ORIAN 8
Which of the following are principles of managing accounts receivable? Select all that apply.
- accelerating cash receipts from receivables when necessary - monitoring collections -establishing a payment period
Which of the following statements concerning receivables are true? Select all that apply.
- both the gross amount of receivables and the allowance for doubtful accounts should be reported - interest revenue and gain on sale of notes receivable are shown under other revenues and gains - the contingent liability From selling notes receivable should be disclosed
Which of the following represents amounts due to a company? Select all that apply.
- notes receivable - accounts receivable
The financial statements of the Dimensions Company reports credit sales of $600,000 and accounts receivable of $20,000 and $10,000 at the beginning of the year and end of year, respectively. What is the accounts receivable turnover for Dimensions?
40
A debit to Accounts Receivable _________ entered to record the dishonor of a note receivable, assuming the payee expects eventual collection.
IS
The balance of Allowance for Doubtful Accounts prior to making the adjusting entry to record estimated uncollectible accounts _________ relevant when using the percentage of receivables basis.
IS
The holder of a note adjusts for accrued interest by debiting Interest Receivable and crediting
Interest Revenue.
Which of the following happens when an account is written off using the allowance method?
Net accounts receivable will stay the same.
If a company receives a 60-day, 5% note for $5,000 on September 5, which of the following statement is true?
The company should receive the principal of the note plus interest in early November.
Which of the following statements is true about factoring arrangements?
They are ways to accelerate receivable collections.
________ is a threat of nonpayment from a single large customer that could adversely affect the financial health of a company.
a concentration of credit risk
What is the Bad Debts Expense considered?
a necessary risk of doing business on a credit basis
What is the meaning of the term concentration of credit risk?
a threat of nonpayment from a single large customer that could threaten the financial health of the company
What happens when a note receivable is dishonored?
accounts Receivable is debited if eventual collection is expected
A debit to ________ is entered to record the dishonor of a note receivable assuming the payee expects eventual collection.
accounts receivable
________ are also called trade receivables.
accounts receivable
The average collection period for receivables is computed by dividing 365 days by _________ _________ __________ .
accounts receivable turnover
________ is used to calculate how quickly customers are making payments.
accounts receivable turnover
In addition to gross amount of receivables, which of the following is included in the balance sheet?
allowance for doubtful accounts
The accounts receivable turnover is needed to calculate which of the following?
average collection period in days
How is the average collection period computed?
by dividing 365 days by the accounts receivable turnover ratio
The net amount expected to be received in cash from receivables is termed the ________ value.
cash realizable
What does a company do when it receives an interest-bearing note receivable?
debits Notes Receivable for the face value of the note
The entry to recognize the bad debt expense ________ when the allowance method is used.
decreases current assets
All of the following are accounting issues associated with accounts receivable EXCEPT
depreciating accounts receivable.
All of the following are principles of managing accounts receivable EXCEPT
determining from which vendor credit should be requested
________ is often the most critical part of managing receivables.
determining who gets credit and who doesn't
A rarely used formula for computing interest on an interest-bearing note is Face Value of Note × Annual Interest Rate × Time in Terms of One Year = Interest.
false
The sale or transfer of accounts receivable in order to raise funds is called collateralizing.
false - factoring
Bunny's Furniture Warehouse accepted a national credit card for a $3,300 purchase. The cost of the goods sold is $1,300. The credit card company charges a 3% fee. What is the impact of this transaction on net operating income?
increase of $1,901
Which of the following is recorded under "other revenues and gains" on the income statement?
interest revenue
The retailer ________ when customers use national credit cards to make purchases.
is not involved in the collection process
Which of the following statements about a note receivable is true?
it can be transferred to another party by endorsement
What is the accounts receivable turnover often used to analyze?
liquidity
What are the two key parties to a promissory note?
maker & payee
When a note receivable is honored, Cash is debited for the note's
maturity value
If a company has significant concentration of credit risk it
must include a note about this in its financial statements
The category "other receivables" includes __________ receivables that are reported as separate items on the balance sheet.
non-trade
Writing off an uncollectible account affects ________ under the allowance method.
only balance sheet accounts
________ are three accounting issues associated with accounts receivable.
recognizing, valuing, disposing
To help minimize losses due to bad debts, companies could require bank guarantees when they decide to ________ credit standards for new customers.
relax
In order to minimize losses due to bad debts, a company might
require a potentially risky customer to pay cash on delivery.
When a factor buys accounts receivable, the charge for the factor's commission is recorded as
service charge expense
Accelerating cash receivables is a(n) ________ application of accounts receivable management.
sound
When would a credit card holder receive lower interest charges?
the card company allows a grace period before interest is accrued
Maynard Mills received a 60-day, 5% note for $10,000 on April 5th. Which of the following statements is true?
the principal of the note plus interest is due on June 4th
What are notes or accounts receivables that result from sales transactions often called?
trade receivables
