Question 1

The maturity value of a $70,000, 8%, 3-month note receivable is

Accepted Answer

A)  $70,467.
B)  $70,560.
C)  $71,400.
D)  $75,600.

Question 2

The accounts receivable turnover is computed by dividing

Accepted Answer

A)  total sales by average net accounts receivable.
B)  net credit sales by average net accounts receivable.
C)  total sales by ending net accounts receivable.
D)  net credit sales by ending net accounts receivable.

Question 3

Receivables are valued and reported in the balance sheet at their gross amount less any sales returns and allowances and less any cash discounts.

Accepted Answer

A) True 
 B)False

Question 4

The term "receivables" refers to

Accepted Answer

A)  amounts due from individuals or companies.
B)  merchandise to be collected from individuals or companies.
C)  cash to be paid to creditors.
D)  cash to be paid to debtors.

Question 5

When an account is written off using the allowance method, accounts receivable

Accepted Answer

A)  is unchanged and the allowance account increases.
B)  increases and the allowance account increases.
C)  decreases and the allowance account decreases.
D)  decreases and the allowance account increases.

Question 6

The financial statements of Danielle Manufacturing Company report net sales of $750,000 and accounts receivable of $60,000 and $90,000 at the beginning and end of the year, respectively.What is the average collection period for accounts receivable in days?

Accepted Answer

A)  29.2
B)  36.5
C)  43.8
D)  73

Question 7

Under the direct write-off method of accounting for uncollectible accounts,

Accepted Answer

A)  the allowance account is increased for the actual amount of bad debt at the time of write-off.
B)  a specific account receivable is decreased for the actual amount of bad debt expense at the time of write-off.
C)  balance sheet relationships are emphasized.
D)  bad debt expense is always recorded in the period in which the revenue was recorded.

Question 8

The cash realizable value is the difference between the

Accepted Answer

A)  accounts receivable balance and the allowance for doubtful accounts balance.
B)  net sales and the allowance account balance.
C)  accounts receivable balance and bad debt expense.
D)  net sales and bad debt expense.

Question 9

Two methods of accounting for uncollectible accounts are the

Accepted Answer

A)  allowance method and the accrual method.
B)  allowance method and the net realizable method.
C)  direct write-off method and the accrual method.
D)  direct write-off method and the allowance method.

Question 10

Schwartzman Co.makes a credit card sale to a customer for $800.The credit card sale has a grace period of 30 days and then an interest charge of 1.5% per month is added to the balance.If the unpaid balance on the above sale is $640 at the end of the grace period, the interest charge is

Accepted Answer

A)  $6.40.
B)  $9.60.
C)  $11.00.
D)  $16.00.

Question 11

If a company sells its accounts receivables to a factor,

Accepted Answer

A)  the seller pays a commission to the factor.
B)  the factor pays a commission to the seller.
C)  there is a gain on the sale of the receivables.
D)  the seller defers recognition of sales revenue until the account is collected.

Question 12

Receivables may be sold because they may be the only available source of cash.

Accepted Answer

A) True 
 B)False

Question 13

The entry to record the dishonor of a note receivable assuming that the payee expects eventual collection includes a debit to

Accepted Answer

A)  Notes Receivable.
B)  Cash.
C)  Allowance for Doubtful Accounts.
D)  Accounts Receivable.

Question 14

Major advantages of credit cards to the retailer include all of the following except the

Accepted Answer

A)  issuer does the credit investigation of customers.
B)  issuer undertakes the collection process.
C)  retailer receives more cash from the credit card issuer.
D)  All of these answers are correct.

Question 15

The financial statements of Danielle Manufacturing Company report net sales of $750,000 and accounts receivable of $60,000 and $90,000 at the beginning and end of the year, respectively.What is the accounts receivable turnover for Danielle?

Accepted Answer

A)  5 times
B)  8.3 times
C)  10 times
D)  12.5 times

Question 16

Under the allowance method, the cash realizable value of receivables is the same both before and after an account has been written off.

Accepted Answer

A) True 
 B)False

Question 17

Bad Debt Expense is considered

Accepted Answer

A)  an avoidable cost in doing business on a credit basis.
B)  an internal control weakness.
C)  a necessary risk of doing business on a credit basis.
D)  avoidable unless there is a recession.

Question 18

A 90-day note dated May 14 has a maturity date of

Accepted Answer

A)  August 14.
B)  August 12.
C)  August 13.
D)  August 15.

Question 19

When a note receivable is dishonored,

Accepted Answer

A)  interest revenue is never recorded.
B)  bad debts expense is recorded.
C)  the maturity value of the note is written off.
D)  Accounts Receivable is debited if collection is eventually expected.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 8: Accounting for Receivables

The maturity value of a $70,000, 8%, 3-month note receivable is

Correct AnswerverifiedShow Answer

The term "receivables" refers to

Correct AnswerverifiedShow Answer

When an account is written off using the allowance method, accounts receivable

Correct AnswerverifiedShow Answer

The accounts receivable turnover is computed by dividing

Correct AnswerverifiedShow Answer

When a note receivable is dishonored,

Correct AnswerverifiedShow Answer

Two methods of accounting for uncollectible accounts are the

Correct AnswerverifiedShow Answer

Under the allowance method, the cash realizable value of receivables is the same both before and after an account has been written off.

Correct AnswerverifiedShow Answer

The entry to record the dishonor of a note receivable assuming that the payee expects eventual collection includes a debit to

Correct AnswerverifiedShow Answer

The financial statements of Danielle Manufacturing Company report net sales of $750,000 and accounts receivable of $60,000 and $90,000 at the beginning and end of the year, respectively.What is the average collection period for accounts receivable in days?

Correct AnswerverifiedShow Answer

The financial statements of Danielle Manufacturing Company report net sales of $750,000 and accounts receivable of $60,000 and $90,000 at the beginning and end of the year, respectively.What is the accounts receivable turnover for Danielle?

Correct AnswerverifiedShow Answer

Schwartzman Co.makes a credit card sale to a customer for $800.The credit card sale has a grace period of 30 days and then an interest charge of 1.5% per month is added to the balance.If the unpaid balance on the above sale is $640 at the end of the grace period, the interest charge is

Correct AnswerverifiedShow Answer

Bad Debt Expense is considered

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A 90-day note dated May 14 has a maturity date of

Correct AnswerverifiedShow Answer

If a company sells its accounts receivables to a factor,

Correct AnswerverifiedShow Answer

Receivables may be sold because they may be the only available source of cash.

Correct AnswerverifiedShow Answer

Under the direct write-off method of accounting for uncollectible accounts,

Correct AnswerverifiedShow Answer

The cash realizable value is the difference between the

Correct AnswerverifiedShow Answer

Major advantages of credit cards to the retailer include all of the following except the

Correct AnswerverifiedShow Answer

Receivables are valued and reported in the balance sheet at their gross amount less any sales returns and allowances and less any cash discounts.

Correct AnswerverifiedShow Answer

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