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Exam 7: Reporting and Analyzing Receivables

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Question 101

Multiple Choice

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Receivables are

A) one of the most liquid assets and thus are always considered current assets.
B) claims that are expected to be collected in cash.
C) shown on the income statement at cash realizable value.
D) always the result of revenue recognition.

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Question 102

Multiple Choice

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The following information is related to December 31, 2016 balances. During 2017 sales on account were $390,000 and collections on account were $230,000. Also, during 2017 the company wrote off $22,000 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that bad debts should be estimated at $144,000. The change in the cash realizable value from the balance at 12/31/16 to 12/31/17 was

A) 136,000 increase.
B) $160,000 increase.
C) $114,000 increase.
D) $138,000 increase.

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Question 103

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A company regularly sells its receivables to a factor who assesses a 2% service charge on the amount of receivables purchased. Which of the following statements is true for the seller of the receivables?

The Allowance for Doubtful Accounts is a liability account.

Smithson Corporation's unadjusted trial balance includes the following balances (assume normal balances) : Accounts Receivable $\quad\quad\quad\quad\quad \$ 1,119,000$ Allowances for Doubtful Accounts $\quad \$ 21,300$ Bad debts are estimated to be 6% of outstanding receivables. What amount of bad debt expense will the company record?

When the due date of a note is stated in months, the time factor in computing interest is the number of months divided by 360 days.

Which receivables accounting and reporting issue is essentially the same for IFRS and GAAP?

An aging schedule is prepared only for old accounts receivables that have been past due for more than one year.

The collection of an account that had been previously written off under the allowance method of accounting for uncollectibles

A note receivable is executed in December. When the note is paid the following February, the payee's entry includes (assuming a calendar-year accounting period and no reversing entries) a

The two accounting problems with accounts receivable are: (1) recognizing and (2) disposing.

A dishonored note receivable

Using the allowance method, the uncollectible accounts for the year is estimated to be $50,000. If the balance for the Allowance for Doubtful Accounts is a $9,000 debit before adjustment, what is the amount of bad debt expense for the period?

Bad debt expense and interest revenue are reported in the income statement under other revenues and expenses.

The financial statements of the Nelson Manufacturing Company reports net sales of $360,000 and accounts receivable of $50,000 and $30,000 at the beginning of the year and end of year, respectively. What is the accounts receivable turnover for Nelson?

In 2017 the Golic Co. had net credit sales of $900,000. On January 1, 2017, the Allowance for Doubtful Accounts had a credit balance of $22,500. During 2017, $36,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage-of-receivables basis) . If the accounts receivable balance at December 31 was $240,000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2017?

A captive finance company refers to

When an account becomes uncollectible and must be written off

Accounts receivable are valued and reported on the balance sheet

Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $55,000. If the balance of the Allowance for Doubtful Accounts is $11,000 debit before adjustment, what is the balance after adjustment?