollectible $21,540,000 is the gross receivables $19,500,000 is the expected amount to be collected from customers
Uncollectible Accounts Expense Provision for Uncollectible Accounts Doubtful Accounts Expense
Which of the following are other account titles for Bad Debt Expense? (Select all that apply.) Uncollectible Accounts Expense Sales Discounts and Allowances Provision for Uncollectible Accounts Doubtful Accounts Expense
Net sales revenue is $720,000. Beginning and ending net trade accounts receivable are $62,000 and $58,000, respectively. Calculate the receivables turnover ratio.
12.0 times
The average collection period (or average days sales in receivables) is computed as ______.
365 divided by the receivables turnover ratio
ABC's Accounts receivable for 2018 and 2019 are $880 and $820 respectively, and its 2019 sales are $7,225. Compute the number of days it takes ABC to collect its accounts receivable during 2019.
43 days
funds have been withdrawn from your bank account to cover the check
A check that you have written has cleared the bank when ______.
sales to decrease bad debt expense to decrease
Accepting only cash and canceling a credit card program that previously allowed customers to purchase merchandise on credit may cause ______. (Check all that apply.)
$784,000
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 ______.
Which of the following are typically netted against sales to arrive at net sales? (Check all that apply.)
Sales discounts Sales returns and allowances Credit card discounts
The Allowance for Doubtful Accounts, a contra-asset account, is ______ when specific uncollectible accounts are written-off.
debited
The allowance method is a method of accounting that ______ for estimated bad debts
decreases net accounts receivable
The allowance method is a method of accounting that ______ for estimated bad debts.
decreases net accounts receivable
Sales discounts should appear in the financial statements as a(n) ______.
deduction from sales
A high receivables turnover ratio is a sign of a company's ______.
effectiveness in granting and collecting crediteffectiveness in granting and collecting credit
Net sales is reported on the ______.
first line of the income statement
When the allowance method is used, the write-off of an uncollectible account ______.
has no effect on net income
Rank the the 5 step process of recognizing revenue for bundled goods and services listing the 1st step at the top.
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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 ______.
$784,000
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 $
1,000
Since accounting numbers, such as the allowance for doubtful accounts balance, are based on , financial statements are susceptible to management manipulation. (Enter one word per blank.)
estimates
Match each description with the financial statement on which the information is found.
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Match the two steps in accounting for bad debts with the appropriate entry.
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When a company sells phones bundled with a one-year service contract, then the portion of revenue allocated to the one-year service is recognized ______.
over time as the service is provided
Accounting for bad debts using the allowance method requires which 2 steps?
1) Recording an adjusting entry for the estimated bad debts and 2) writing off the actual bad debts
debit, because a withdrawal decreases its liability from the bank's point of view
From the bank's perspective, the bank will show a bank service charge as a _____.
Bad debt expense is included in the category ______ net income and stockholders' equity.
General and Administrative Expenses on the income statement and decreases
increases the likelihood the seller will receive the cash before the customer runs out of funds; prompt receipt of cash
Identify two benefits to the seller of offering sales discounts to its customers.
timing
If a company records a transaction before the bank records the same transaction, this is called a/an ______ difference.
$79,000
Lassiter Corp.'s cash balance in the accounting records is $80,000. When Lassiter receives the bank reconciliation, the following items were discovered: What is the corrected cash account balance?
$53,000
Malik Corp.'s bank statement has an ending balance of $50,000. The deposits in transit were $6,000. NSF checks were $1,000. Checks outstanding at the end of the month were $3,000. Using the bank statement, what is the corrected cash balance?
debit to Bad Debt Expense of $1,000 credit to Allowance for Doubtful Accounts of $1,000
Management estimates that 1% of the $100,000 of credit sales will be uncollectible. The Allowance for Doubtful Accounts has a $100 unadjusted credit balance. The adjusting entry to record estimated bad debts includes a ______. (Check all that apply.)
$900
Management estimates that 1% of the $100,000 of credit sales will be uncollectible. The Allowance for Doubtful Accounts has a $100 unadjusted debit balance. The Allowance for Doubtful Accounts balance on the balance sheet will equal ______.
8.5
Muffins & Turnovers, Inc.'s net trade accounts receivable are $880 and $820 at the end of 2019 and 2018 respectively. Net sales for 2019 are $7,225. The accounts receivable turnover for 2019 is ______ times.
subtraction from the book balance
NSF checks from customers should be a(n) ______ on a bank reconciliation.
sales discounts
Offering customers ______ increases the likelihood the seller will receive the cash before the customer runs out of funds and encourages prompt payment.
shipping point
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 ______.
net sales
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
On the income statement, Sales revenue less Credit card discounts less Sales discounts less Sales returns and allowances equals the line item called _____ _____.
debited
The Allowance for Doubtful Accounts, a contra-asset account, is ______ when specific uncollectible accounts are written-off.
bad debt expense
The account that reports the amount that may not be collected and is matched against credit sales of the period is referred to as ______.
assets decrease stockholders' equity to decrease
The adjusting entry to record the allowance for doubtful accounts causes total ______. (Check all that apply.)
report accounts receivable net of the amount the company does not expect to collect (i.e., at the net realizable value) match the cost of bad debts to the accounting period in which the related credit sales are made
The objectives when accounting for accounts receivable and bad debts are to ______. (Check all that apply.) report accounts receivable net of the amount the company does not expect to collect (i.e., at the net realizable value) increase both accounts receivable and net income by the amount of credit sales that are unlikely to be collected as cash match the cost of bad debts to the accounting period in which the related credit sales are made
Net Sales divided by Average Net Trade Accounts Receivable
The receivables turnover ratio is computed as ______.
It would be added to the book balance.
This month's bank statement shows interest earned of $45. How would this item be treated on the bank reconciliation?
It would be deducted from the bank balance.
This month's bank statement shows that the bank incorrectly credited ABC Corp.'s account for a $600 deposit that should have been credited to XYZ Corp.'s account. How would this item be treated on ABC's bank reconciliation?
credit to Allowance for Doubtful Accounts of $900 debit to Bad Debt Expense of $900
Using the aging approach, management estimates that $1,000 of Accounts Receivable will be uncollectible. The Allowance for Doubtful Accounts has a $100 unadjusted credit balance. The adjusting entry to record estimated bad debts includes a ______. (Check all that apply.)
To help minimize bad debt expense and provide feedback, a good internal control system will require ______. (Check all that apply.)
a periodic aging of accounts receivable approval of customers' credit history
To help minimize bad debt expense and provide feedback, a good internal control system will require ______. (Check all that apply.)
a periodic aging of accounts receivable approval of customers' credit history
Removing an uncollectible account and its corresponding allowance from the accounting records is called ______.
a write-off
Requiring approval of customers' credit history, reviewing the age of past due accounts and rewarding speedy collections are examples of controls over ______.
accounts receivable
Expense is associated with the estimated uncollectible accounts receivable. (Enter one word per blank.)
bad debt
The expense associated with the estimate of the amount of accounts receivable that may not be collected during the year is referred to as ______.
bad debt expensebad debt expensebad debt expensebad debt expense
The line item Trade accounts receivable, net of allowances will be found on the ______.
balance sheet
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
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.ance.
less; less
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
Nontrade receivables differ from trade receivables in that nontrade receivables ______.
result from lending money to employees
Offering customers ______ increases the likelihood the seller will receive the cash before the customer runs out of funds and encourages prompt payment.
sales discounts
$2,040,000 is the amount estimated to be uncollectible $19,500,000 is the expected amount to be collected from customers $21,540,000 is the gross receivables
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. (Select all that apply.) $2,040,000 is the amount estimated to be uncollectible $19,500,000 is the expected amount to be collected from customers $19,500,000 is the sum of all of its customers' account balances $21,540,000 is the gross receivables
is a cost of extending credit to customers is an estimate
Bad Debt Expense ______. (Check all that apply.) should exceed the revenue generated from incurring the cost is a cost of extending credit to customers is an estimate is based on actual events and does not require estimation
The receivables turnover ratio is computed as ______.
Net Sales divided by Average Net Trade Accounts ReceivableNet Sales divided by Average Net Trade Accounts ReceivableNet Sales divided by Average Net Trade Accounts Receivable
Which of the following is a noncurrent asset? (Check all that apply.)
Nontrade receivable due in 3 years 2-year notes receivable
at the time of the sale, it is not known which particular customer will be a "bad" customer
The challenge businesses face when estimating the allowance for doubtful accounts is that ______.
Accounts receivable Trade receivable Notes receivable due within 90 days
Which of the following is a current asset? (Check all that apply.) Accounts payable Accounts receivable 2-year notes receivable Trade receivable Notes receivable due within 90 days 2-year notes payable
2-year notes receivable Nontrade receivable due in 3 years
Which of the following is a noncurrent asset? (Check all that apply.) 2-year notes receivable Trade receivable due in 9 months Notes receivable due within 90 days Nontrade receivable due in 3 years Accounts receivable
It guarantees the management will behave ethically.
Which of the following is not an accurate statement about internal control?
Delectable, Inc.'s unadjusted trial balance includes Accounts receivable of $10,000; Allowance for doubtful accounts as a $50 credit balance; and Credit sales of $100,000. Based on an aging of its receivable, management estimates that $1,000 of receivables will be uncollectible. Delectable's financial statements will show ______. (Check all that apply.)
Allowance for Doubtful Accounts of $1,000 Bad Debt Expense of $950
equivalents
Cash _____ are investments with original maturities of three months or less that are readily convertible to cash and whose value is unlikely to change. Examples include bank certificates and US Treasury bills.
equivalents
Cash ________ are investments with original maturities of three months or less that are readily convertible to cash and whose value is unlikely to change. Examples include bank certificates and US Treasury bills.
Provide discounts for early collection Allow customers to purchase on credit
Companies may use which of the following to motivate sales and collections? (Select all that apply.)
Provide discounts for early collection Allow customers to purchase on credit
Companies may use which of the following to motivate sales and collections? (Select all that apply.) Provide discounts for early collection Sell merchandise FOB shipping point Allow customers to pay in advance Allow customers to purchase on credit
charging the credit card holder interest charging the retailer a fee for each credit card sale
Credit card companies earn revenues from ______. (Check all that apply.) charging the credit card holder a fee for each transaction charging the credit card holder interest charging the retailer interest until the purchase is paid charging the retailer a fee for each credit card sale
Allowance for Doubtful Accounts of $2,050 credit balance Bad Debt Expense of $2,000
Delectable, Inc.'s unadjusted trial balance includes Accounts Receivable of $10,000; Allowance for Doubtful Accounts of $50 credit balance; and Sales Revenue of $100,000 (all on credit). Management estimates that 2% of credit sales will be uncollectible. Delectable's financial statements will show ______. (Check all that apply.)
credit sales sales on account
Sales to customers in which the customers pay within 30 days are referred to as ______. (Check all that apply.) credit sales nonaccrued sales sales on account deferred sales
In which situations does a company issue a note receivable? (Check all that apply.)
The company lends money to employees or businesses. The company makes an exception for a financially troubled customer and extends the payment period and charges interest.
Ace Electronics recorded a debit to Sales Returns and Allowances and a credit to Accounts Receivable, along with a debit to Inventory and a credit to Cost of Goods Sold. What business event must have taken place?
The customer received a damaged product and returned it.
Credit card discount
The entry to record the collection of cash from major credit cards includes a debit to ______.
Goods are owned by the buyer when they leave the seller's place of business.
What does FOB shipping point mean?
credit
When an entry is recorded with a debit to Accounts Receivable and credit to Sales Revenue, then the sale was a(n) ______ sale.
bad checks that have been deposited; deducted from
When preparing a bank reconciliation, NSF checks are ______ and must be ______ the company's cash balance.
aging of account receivable
When the allowance method is used, the entry to record the write-off of an uncollectible account ______.
has no effect on net income
When the allowance method is used, the entry to record the write-off of an uncollectible account ______.
deposits in transit
Which of the following would be added to the cash balance per the bank statement when preparing a bank reconciliation?
outstanding checks
Which of the following would be deducted from the cash balance per the bank statement when preparing a bank reconciliation?
Seller
Who normally pays for shipping when the shipping terms are FOB destination?
seller
Who normally pays for shipping when the shipping terms are FOB destination?
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. Net receivables (net realizable value) after the write-off equals ______.
$2,100
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 ______.
$4,900
current asset
Accounts Receivable is classified as a ______ because the cash is expected to be received within a year.
balance sheet as a current asset
Accounts Receivable is classified on the ______.
Accounts receivable, net on the balance sheet refers to ______.
Accounts Receivable minus the Allowance for Uncollectible Accounts
amounts owed to a business by its customers
Accounts Receivable represent ______.
Which of the following is a current asset? (Check all that apply.)
Accounts receivable Notes receivable due within 90 days Trade receivable
Delectable, Inc.'s unadjusted trial balance includes Accounts Receivable of $10,000; Allowance for Doubtful Accounts of $50 credit balance; and Sales Revenue of $100,000 (all on credit). Management estimates that 2% of credit sales will be uncollectible. Delectable's financial statements will show:
Allowance for Doubtful Accounts of $2050 credit balance ($50 credit unadjusted balance + $2000 credit for the amount expensed) and Bad Debt Expense of $2000
Net sales revenue
Allowing credit cards, returns or discounts for early payment affects the recording of ______.
net sales revenue
Allowing credit cards, returns or discounts for early payment affects the recording of ______.
$19,500,000 is the expected amount to be collected from customers $2,040,000 is the amount estimated to be uncollectible $21,540,000 is the gross receivables
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. (Select all that apply.)
direct deposit of employee paychecks
An example of an EFT is ______.
is a cost of extending credit to customers; is an estimate
Bad Debt Expense ______. (Check all that apply.)
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: (Check all that apply.)
Bad debt expense of $7,250 on the income statement. Allowance for doubtful accounts of $8,000 on the balance sheet.
What conclusion are managers likely to draw from a constant increase to sales returns and allowances?
Customers are unhappy with the quality of the merchandise.
Using the allowance method, which is the correct adjusting journal entry to record bad debt expense?
Debit Bad Debt Expense and credit Allowance for Doubtful Accounts
Management estimates that 1% of the $100,000 of credit sales will be uncollectible. The Allowance for Doubtful Accounts has a $100 unadjusted credit balance. The adjusting entry to record estimated bad debts includes a ______. (Check all that apply.)
Debit to Bad Debt Expense of $1000 and Credit to Allowance for Doubtful Accounts of $1000
True or false: Net sales is the same as net income and is reported on the income statement
False Rationale: Net sales is the first line of the income statement above expenses. Net income is net of all expenses.
Bank service charges; Deposits in transit; NSF checks; Outstanding checks
Identify which of the following would cause timing differences between the bank statement and what is recorded in a company's cash account.
write off of a specific uncollectible account
If a company debits Allowance for doubtful accounts and credits Accounts receivable it is recording the ______.
$27 deduction from the book balance
If the company's accountant mistakenly recorded a $58 deposit as $85, the error would be shown on the bank reconciliation as a(n) ______.
debit Allowance for Doubtful Accounts
Nim Com Soup, Inc. uses the allowance method to account for bad debt expense. It determines that a customer account of $10,000 should be written off as uncollectible. The write off of the account will include a ______.
generally charge the borrowers interest from the day they are signed to the day they are collected.
Notes Receivable differ from Accounts Receivable in that Notes Receivable ______.
Match the following methods for estimating bad debts with their descriptions.
Percentage of credit sales method Percentage of credit sales method answer drop zone Requires directly computing the desired amount of bad debt expense on the income statement correct toggle button unavailable Requires directly computing the desired amount of bad debt expense on the income statement Percentage of credit sales method Percentage of credit sales method answer drop zone Requires directly computing the desired amount of bad debt expense on the income statement correct toggle button unavailable Requires directly computing the desired amount of bad debt expense on the income statement
Which method for accounting for doubtful accounts is easier to apply but less accurate and thus tends to be used on a monthly basis, instead of on an annual basis?
Percentage of total credit sales method
What information is provided by the receivables turnover ratio? (Check all that apply.)
The number of times the average receivables balance is collected during the period That a higher ratio means faster (better) turnover
$1,000
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 ______.
Allowance for doubtful accounts Accumulated depreciation
Which of the following are contra-asset accounts? (Check all that apply.)
It guarantees the management will behave ethically.
Which of the following is not an accurate statement about internal control? It promotes efficient and effective operations. It guarantees the management will behave ethically. It enhances the reliability of accounting information. It helps protect against the theft of assets.
deposits in transit outstanding checks
Which of the following timing differences result because of transactions that show up on the books but not on the bank statement? (Check all that apply.) NSF checks bank service charges interest deposits in transit outstanding checks
deposits in transit
Which of the following would be added to the cash balance per the bank statement in a bank reconciliation?
During the year, ABC Corp. realizes that a particular customer will never pay. What action should ABC take?
Write off the uncollectible account and its corresponding allowance from the accounting records.
deposits
________ in transit should be added to the cash balance per the bank statement when preparing a bank reconciliation.
Accounts Receivable represent ______.
amounts owed to a business by its customers
The challenge businesses face when estimating the allowance for doubtful accounts is that ______.
at the time of the sale, it is not known which particular customer will be a "bad" customer
Accounts Receivable is classified on the ______.
balance sheet as a current asset
When using the allowance method, the adjusting entry to record estimated bad debt expense includes a ______. (Check all that apply.)
credit to Allowance for Doubtful Accounts debit to Bad Debt Expense
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
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
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
Identify two benefits to the seller of offering sales discounts to its customers.
increases the likelihood the seller will receive the cash before the customer runs out of funds prompt receipt of cash
If the direction of change in Accounts Receivable is a decrease from the prior period, the amount of that change is added to net income in the operating Blank 1 Blank 1 operating, Correct Unavailable activities section of the statement of cash flows.
operating
An individual customer's accounts receivable is recorded in the customer's ______ account and then summarized with all other customers' accounts on the balance sheet as Accounts receivable.
subsidiary
The accounts receivable balance on the balance sheet represents the total of the individual customer accounts. Each customer's account is referred to as a(n) ______ account.
subsidiary
Short-term highly liquid investments with a maturity of three Blank 1 Blank 1 three, Correct Unavailable months or less that can be readily converted to cash with little risk of loss are classified as cash equivalents. (Enter one word per blank.)
three
estimated amount of this period's credit sales that customers will fail to pay
A company's Bad Debt Expense reports the ______.
reconciliation
A timing difference in cash occurs when a company records a transaction either before or after the bank records the same transaction. A bank _____ is used to explain these timing differences.
Credit card companies charge fees that reduce profits.
ABC Corp. wants to avoid lengthy cash collection periods and, therefore, allows customers to pay with a national credit card, rather than extend credit to its customers directly. What is the downside to such a strategy?
Select all of the following that are properly defined.
Accounts Receivable (Net) is the net realizable value. Accounts Receivable (Gross) includes both collectible and uncollectible receivables. Allowance for Doubtful Accounts is the amount of receivables estimated to be uncollectible. Accounts Receivable (Net) reports the amount of receivables expected to be collected.
$2,100
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 ______.
2100
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. Net receivables (net realizable value) after the write-off equals ______.
Which of the following are contra-asset accounts? (Check all that apply.)
Accumulated depreciation Allowance for doubtful accounts
Although there are some clear disadvantages associated with extending credit to customers, such as bad debt costs, most managers believe a particular advantage outweighs the costs. To which primary advantage do they refer?
Additional sales revenue
Which method for accounting for doubtful accounts is more accurate?
Aging of accounts receivable
Companies may use which of the following to motivate sales and collections? (Select all that apply.)
Allow customers to purchase on credit Provide discounts for early collection
784000
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 ______.
The same period as credit sales
The estimated amount of credit sales that customers will likely fail to pay is recorded as bad debt expense in which period?
The estimated amount of credit sales that customers will likely fail to pay is recorded as bad debt expense in which period?
The same period as credit sales
Debit Bad Debt Expense and credit Allowance for Doubtful Accounts
Using the allowance method, which is the correct adjusting journal entry to record bad debt expense?
increase expenses decrease assets
What are the financial statement effects of recording bad debt expense using the allowance method? (Check all that apply.)
Customers are unhappy with the quality of the merchandise.
What conclusion are managers likely to draw from a constant increase to sales returns and allowances?
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
Bad debt expense of $7,250 on the income statement. Allowance for doubtful accounts of $8,000 on the balance sheet.
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: (Check all that apply.)
debit to Credit card discount of $20 credit to Sales of $1,000 debit to Cash of $980
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 ______. (Check all that apply.) debit to Credit card discount of $20 credit to Sales of $1,000 credit to Credit card discount of $20 credit to Sales of $980 debit to Cash of $980 debit to Cash of $1,000
electronic funds transfer
ETF stands for ________.
deducted from the bank balance
In a bank reconciliation, an outstanding check is ______.
added to the book balance
In a bank reconciliation, interest revenue earned on the bank account balance is ______.
preventing excess accumulation of cash in checking accounts
In addition to safeguarding cash from theft, maintaining accurate accounting records of cash flows and other controls, effective cash management also involves ______.
not sufficient fund checks subtracted from the company's cash balance
NSF checks written by customers are ______. (Check all that apply.)
Accepting only cash and canceling a credit card program that previously allowed customers to purchase merchandise on credit may cause ______. (Check all that apply.)
Sales to decrease and Bad Debt Expense to decrease
3
Short-term highly liquid investments with a maturity of _____ months or less that can be readily converted to cash with little risk of loss are classified as cash equivalents.
three
Short-term highly liquid investments with a maturity of ________ months or less that can be readily converted to cash with little risk of loss are classified as cash equivalents. (Enter one word per blank.)
decreases net accounts receivable
The allowance method is a method of accounting that ______ for estimated bad debts.
deduction from the bank balance
The bank credited your account for a deposit that should have been deposited into another customer's bank account, not yours. This bank error should be a(n) ______ on a bank reconciliation.
credit, because a deposit is a liability from the bank's point of view
The bank will show interest earned on customer's bank statements as a ______.
improve the efficiency and effectiveness of operations; protect against theft of assets; enhance the reliability of accounting information
The benefits of internal control procedures are that they ______. (Check all that apply.)
protect against theft of assets enhance the reliability of accounting information improve the efficiency and effectiveness of operations
The benefits of internal control procedures are that they ______. (Check all that apply.) protect against theft of assets enhance the reliability of accounting information improve the efficiency and effectiveness of operations decrease a firm's taxes, which increases its available cash
debit to Receivables; credit to Cash
The entry to record NSF checks per the bank statement include a ______. (Check all that apply.)
Percentage of total credit sales method
Which method for accounting for doubtful accounts is easier to apply but less accurate and thus tends to be used on a monthly basis, instead of on an annual basis?
Aging of accounts receivable
Which method for accounting for doubtful accounts is more accurate?
$4,900
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 ______.
outstanding checks
________ ________ written by the company should be deducted from the bank balance on the company's bank reconciliation.
$1000
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
Bad Debt Expense of $950 Allowance for Doubtful Accounts of $1,000
Delectable, Inc.'s unadjusted trial balance includes Accounts receivable of $10,000; Allowance for doubtful accounts as a $50 credit balance; and Credit sales of $100,000. Based on an aging of its receivable, management estimates that $1,000 of receivables will be uncollectible. Delectable's financial statements will show ______. (Check all that apply.)
deposits sent to the bank and recorded by the company but have not yet been recorded by the bank
Deposits in transit are ______.
9,702 (100 x 100) - (10,000 x .01) - 198 The 20 is an expense, not a contra revenue account
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 $ _____.
Write off the uncollectible account and its corresponding allowance from the accounting records.
During the year, ABC Corp. realizes that a particular customer will never pay. What action should ABC take?
safeguarding cash from theft; preventing excess accumulation of cash in checking accounts; maintaining accurate accounting records of cash flows
Effective cash management includes ______. (Check all that apply.)
maintaining accurate accounting records of cash flows safeguarding cash from theft preventing excess accumulation of cash in checking accounts
Effective cash management includes ______. (Check all that apply.) maintaining accurate accounting records of cash flows safeguarding cash from theft minimizing the amounts of sales made on account preventing excess accumulation of cash in checking accounts
they arrive at the buyer's place of business
FOB destination means that goods are owned by the buyer as soon as ______.
$760
In its first year of business, ABC, Inc. had Accounts Receivable of $8,000 and Credit sales of $38,000. Management estimates 2% of the total credit sales will be uncollectible. Bad Debt Expense equals ______.
The company lends money to employees or businesses. The company makes an exception for a financially troubled customer and extends the payment period and charges interest.
In which situations does a company issue a note receivable? (Check all that apply.)
What are the financial statement effects of recording bad debt expense using the allowance method?
Increase expenses Decrease assets
1. Identify the contract between the company and customer 2.Identify the performance obligations (promised goods and services) 3. Determine the transaction price 4. Allocate the transaction price to the performance obligations 5. Recognize revenue when each performance obligation is satisfied (or over time if a service is provided over time)
Rank the the 5 step process of recognizing revenue for bundled goods and services listing the 1st step at the top. Identify the contract between the company and customer Recognize revenue when each performance obligation is satisfied (or over time if a service is provided over time) Identify the performance obligations (promised goods and services) Allocate the transaction price to the performance obligations Determine the transaction price
credit
When a business sells goods to a customer, and the customer promises to pay later, this is referred to as ______ sales.
over time as the service is provided
When a company sells phones bundled with a one-year service contract, then the portion of revenue allocated to the one-year service is recognized ______.
Sales Returns and Allowances
When a customer returns a product for a refund, in which of the seller's accounts is the entry recorded?
Sales returns and allowances
When a customer returns a product for a refund, in which of the seller's accounts is the entry recorded?
sales on account credit sales
Sales to customers in which the customers pay within 30 days are referred to as ______. (Check all that apply.)
