Accy 303 chapter 7
A trial balance before adjustments included the following: Debit Credit Sales 1,700,000 Sales returns and allowance $56,000 Accounts receivable 172,000 Allowance for doubtful accounts 3,040 If the estimate of uncollectible accounts is made by taking 10% of gross account receivables, the amount of the adjustment is a. $14,160. b. $17,200. c. $16,896. d. $20,240.
, a. $14,160.
charge of 5%. The finance company retains an amount equal to 10% of the accounts Sun Inc. factors $6.000,000 of its accounts receivables without recourse for a finance receivable for possible adjustments. What would be recorded as a gain (loss) on the transfer of receivables? a. Loss of $300,000. b. Gain of $530,000. c. Loss of $1,130,000. d. Loss of $230,000
a. Loss of $300,000.
Deposits held as compensating balances a. usually do not earn interest. b. legally restricted and held against short-term credit may be included as cash. c. if legally restricted and held against long-term credit may be included among current assets. d. if separately restricted and held against long-term credit may be included as noncurrent assets
d. if separately restricted and held against long-term credit may be included as noncurrent assets
The advantage of relating a company's bad debt expense to its outstanding accounts receivable is that this approach A. gives a reasonably correct statement of receivables in the balance sheet. b. best relates bad debt expense to the period of sale. c. is the only generally accepted method for valuing accounts receivable. d. makes estimates of uncollectible accounts unnedessary.
A. gives a reasonably correct statement of receivables in the balance sheet
Maxwell Corporation factored, with recourse, $200,000 of accounts receivable with Huskie Financing. The finance charge is 3%, and 5% was retained to cover sales discounts, sales retums, and sales allowances. Maxwell estimates the recourse obligation at $4,800. What amount should Maxwell report as a loss on sale of receivables? a. $ -0-. b. $6,000 C. $10,800. d. $20,800.
C. $10,800.
The following information is available for Murphy Company: Allowance for doubtful accounts at December 31, 2019 $ 24,000 Credit sales during 2020 1,200,000 Accounts receivable deemed worthless and written off during 2020 27,000 As a result of a review and aging of accounts receivable in early January 2021, it has been determined that an allowance for doubtful accounts of $16,000 is needed at December 31, 2020. What amount should Murphy record as "bad debt expense" for the year ended December 31, 2020? a. $13,000 b. $16,000 C. $19,000 d. $40,000
C. $19,000
Wilkinson Corporation factored, with recourse, $500,000 of accounts receivable with Huskie Financing. The finance charge is 3%, and 5% was retained to cover sales discounts, sales returns, and sales allowances. Wilkinson estimates the recourse obligation at $12,000. What amount should Wilkinson report as a loss on sale of receivables? a. $ -0-. b. $15,000. C. $27,000. d. $52,000.
C. $27,000.
If a company purchases merchandise on terms of 2/10, n/30, the cash discount available (assuming a 360-day year) is equivalent to an effective annual interest rate of a. 2% b. 24% C. 36% d. 60%
C. 36%
Remington Corporation had accounts receivable of $100,000 at 1/1. The only transactions affecting accounts receivable were sales of $900,000 and cash collections of $850,000. The accounts receivable turnover is a. 6.0. b. 6.6. C. 7.2. d. 9.0.
C. 7.2.
Laventhol Corporation had accounts receivable of $100,000 at 1/1. The only transactions affecting accounts receivable were sales of $1,050,000 and cash collections of $1.000,000. The accounts receivable tumover is а. 7.0. b. 7.7 C. 8.4. d. 10.5.
C. 8.4.
What is the preferable presentation of accounts receivable from officers, employees, or affiliated companies on a balance sheet? a. As offsets to capital. b. By means of footnotes only. C. As assets but separately from other receivables. d. As trade notes and accounts receivable if they otherwise qualify as current assets.
C. As assets but separately from other receivables.
When preparing a bank reconciliation, bank credits are a. added to the bank statement balance. b. deducted from the bank statement balance. C. added to the balance per books. d. deducted from the balance per books.
C. added to the balance per books.
All of the following are problems associated with the valuation of accounts receivable except a. uncollectible accounts. b. returns. C. cash discounts under the net method. d. allowances granted.
C. cash discounts under the net method.
Geary Co. assigned $1,600,000 of accounts receivable to Kwik Finance Co. as security for a loan of $1,340,000. Kwik charged a 2% commission on the amount of the loan; the interest rate on the note was 10%. During the first month, Geary collected $440,000 on assigned accounts after deducting $1,520 of discounts. Geary accepted returns worth $5,400 and wrote off assigned accounts totaling $11,920. Entries during the first month would include a a. debit to Cash of $441,520. b. debit to Bad Debt Expense of $11,920. C. debit to Allowance for Doubtful Accounts of $11,920. d. debit to Accounts Receivable of $458,840.
C. debit to Allowance for Doubtful Accounts of $11,920.
A Cash Over and Short account a. is not generally accepted. b. is debited when the petty cash fund proves out over. C. is debited when the petty cash fund proves out short. d. is a contra account to Cash.
C. is debited when the petty cash fund proves out short.
The accounting for cash discounts and trade discounts are a. the same. b. always recorded net, C. not the same. d. tied to the timing of cash collections on the account.
C. not the same.
Assuming that the ideal measure of short-term receivables in the balance sheet is the discounted value of the cash to be received in the future, failure to follow this practice usually does not make the balance sheet misleading because a. most short-term receivables are not interest-bearing. b. the allowance for uncollectible accounts includes a discount element. C. the amount of the discount is not material. d. most receivables can be sold to a bank or factor.
C. the amount of the discount is not material.
Why do companies provide trade discounts? a. To avoid frequent changes in catalogs. b. To induce prompt payment. C. To easily alter prices for different customers. d. To avoid frequent changes in catalogs and to easily alter prices for different customers.
To avoid frequent changes in catalogs and to easily alter prices for different customers.
On December 31, 2020, Flint Corporation sold for $150,000 an old machine having an original cost of $270,000 and a book value of $120,000. The terms of the sale were as follows: $30,000 down payment $60,000 payable on December 31 each of the next two years The agreement of sale made no mention of interest; however, 9% would be a fair rate for this type of transaction. What should be the amount of the notes receivable net of the unamortized discount on December 31, 2020 rounded to the nearest dollar? (The present value of an ordinary annuity of 1 at 9% for 2 years is 1.75911.) a. $105,547 b. $135,546. c. $120,000. d. $211,092.
a. $105,547
Assume Royal Palm Corp. an equipment distributor sells a piece of machinery with a list price of $900,000 to arch Inc. arch Inc. will pay $975,000 in one year Royal Palm Corp. normally sells this type of equipment for 90% of list price how much should be recorded as revenue? a. $810,000. b. $877,500. c. $900,000. d. $975,000
a. $810,000.
How is days to collect accounts receivable determined? a. 365 days divided by accounts receivable turnover. b. Net sales divided by 365. c. Net sales divided by average net trade receivables. d. Accounts receivable turnover divided by 365 days.
a. 365 days divided by accounts receivable turnover.
The opening balance of Accounts Receivable for George Company was $25,000. Net sales (all on account) for the year amounted to $200,000. The Company doesn't offer any cash discount. During the year $180,000 was collected on accounts receivable. Compute accounts receivable turnover for the year. a. 5.7 times b. 5.1 times C. 4.4 times d. 8.0 times
a. 5.7 times
Which of the following concepts relates to using the allowance method in accounting for accounts receivable? a. Bad debt expense is an estimate that is based on historical and prospective information. b. Bad debt expense is based on the actual amounts determined to be uncollectible. C. Bad debt expense is an estimate that is based only on an analysis of the receivables aging. d. Bad debt expense is management's determination of which accounts will be sent to the attorney for collection.
a. Bad debt expense is an estimate that is based on historical and prospective information.
On July 22, Peter sold $23,500 of inventory items on credit with the terms 2/15, net 30. Payment on $15,000 sales was received on August 1 and the remaining payment was received on August 12. Assuming Peter 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? a. Cash. 14,700 Sales Discount 300 Accounts Receivable 15,000 b. Cash.. 15,000 Accounts Receivable 15,000 C. Cash... 14,700 Accounts Receivable 14,700 d. Accounts Receivable.300 Sales Discount Forfeited. 300
a. Cash. 14,700 Sales Discount 300 Accounts Receivable 15,000
AG Inc. made a $25,000 sale on account with the following terms: 2/10, n/30. If the company uses the net method to record sales made on credit, what is/are the debit(s) in the journal entry to record the sale? a. Debit Accounts Receivable for $24,500. b. Debit Accounts Receivable for $24,500 and Sales Discounts for $500. c. Debit Accounts Receivable for $25,000. d. Debit Accounts Receivable for $25,000 and Sales Discounts for $500.
a. Debit Accounts Receivable for $24,500.
What is the normal journal entry when writing-off an account as uncollectible under the allowance method? a. Debit Allowance for Doubtful Accounts, credit Accounts Receivable. b. Debit Allowance for Doubtful Accounts, credit Bad Debt Expense. c. Debit Bad Debt Expense, credit Allowance for Doubtful Accounts. d. Debit Accounts Receivable, credit Allowance for Doubtful Accounts.
a. Debit Allowance for Doubtful Accounts, credit Accounts Receivable.
Moon Inc. assigns $4,500,000 of its accounts receivables as collateral for a $3 million loan with a bank. The bank assesses a 3% finance charge on the loan amount and charges interest on the note at 6%. What would be the journal entry to record this transaction? a. Debit Cash for $2,910,000, debit Interest Expense for $90,000, and credit Notes Payable for $3,000,000. b. Debit Cash for $2,910,000, debit Interest Expense for $90,000, and credit Accounts Receivable for $3,000,000. c. Debit Cash for $1,940,000, debit Interest Expense for $90,000, debit Due from Bank for $1,500,000, and credit Accounts Receivable for $4,500,000. d. Debit Cash for $2,730,000, debit Interest Expense for $270,000, and credit Notes Payable for $3,000,000.
a. Debit Cash for $2,910,000, debit Interest Expense for $90,000, and credit Notes Payable for $3,000,000.
Which of the following methods of determining annual bad debt expense does not satisfy the matching concept? a. Direct write-off b. Percentage of ending accounts receivable c. Aging of accounts receivable d. All of these methods satisfy the matching concept.
a. Direct write-off
Of the approaches to record cash discounts related to accounts receivable, which is more theoretically correct? a. Net approach. b. Gross approach. C. Allowance approach. d. Contra revenue approach
a. Net approach.
In which account are post-dated checks received classified? a. Receivables. b. Prepaid expenses. c. Cash. d. Payables.
a. Receivables.
What is "recourse" as it relates to selling receivables? a. The obligation of the seller of the receivables to pay the purchaser in case the debtor fails to pay. b. The obligation of the purchaser of the receivables to pay the seller in case the debtor fails to pay c. The obligation of the seller of the receivables to pay the purchaser in case the debtor returns the product related to the sale. d. The obligation of the purchaser of the receivables to pay the seller if all of the receivables are collected,
a. 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? a. The transferor is obligated to make a genuine effort to identify those receivables that are uncollectible. b. The transferor surrenders control of the future economic benefits of the receivables. C. The transferee cannot require the transferor to repurchase the receivables. d. The transferor's obligation under the recourse provisions can be reasonably estimated,
a. The transferor is obligated to make a genuine effort to identify those receivables that are uncollectible.
If a company employs the gross method of recording accounts receivable from customers, then sales discounts taken should be reported as a. a deduction from sales in the income statement. b. an item of "other expense" in the income statement . С. a deduction from accounts receivable in determining the accounts receivable amount expected to be collected. d. sales discounts forfeited in the cost of goods sold section of the income statement.
a. a deduction from sales in the income statement.
The accounts receivable turnover measures the a. number of times the average balance of accounts receivable is collected during the period. b . percentage of accounts receivable turned over to a collection agency during the period. c. percentage of accounts receivable arising during certain seasons. d. number of times the average balance of inventory is sold during the period.
a. number of times the average balance of accounts receivable is collected during the period.
When a company has cash available in another account in the same bank at which an overdraft has occurred, the company will: a. offset the overdraft against cash account. b. report the same in the notes to financial statement. c. report the bank overdraft amount as account payable. d. classify the bank overdraft as compensating balance.
a. offset the overdraft against cash account.
Before year-end adjusting entries, Dunn Company's account balances at December 31, 2020, for accounts receivable and the related allowance for uncollectible accounts were $1,500,000 and $90,000, respectively. An aging of accounts receivable indicated that $125,000 of the December 31 receivables are expected to be uncollectible. The accounts receivable amount expected to be collected after adjustment is a. $1,465,000. b. $1,375,000. C. $1,285,000. d. $1,410,000.
b. $1,375,000.
At the close of its first year of operations, December 31, 2020, Ming Company had accounts receivable of $1,620,000, after deducting the related allowance for doubtful accounts. During 2020, the company had charges to bad debt expense of $270,000 and wrote off, as uncollectible, accounts receivable of $120,000. What should the company report on its balance sheet at December 31, 2020, as accounts receivable before the allowance for doubtful accounts? a. $2,010,000 b. $1,770,000 c. $1,470,000 d. $1,320,000
b. $1,770,000
In preparing its bank reconciliation for the month of April 2020, Henke, Inc. has the following information available. Balance per bank statement, 4/30/20 $102,420 NSF check returned with 4/30/20 bank statement 1,350 Deposits in transit, 4/30/20 15,000 Outstanding checks, 4/30/20 15,600 Bank service charges for April 60 What should be the correct balance of cash at April 30, 2020? a. $103,110 b. $101,820 c. $100,470 d. $100,410
b. $101,820
If the month-end bank statement shows a balance of $144,000, outstanding checks are $48,000, a deposit of $16,000 was in transit at month end, and a check for $2,000 was erroneously charged by the bank against the account, the correct balance in the bank account at month end is a. $110,000. b. $114,000. c. $82,000 d. $174,000.
b. $114,000.
David Company uses the gross method to record sales made on credit. On June 10, 2020, it sold goods worth $250,000 with terms 2/10, n/30 to Charles Inc. On June 19, 2020, David received payment for 1/2 of the amount due from Charles Inc. David's fiscal year end is on June 30, 2020. What amount will be reported in the financial statements for the accounts receivable due from Charles Inc.? a. $122,500. b. $125,000. c. $250,000. d. $245,000.
b. $125,000.
Shelton Company has the following account balances at year-end: Accounts receivable $140,000 Allowance for doubtful accounts 7,200 Sales discounts 4,800 Shelton should report accounts receivable at a net amount of a. $128,000. b. $132,800. c. $135,200. d. $140,000.
b. $132,800.
Kennison Company has cash in bank of $20,000, restricted cash in a separate account of $3,000, and a bank overdraft in an account at another bank of $1,000. Kennison should report cash of a. $19,000. b. $20,000. C. $22,000. d. $23,000.
b. $20,000.
Kennison Company has cash in bank of $20,000, restricted cash in a separate account of $3,000, and a bank overdraft in an account at another bank of $1,000. Kennison should report cash of a. $19,000. b. $20,000. c. $22,000. d. $23,000.
b. $20,000.
$700,000 to Agee Company. Agee Company assesses a finance charge of 3% of the On February 1, 2020, Henson Company factored receivables with a carrying amount of receivables and retains 5% of the receivables. Relative to this transaction, you are to determine the amount of loss on sale to be reported in the income statement Henson Company for February. Assume that Henson factors the receivables on a without recourse basis. The loss to be reported is a. $0. b. $21,000. C. $35,000. d. $56,000.
b. $21,000.
Smithson Corporation had a 1/1/20 balance in the Allowance for Doubtful Accounts of $30,000. During 2020, it wrote off $21,600 of accounts and collected $6,300 on accounts previously written off. The balance in Accounts Receivable was $600,000 at 1/1 and $720,000 at 12/31. At 12/31/20, Smithson estimates that 5% of accounts receivable will prove to be uncollectible. What is Bad Debt Expense for 2020? a. $6,000. b. $21,300. C. $27,600. d. $36,000.
b. $21,300.
On February 1, 2020, Henson Company factored receivables with a carrying amount of $700,000 to Agee Company. Agee Company assesses a finance charge of 3% of the receivables and retains 5% of the receivables. Relative to this transaction, you are to determine the amount of loss on sale to be reported in the income statement of Henson Company for February. Assume that Henson factors the receivables on a with recourse basis. The recourse obligation has a fair value of $3,500. The loss to be reported is a. $21,000. b. $24,500. c. $35,000. d. $59,500.
b. $24,500.
AG Inc. made a $25,000 sale on account with the following terms: 1/15, n/30. If the company uses the net method to record sales made on credit, how much should be recorded as revenue? a. $24,500, b. $24,750. C. $25,000. d. $25,250.
b. $24,750.
Lawrence Company has cash in bank of $25,000, restricted cash in a separate account of $4,000, and a bank overdraft in an account at another bank of $2,000. Lawrence should report cash of a. $23,000. b. $25,000. c. $28,000. d. $29,000.
b. $25,000.
Vasguez Corporation had a 1/1/20 balance in the Allowance for Doubtful Accounts of $40,000. During 2020, it wrote off $28,800 of accounts and collected $8,400 on accounts previously written off. The balance in Accounts Receivable was $800,000 at 1/1 and $960,000 at 12/31. At 12/31/20, Vasguez estimates that 5% of accounts receivable will prove to be uncollectible. What is Bad Debt Expense for 2020? a. $8,000, b. $28,400. C. $36,800. d. $48,000.
b. $28,400.
A trial balance before adjustments included the following: Debit Credit Sales 1,700,000 Sales returns and allowance $56,000 Accounts receivable 172,000 Allowance for doubtful accounts 3,040 If the estimate of uncollectible accounts is made by taking 5% of gross accounts receivables, the amount of the adjustment is a. $8,448. b. $5,560. C. $8,600. d. $11,640.
b. $5,560.
Lankton Company has the following account balances at year-end: Accounts receivable $90,000 Allowance for doubtful accounts 4,800 Sales discounts 3,200 Lankton should report accounts receivable at a net amount of a. $82,000. b. $85,200. c. $86,800. d. $90,000.
b. $85,200.
The cash account shows a balance of $85,000 before reconciliation. The bank statement does not include a deposit of $4,600 made on the last day of the month. The bank statement shows a collection by the bank of $1,880 and a customer's check for $640 was returmed because it was NSF. A customer's check for $900 was recorded on the books as $1,080, and a check written for $158 was recorded as $194. The correct balance in the cash account was a. $86,024. b. $86,096. c. $86,456. d. $90,696.
b. $86,096.
Consider the following: Cash in Bank - checking account of $18,500, Cash on hand of $500, Post-dated checks received totaling $3,500, and Certificates of deposit totaling $124,000. How much should be reported as cash in the balance sheet? a. $ 18,500. b. $ 19,000. c. $ 22,500. d. $136,500.
b. 19,000.
During the year Tulip reported net sales of $960,000. The company had accounts receivable of $75,000 at the beginning of the year and $120,000 at the end of the year Compute Tulip's average collection period (assume 365 days a year.) a. 28.5 days b. 37.2 days. c. 45.7 days. d. 74.2 days
b. 37.2 days.
Lester Company received a seven-year zero-interest-bearing note on February 22, 2020, in exchange for property it sold to Porter Company. There was no established exchange price for this property and the note has no ready market. The prevailing rate of interest for a note of this type was 6% on February 22, 2020, 6.5% on December 31, 2020, 6.7% on February 22, 2021, and 7% on December 31, 2021. What interest rate should be used to calculate the interest revenue from this transaction for the years ended December 31, 2020 and 2021, respectively? a. 0% and 0% b. 6% and 6% C. 6% and 7.7% d. 6.5% and 7%
b. 6% and 6%
Which of the following is a generally accepted method of determining the amount of the adjustment to bad debt expense? a. Actual losses from uncollectible accounts b. A percentage of accounts receivable adjusted for the balance in the allowance c. A percentage of accounts receivable not adjusted for the balance in the allowance d. An amount derived from aging accounts receivable and not adjusted for the balance in the allowance
b. A percentage of accounts receivable adjusted for the balance in the allowance
How can accounting for bad debts be used for earnings management? a. Determining which accounts to write-off. b. Changing the percentage of receivables recorded as bad debt expense. C. Using an aging of the accounts receivable balance to determine bad debt expense. d. Reversing previous write-offs.
b. Changing the percentage of receivables recorded as bad debt expense.
Equestrain Roads sold $120,000 of goods and accepted the customer's $120,000 10%, 1-year note receivable in exchange. Assuming 10% approximates the market rate of retum, what would be the debit in this journal entry to record the sale? a. No journal entry until cash is collected. b. Debit Notes Receivable for $120,000. c. Debit Accounts Receivable for $120,000. d. Debit Notes Receivable for $108,000.
b. Debit Notes Receivable for $120,000.
Which of the following is an appropriate reconciling item to the balance per bank in a bank reconciliation? a. Bank service charge. b. Deposit in transit. c. Bank interest. d. Chargeback for NSF check.
b. Deposit in transit.
What is imputed interest? a. Interest based on the stated interest rate. b. Interest based on the implicit interest rate. c. Interest based on the average interest rate. d. Interest based on the coupon rate.
b. Interest based on the implicit interest rate.
What would be recorded as a gain (loss) on the transfer of receivables? for possible adjustments. Sun estimates the fair value of the recourse liability at $300,000. of 3%. The finance company retains an amount equal to 10% of the accounts receivable Sun Inc. factors $6,000,000 of its accounts receivables with recourse for a finance charge a. Gain of $180,000. b. Loss of $480,000. c. Gain of $1,080,000. d. Loss of $300,000
b. Loss of $480,000.
Which of the following is considered cash? a. Certificates of deposit (CDs) b. Money market checking accounts c. Money market savings certificates d. Postdated checks
b. Money market checking accounts
Under which section of the balance sheet is "cash restricted for plant expansion" reported? a. Current assets. b. Non-current assets. c. Current liabilities. d. Stockholders' equity.
b. Non-current assets
In which account are postage stamps classified? a. Cash. b. Office supplies . c. Receivables. d. Inventory.
b. Office supplies.
Which of the following statements is correct regarding receivables? a. Receivables are written promises of the purchaser to pay for goods or services . b. Receivables are claims held against customers and others for money, goods, or services. C. Receivables are non-financial assets. d. Receivables that are expected to be collected within a year are classified as noncurrent.
b. Receivables are claims held against customers and others for money, goods, or services.
Jones Company has notes receivable that have a fair value of $950,000 and a carrying amount of $1,250,000. Jones decides on December 31, 2020, to use the fair value option for these recently-acquired receivables. Which of the following entries will be made on December 31, 2020 to record the unrealized holding gain/loss? a. Unrealized Holding Gain or Loss Equity.. 300,000 Notes Receivable 300,000 b. Unrealized Holding Gain or Loss Income. 300,000 Notes Receivable. 300,000 C. Notes Receivable.. 300,000 Unrealized Holding Gain or LossIncome 300,000 d. Notes Receivable. 300,000 Unrealized Holding Gain or Loss Equity. 300,000
b. Unrealized Holding Gain or Loss Income. 300,000 Notes Receivable. 300,000
Which of the following statements is not true of fair value option? a. Receivables are recorded at fair value in the financial statements. b. Unrealized holding gains and losses from fair value adjustments are reported as a component of comprehensive income. c. The International Accounting Standards Board believes that fair value measurement for financial instruments provides more relevant and understandable information than historical cost. d. An unrealized holding gain or loss is the net change in the fair value of the receivable from one period to another, exclusive of interest revenue.
b. Unrealized holding gains and losses from fair value adjustments are reported as a component of comprehensive income.
The journal entries for a bank reconciliation a. are taken from the "balance per bank" section only. b. may include a debit to Office Expense for bank service charges. C. may include a credit to Accounts Receivable for an NSF check. d. may include a debit to Accounts Payable for an NSF check.
b. may include a debit to Office Expense for bank service charges.
All of the following may be included under the heading of "cash" except a. currency. b. money market funds. c. checking account balance. d. savings account balance.
b. money market funds.
Wellington Corp. has outstanding accounts receivable totaling $6 million as of December 31 and sales on credit during the year of $30 million. There is also a debit balance of $24,000 in the allowance for doubtful accounts. If the company estimates that 8% of its outstanding receivables will be uncollectible, what will be the balance in the allowance for doubtful accounts after the year-end adjustment to record bad debt expense? a. $2,400,000. b. $ 456,000. c. $ 480,000. d. $ 504,000.
c. $ 480,000.
Geary Co. assigned $1,600,000 of accounts receivable to Kwik Finance Co. as security for a loan of $1,340,000. Kwik charged a 2% commission on the amount of the loan; the interest rate on the note was 10%. During the first month, Geary collected $440,000 on assigned accounts after deducting $1,520 of discounts. Geary accepted returns worth $5,400 and wrote off assigned accounts totaling $11,920. The amount of cash Geary received from Kwik at the time of the assignment was a. $1,206,000. b. $1,308,000. c. $1,313,200. d. $1,340,000.
c. $1,313,200.
Moon Inc. factors $3,000,000 of its accounts receivables without recourse for a finance charge of 4%. The finance company retains an amount equal to 8% of the accounts receivable for possible adjustments. Moon estimates the fair value of the recourse liability at $300,000. What would be the debit to Cash in the journal entry to record this transaction? a. $3,000,000. b. $2,880,000. c. $2,640,000. d. $2,340,000.
c. $2,640,000.
Wellington Corp. has outstanding accounts receivable totaling $1.27 million as of December 31 and sales on credit during the year of $6.4 million. There is also a debit balance of $6,000 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? a. $19,400. b. $31,400. c. $25,400. d. $25,280.
c. $25,400.
Jeriny Manufactures sold toys listed at $360 per unit to Jack Inc. for $306, a trade discount of 15 percent. Jack Inc. in turn sells the toys in the market at $335. Jenny should record the receivable and related sales revenue (per unit) at: a. $360. b. $335. c. $306. d. $285.
c. $306.
In preparing its May 31, 2020 bank reconciliation, Catt Co. has the following information available: Balance per bank statement, 5/31/20 $40,000 Deposit in transit, 5/31/20 5,400 Outstanding checks, 5/31/20 4,900 Note collected by bank in May 1,250 The correct balance of cash at May 31, 2020 is a. $45,400. b. $39,250. c. $40,500, d. $41,750.
c. $40,500,
Kaniper Company has the following items at year-end: Cash in bank $35,000 Petty cash 300 Short-term paper with maturity of 2 months 5,500 Postdated checks 1,400 Kaniper should report cash and cash equivalents of a. $35,000. b. $35,300. c. $40,800. d. $42,200.
c. $40,800.
Steinert Company has the following items at year-end: Cash in bank $45,000 Petty cash 500 Short-term paper with maturity of 2 months 8,200 Postdated checks 2,100 Steinert should report cash and cash equivalents of a. $45,000. b. $45,500. c. $53,700. d. $55,800.
c. $53,700.
Equestrain Roads sold $120,000 of goods and accepted the customer's $120,000 10%, 1-year note in exchange. Assuming 10% approximates the market rate of return, how much interest would be recorded for the year ending December 31 if the sale was made on June 30? a. $0. b. $3,000. c. $6,000. d. $12,000.
c. $6,000.
Equestrain Roads accepted a customer's $100,000 zero-interest-bearing six-month note in a sales transaction. The product sold normally sells for $92,000. If the sale was made on June 30, how much interest revenue from this transaction would be recorded for the year ending December 31? a. $0. b. $4,000. c. $8,000. d. $10,000.
c. $8,000.
Finley, Inc.'s checkbook balance on December 31, 2020 was $84,800. In addition, Finley held the following items in its safe on December 31. (1) A check for $1,800 from Peters, Inc. received December 30, 2020, which was not included in the checkbook balance. (2) An NSF check from Garner Company in the amount of $3,600 that had been deposited at the bank, but was returned for lack of sufficient funds on December 29. The check was to be redeposited on January 3, 2021. The original deposit has been included in the December 31 checkbook balance. (3) Coin and currency on hand amounted to $5,800. The proper amount to be reported on Finley's balance sheet for cash at December 31, 2020 is a. $85,200. b. $81,600. c. $88.800. d. $87,100.
c. $88.800.
Which of the following items should be included in accounts receivable reported on the balance sheet? a. Notes receivable. b. Interest receivable. c. Allowance for doubtful accounts. d. Advances to related parties and officers.
c. Allowance for doubtful accounts.
Which of the following statements is incorrect regarding the classification of accounts and notes receivable? a. Segregation of the different types of receivables is required if they are material . b. Disclose any loss contingencies that exist on the receivables. c. Any discount or premium resulting from the determination of present value in notes receivable transactions is an asset or liability respectively. d. Valuation accounts should be appropriately offset against the proper receivable accounts,
c. Any discount or premium resulting from the determination of present value in notes receivable transactions is an asset or liability respectively.
AG Inc. made a $25,000 sale on account with the following terms: 1/15, 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? a. Debit Accounts Receivable for $24,750. b. Debit Accounts Receivable for $24,750 and Sales Discounts for $250. c. Debit Accounts Receivable for $25,000. d. Debit Accounts Receivable for $25,000 and Sales Discounts for $250.
c. Debit Accounts Receivable for $25,000.
What is the normal journal entry for recording bad debt expense under the allowance method? a. Debit Allowance for Doubtful Accounts, credit Accounts Receivable. b. Debit Allowance for Doubtful Accounts, credit Bad Debt Expense. c. Debit Bad Debt Expense, credit Allowance for Doubtful Accounts. d. Debit Accounts Receivable, credit Allowance for Doubtful Accounts.
c. Debit Bad Debt Expense, credit Allowance for Doubtful Accounts.
Which of the following statements is true? a. An imprest petty cash system is more impractical than disbursement by check b. If cash proves out short the company credits the shortage to Cash Over and Short c. The company closes Cash Over and Short only at the end of the year. d. The Petty Cash account is debited when the fund is replenished
c. 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? a. The transaction may be accounted for either as a secured borrowing or as a sale, depending upon the substance of the transaction. b. The receivables are used as collateral for a promissory note issued to the factor by the owner of the receivables. c. The factor assumes the risk of collectibility and absorbs any credit losses in collecting the receivables. d. The financing cost (interest expense) should be recognized ratably over the collection period of the receivables.
c. The factor assumes the risk of collectibility and absorbs any credit losses in collecting the receivables.
Why would a company sell receivables to another company? a. To improve the quality of its credit granting process. b. To limit its legal liability. c. To accelerate access to amounts collected. d. To comply with customer agreements.
c. To accelerate access to amounts collected.
Antique Company has notes receivable that have a fair value of $920,000 and a carrying amount of $710,000. Antique decides on December 31, 2020, to use the fair value option for these recently-acquired receivables. The adjusting entry to record this change will include a: a. debit to Unrealized Holding Gain or Loss-Income for $210,000. b. credit to Notes Receivable for $210,000. c. credit to Unrealized Holding Gain or Loss Income for $210,000. d. debit to Notes Receivable for $920,000.
c. credit to Unrealized Holding Gain or Loss Income for $210,000.
On April 2, Kelvin sold $40,000 of inventory items on credit with the terms 1/10, net 30. Payment on $24,000 sales was received on April 8 and the remaining payment on $16,000 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: a. debit to Cash and credit to Accounts Receivable for $15,840. b. debit to Accounts Receivable and credit to Sales Revenue for $40,000. c. debit to Accounts Receivable and credit to Sales Discounts Forfeited for $160. d. debit to Cash and credit to Sales Discounts Forfeited for $400.
c. debit to Accounts Receivable and credit to Sales Discounts Forfeited for $160.
Wellington Corp. has outstanding accounts receivable totaling $6.5 million as of December 31 and sales on credit during the year of $24 million. There is also a credit balance of $12,000 in the allowance for doubtful accounts. If the company estimates that 6% of its outstanding receivables will be uncollectible, what will be the amount of bad debt expense recognized for the year? a. $ 402,000. b. $ 390,000. c. $1,440,000. d. $ 378,000.
d. $ 378,000.
Sun Inc. assigns $6,000,000 of its accounts receivables as collateral for a $2 million 8% loan with a bank. Sun Inc. also pays a finance fee of 1% on the transaction upfront. What would be recorded as a gain (loss) on the transfer of receivables? a. Loss of $60,000. b. Loss of $480,000. C. Loss of $540,000. d. $0.
d. $0.
Black Corporation had a 1/1/20 balance in the Allowance for Doubtful Accounts of $21,000. During 2020, it wrote off $15,120 of accounts and collected $4,410 on accounts previously written off. The balance in Accounts Receivable was $420,000 at 1/1 and $504,000 at 12/31. At 12/31/20, Black estimates that 5% of accounts receivable will prove to be uncollectible. What should Black report as its Allowance for Doubtful Accounts at 12/31/20? a. $10,080. b. $10,290. c. $14,490. d. $25,200.
d. $25,200.
102. During the year, Kiner Company made an entry to write off a $32,000 uncollectible account. Before this entry was made, the balance in accounts receivable was $400,000 and the balance in the allowance account was $36,000. The accounts receivable amount expected to be collected after the write-off entry was a. $400,000. b. $396,000. C. $332,000. d. $364,000.
d. $364,000.
McGlone Corporation had a 1/1/20 balance in the Allowance for Doubtful Accounts of $40,000. During 2020, it wrote off $28,000 of accounts and collected $8,400 on accounts previously written off. The balance in Accounts Receivable was $800,000 at 1/1 and $960,000 at 12/31. At 12/31/20, McGlone estimates that 5% of accounts receivable will prove to be uncollectible. What should McGlone report as its Allowance for Doubtful Accounts at 12/31/20? a. $19,200, b. $19,600. c. $27,600. d. $48,000.
d. $48,000.
Becky had net sales (all on account) in 2020 of $8,000,000. At December 31, 2020, before adjusting entries, the balances in selected accounts were: accounts receivable $1,000,000 debit, and allowance for doubtful accounts $2,000 debit. Becky estimates that 3% 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? a. $32,000 b. $972,000 c. $968,000 d. $970,000
d. $970,000
Assuming the market interest rate is 10% per annum, how much would Green Co. record as a note payable if the terms of the loan with a bank are that it would have to make one $120,000 payment in two years? (The present value of $1 for two periods at 10% is 0.82645). a. $120,000. b. $108,844. C. $109,090. d. $99,174.
d. $99,174.
On January 1, 2020, Lynn Company borrows $3,000,000 from National Bank at 11% annual interest. In addition, Lynn is required to keep a compensatory balance of $300,000 on deposit at National Bank which will earn interest at 5%. The effective interest that Lynn pays on its $3,000,000 loan is a. 10.0%. b. 11.0%. C. 11.5%. d. 11.6%.
d. 11.6%.
If a petty cash fund is established in the amount of $300, and contains $180 in cash and $115 in receipts for disbursements when it is replenished, the journal entry to record replenishment should include credits to the following accounts a. Petty Cash, $90. b. Petty Cash, $120. C. Cash, $115; Cash Over and Short, $5. d. Cash, $120.
d. Cash, $120.
Which of the following methods of determining bad debt expense does not properly match expense and revenue? a. Charging bad debts with a percentage of sales under the allowance method. b. Charging bad debts with an amount derived from a percentage of accounts receivable under the allowance method. c. Charging bad debts with an amount derived from aging accounts receivable under the allowance method. d. Charging bad debts as accounts are written off as uncollectible.
d. Charging bad debts as accounts are written off as uncollectible.
Which of the following is included in the normal journal entry to record the collection of accounts receivable previously written off when using the allowance method? a. Debit Allowance for Doubtful Accounts, credit Accounts Receivable. b. Debit Allowance for Doubtful Accounts, credit Bad Debt Expense. c. Debit Bad Debt Expense, credit Allowance for Doubtful Accounts. d. Debit Accounts Receivable, credit Allowance for Doubtful Accounts.
d. Debit Accounts Receivable, credit Allowance for Doubtful Accounts.
Which of the following is a general rule of classifying receivables? a. Disclose gain contingencies that exist on the receivables. b. Aggregate the various types of receivables that a company possessed. c. Aggregate current and noncurrent receivables d. Disclose any receivables designated or pledged as collateral
d. Disclose any receivables designated or pledged as collateral
What is a possible reason for accounts receivable turnover to increase from one year to the next year? a. Decreased credit sales during a recession. b. Write-off uncollectible receivables. C. Granting credit to customers with lower credit quality. d. Improved collection process.
d. Improved collection process.
Why is the allowance method preferred over the direct write-off method of accounting for bad debts? a. Allowance method is used for tax purposes. b. Estimates are used. C. Determining worthless accounts under direct write-off method is difficult to do. d. Improved matching of bad debt expense with revenue.
d. Improved matching of bad debt expense with revenue.
What is a compensating balance? a. Savings account balances. b. Margin accounts held with brokers . c. Temporary investments serving as collateral for outstanding loans. d. Minimum deposits required to be maintained in connection with a borrowing arrangement.
d. Minimum deposits required to be maintained in connection with a borrowing arrangement.
Which of the following should be recorded in Accounts Receivable? a. Receivables from officers b. Receivables from subsidiaries c. Dividends receivable d. Oral promises from customers to pay for good or services sold
d. Oral promises from customers to pay for good or services sold
At the beginning of 2019, Gannon Company received a three-year zero-interest-bearing $1,000 trade note. The market rate for equivalent notes was 8% at that time. Gannon reported this note as a $1,000 trade note receivable on its 2019 year-end statement of financial position and $1,000 as sales revenue for 2019. What effect did this accounting for the note have on Gannon's net earnings for 2019, 2020, 2021, and its retained earnings at the end of 2021, respectively? a. Overstate, overstate, understate, zero b. Overstate, understate, understate, understate c. Overstate, overstate, overstate, overstate d. Overstate, understate, understate, zero
d. Overstate, understate, understate, zero
Which of the following items should not be included in the Cash caption on the balance sheet? a. Coins and currency in the cash register b. Checks from other parties presently in the cash register c. Amounts on deposit in checking account at the bank d. Postage stamps on hand
d. Postage stamps on hand
Which of the following is not considered cash for financial reporting purposes? a. Petty cash funds and change funds b. Money orders, certified checks, and personal checks c. Coin, currency, and available funds d. Postdated checks and I. O. U's
d. Postdated checks and I. O. U's
When should a transfer of receivables be recorded as a sale? a. The buyer surrenders control of the receivables to the seller b. The transferor maintains effective control over the transferred assets through an agreement to repurchase or redeem them prior to their maturity. c. The transferee cannot pledge or exchange the transferred assets. d. The transferred assets are isolated from the transferor
d. The transferred assets are isolated from the transferor
The category "trade receivables" includes a. advances to officers and employees. b. income tax refunds receivable. C. claims against insurance companies for casualties sustained. d. amounts owed by customers for goods bought or services rendered
d. amounts owed by customers for goods bought or services rendered
When a customer purchases merchandise inventory from a business organization, she may be given a discount which is designed to induce prompt payment. Such a discount is called a(n) a. trade discount. b. nominal discount . C. enhancement discount. d. cash discount.
d. cash discount.
A cash equivalent is a short-term, highly liquid investment that is readily convertible into known amounts of cash and a. is acceptable as a means to pay current liabilities. b. has a current market value that is greater than its original cost c. bears an interest rate that is at least equal to the prime rate of interest at the date of liquidation. d. is so near its maturity that it presents insignificant risk of changes in interest rates.
d. is so near its maturity that it presents insignificant risk of changes in interest rates.
The accounts receivable tumover is computed by dividing a. gross sales by ending net receivables. b. gross sales by average net receivables. c. net sales by ending net receivables. d. net sales by average net receivables.
d. net sales by average net receivables.
Travel advances should be reported as a. supplies. b. cash because they represent the equivalent of money. c. investments. d. receivables
d. receivables
Bank overdrafts, if material, should be a. reported as a deduction from the current asset section. b. reported as a deduction from cash. c. netted against cash and a net cash amount reported. d. reported as a current liability.
d. reported as a current liability.
Trade discounts are a. recorded as other revenues and gains. b. used to induce prompt payment. C. presented in terms such as 2/10, n/30. d. used to avoid frequent changes in catalogs
d. used to avoid frequent changes in catalogs
