Question 1

The face value of a note refers to the amount

Accepted Answer

A)   that can be received if sold to a factor.
B)   borrowed plus interest received at maturity from the maker.
C)   that is identified on the formal instrument of credit.
D)   remaining after a service charge has been deducted.

Question 2

Which of the following are also called trade receivables?

Accepted Answer

A)   Accounts receivable
B)   Other receivables
C)   Advances to employees
D)   Income taxes refundable

Question 3

Retailers generally consider sales from the use of national credit card sales as a

Accepted Answer

A)   credit sale.
B)   collection of an accounts receivable.
C)   cash sale.
D)   collection of a note receivable.

Question 4

Writing off an uncollectible account under the allowance method requires a debit to

Accepted Answer

A)   Accounts Receivable.
B)   Allowance for Doubtful Accounts.
C)   Bad Debt Expense.
D)   Uncollectible Accounts Expense.

Question 5

Which of the following statements is false regarding the different bases used for the allowance method?

Accepted Answer

A)   Three bases are generally accepted, the percentage of sales, the percentage of receivables, and the direct write-off.
B)   Management can choose whichever basis it prefers.
C)   If management wishes to emphasize the cash realizable value of receivables it will select the percentage of receivables basis.
D)   The company must determine its past experience with bad debt losses regardless of which basis it selects.

Question 6

Which of the following statements is true regarding accounting for receivables under IFRS and U.S. GAAP?

Accepted Answer

A)   U.S. GAAP has four specifically defined categories for financial assets, which include loans and receivables.
B)   U.S. GAAP accounts for short-term receivables at amortized cost, adjusted for allowances for doubtful accounts, whereas IFRS requires fair value for receivables.
C)   In their current deliberations regarding accounting for financial instruments, it appears that IASB wants amortized costs for receivables, but GAAP is tending toward fair value.
D)   All of these answer choices are correct.

Question 7

If a company uses the allowance method to account for uncollectible accounts, the entry to write off an uncollectible account only involves statement of financial position accounts.

Accepted Answer

A) True 
 B)False

Question 8

An aging of a company's accounts receivable indicates that $7,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,100 credit balance, the adjustment to record bad debts for the period will require a

Accepted Answer

A)   debit to Bad Debt Expense for $7,000.
B)   debit to Allowance for Doubtful Accounts for $5,900.
C)   debit to Bad Debt Expense for $5,900.
D)   credit to Allowance for Doubtful Accounts for $7,000.

Question 9

Your friend Stan has opened an office supply store. He will extend open credit to local businesses and is concerned about potential bad debts. What can Stan do to reduce potential bad debts?

Accepted Answer

1. Establish a reasonable policy for ext...

Question 10

Both accounts receivable and notes receivable represent claims that are expected to be collected in cash.

Accepted Answer

A) True 
 B)False

Question 11

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?

Accepted Answer

A)   The loss section of the income statement will increase each time receivables are sold.
B)   The credit to Accounts Receivable is less than the debit to Cash when the accounts are sold.
C)   Selling expenses will increase each time accounts are sold.
D)   The other income and expense section of the income statement will increase each time accounts are sold.

Question 12

A note receivable is a written promise by the maker to the payee to pay a specified amount of money at a definite time.

Accepted Answer

A) True 
 B)False

Question 13

A debit balance in the Allowance for Doubtful Accounts

Accepted Answer

A)   is the normal balance for that account.
B)   indicates that actual bad debt write-offs have exceeded previous provisions for bad debts.
C)   indicates that actual bad debt write-offs have been less than what was estimated.
D)   cannot occur if the percentage of sales method of estimating bad debts is used.

Question 14

Trade receivables occur when two companies trade or exchange notes receivables.

Accepted Answer

A) True 
 B)False

Question 15

An aging of accounts receivable schedule is based on the premise that the longer the period an account remains unpaid, the greater the probability that it will eventually be collected.

Accepted Answer

A) True 
 B)False

Question 16

If a company fails to record estimated bad debts expense,

Accepted Answer

A)   cash realizable value is understated.
B)   expenses are understated.
C)   revenues are understated.
D)   receivables are understated.

Question 17

When a company determines a particular account to be uncollectible, it charges the loss to Bad Debt Expense under

Accepted Answer

A)   the allowance method.
B)   the direct writeoff method.
C)   both the allowance method and the direct write-off method.
D)   None of these answer choices are correct.

Question 18

Assuming a 360-day year, the interest on a €10,000, 6%, 90-day note receivable is

Accepted Answer

A)   €600.
B)   €300.
C)   €150.
D)   €450.

Question 19

Oliver Furniture factors $800,000 of receivables to Kwik Factors, Inc. Kwik Factors assesses a 2% service charge on the amount of receivables sold. Oliver Furniture factors its receivables regularly with Kwik Factors. What journal entry does Oliver make when factoring these receivables?

Accepted Answer

The answer of Oliver Furniture factors $800,000 of receivables to...

Question 20

Maloney Company had net credit sales during the year of ₤1,800,000 and cost of goods sold of ₤1,200,000. The balance in accounts receivable at the beginning of the year was ₤120,000, and the end of the year it was ₤180,000. What was the accounts receivable turnover ratio?

Accepted Answer

A)   7.5
B)   10.0
C)   12.0
D)   15.0

Exam 8: Accounting for Receivables

Which of the following statements is false regarding the different bases used for the allowance method?

Correct AnswerverifiedShow Answer

If a company fails to record estimated bad debts expense,

Correct AnswerverifiedShow Answer

Your friend Stan has opened an office supply store. He will extend open credit to local businesses and is concerned about potential bad debts. What can Stan do to reduce potential bad debts?

Correct Answerverified1. Establish a reasonable policy for ext...View AnswerShow Answer

Assuming a 360-day year, the interest on a €10,000, 6%, 90-day note receivable is

Correct AnswerverifiedShow Answer

Both accounts receivable and notes receivable represent claims that are expected to be collected in cash.

Correct AnswerverifiedShow Answer

Trade receivables occur when two companies trade or exchange notes receivables.

Correct AnswerverifiedShow Answer

Which of the following are also called trade receivables?

Correct AnswerverifiedShow Answer

Maloney Company had net credit sales during the year of ₤1,800,000 and cost of goods sold of ₤1,200,000. The balance in accounts receivable at the beginning of the year was ₤120,000, and the end of the year it was ₤180,000. What was the accounts receivable turnover ratio?

Correct AnswerverifiedShow Answer

An aging of accounts receivable schedule is based on the premise that the longer the period an account remains unpaid, the greater the probability that it will eventually be collected.

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Retailers generally consider sales from the use of national credit card sales as a

Correct AnswerverifiedShow Answer

If a company uses the allowance method to account for uncollectible accounts, the entry to write off an uncollectible account only involves statement of financial position accounts.

Correct AnswerverifiedShow Answer

A note receivable is a written promise by the maker to the payee to pay a specified amount of money at a definite time.

Correct AnswerverifiedShow Answer

A debit balance in the Allowance for Doubtful Accounts

Correct AnswerverifiedShow Answer

Oliver Furniture factors $800,000 of receivables to Kwik Factors, Inc. Kwik Factors assesses a 2% service charge on the amount of receivables sold. Oliver Furniture factors its receivables regularly with Kwik Factors. What journal entry does Oliver make when factoring these receivables?

Correct AnswerverifiedShow Answer

An aging of a company's accounts receivable indicates that $7,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,100 credit balance, the adjustment to record bad debts for the period will require a

Correct AnswerverifiedShow Answer

When a company determines a particular account to be uncollectible, it charges the loss to Bad Debt Expense under

Correct AnswerverifiedShow Answer

The face value of a note refers to the amount

Correct AnswerverifiedShow Answer

Which of the following statements is true regarding accounting for receivables under IFRS and U.S. GAAP?

Correct AnswerverifiedShow Answer

Writing off an uncollectible account under the allowance method requires a debit to

Correct AnswerverifiedShow Answer

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