Chapter 8 Financial Accounting Quiz
A popular variation of the accounts receivable turnover is the A) average collection period. B) credit risk ratio. C) concentration of credit risk. D) bad debts ratio.
A
Net credit sales for the month are $4,000,000 for Marx Clothiers. Its accounts receivable balance is $160,000. The allowance is calculated as 7.5% of the receivables balance using the percentage of receivables basis. The Allowance for Doubtful Accounts has a credit balance of $5,000 before adjustment. How much is the balance of the allowance account after adjustment? A) $12,000 B) $17,000 C) $300,000 D) $7,000
A
On January 15, Novak Corp. sells merchandise on account to Novak Associates for $5400 with terms 4/10, n/30. On January 20, Novak returns merchandise worth $1200 to Novak. On January 24, payment is received from Novak for the balance due. What is the amount of cash received? A) $4032 B) $4200 C) $3984 D) $3000
A
Ryan Leaf Company uses the percentage-of-receivables method for recording bad debts expense. The accounts receivable balance is $60,000 at year-end and the total credit sales were $2,300,000 for the year. Management estimates that 3% of receivables will be uncollectible. What adjusting entry should be made if the Allowance for Doubtful Accounts has a credit balance of $200 before adjustment? A) Bad Debts Expense 1,600 (D) Allowance for Doubtful Accounts 1,600 (C) B) Bad Debts Expense 1,800 (D) Allowance for Doubtful Accounts 1,800 (C) C) Bad Debts Expense 1,600 (D) Accounts Receivable 1,600 (C) D) Allowance for Doubtful Accounts 1,800 (D) Bad Debt Expense 1,800 (C)
A
The term "receivables" refers to A) amounts due from individuals or companies. B) cash to be paid to creditors. C) merchandise to be collected from individuals or companies. D) cash to be paid to debtors.
A
Under the allowance method, writing off an uncollectible account A) affects only balance sheet accounts. B) affects only income statement accounts. C) affects both balance sheet and income statement accounts. D) is not acceptable practice.
A
At what value are accounts receivable reported on the balance sheet? A) Maturity value B) Cash (net) realizable value C) Fair market value D) Present value
B
The accounts receivables turnover is computed by dividing net sales by accounts receivable. A) True B) False
B
What type of receivable is evidenced by a formal instrument and normally requires the payment of interest? A) Past-due accounts receivables B) A note receivable C) A trade receivable D) An account receivable
B
Eddy Corporation had net credit sales during the year of $800,000 and cost of goods sold of $500,000. The balance in receivables at the beginning of the year was $100,000 and at the end of the year was $150,000. How much is the accounts receivables turnover? A) 5.3 B) 4.0 C) 6.4 D) 8.0
C
What type of receivables result from sales transactions? A) Non-trade receivables B) Other receivables C) Trade receivables D) Long-term receivables
C
Factoring is the process of A) determining the average collection period. B) determining the allowance for doubtful accounts value. C) determining the percentage of accounts receivable expected to be collected. D) selling accounts receivable at a discount to another party.
D
Oriole Company unadjusted trial balance includes the following balances (assume normal balances): Accounts Receivable $1150000 Allowances for Doubtful Accounts $22700 Bad debts are estimated to be 6% of outstanding receivables. What amount of bad debt expense will the company record? A) $45022 B) $68878 C) $69000 D) $46300
D
Prall Corporation sells its goods on terms of 2/10, n/30. It has a receivables turnover ratio of 7.00. What is its average collection period (days)? A) 2 days B) 2,555 days C) 30 days D) 52 days
D
The financial statements of the Splish Brothers Inc. reports net sales of $178350 and accounts receivable of $59000 and $28000 at the beginning of the year and end of year, respectively. What is the accounts receivable turnover for Splish? A) 2.05 times B) 7.10 times C) 3.28 times D) 4.10 times
D
Under the allowance method of accounting for uncollectible accounts, A) allowance for Doubtful Accounts is closed each year to Income Summary. B) the cash realizable value of accounts receivable is greater before an account is written off than after it is written off. C) bad Debt Expense is debited when a specific account is written off as uncollectible. D) the cash realizable value of accounts receivable in the balance sheet is the same before and after an account is written off.
D
When an uncollectible account is recovered after it has been written off, which of the following accounts will be credited in the process? A) Allowance for Doubtful Accounts and Bad Debts Expense B) Cash and Account Receivable C) Allowance for Doubtful Accounts and Cash D) Accounts Receivable and Allowance for Doubtful Accounts
D
When is a receivable recorded by a service organization? A) When the related expenses are incurred B) When the bill is sent to the customer C) When the customer pays D) When service is provided on account
D
Which one of the following statements is true? A) Bad Debts Expense is a real account and remains open at the end of the fiscal period, while Allowance for Doubtful Accounts is a nominal account and is closed at the end of the fiscal period. B) Bad Debts Expense and Allowance for Doubtful Accounts are both real accounts and neither are closed at the end of the fiscal period. C) Bad Debts Expense and Allowance for Doubtful Accounts are both nominal accounts and are closed at the end of the fiscal period. D) Bad Debts Expense is a nominal account and is closed at the end of the fiscal period, while Allowance for Doubtful Accounts is a real account and remains open at the end of the fiscal period.
D
Which statement is true about reporting receivables on the balance sheet? A) Bad Debts Expense is is shown as a deduction from Accounts Receivable on the balance sheet. B) Bad Debts Expense is subtracted from Accounts Receivable and is then shown as a deduction from Accounts Receivable on the balance sheet. C) Bad Debts Expense and Allowance for Doubtful Accounts are shown as a deduction from Accounts Receivable on the balance sheet. D) Allowance for Doubtful Accounts is shown as a deduction from Accounts Receivable on the balance sheet.
D