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Exam 7: Accounting for Receivables

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Question 21

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The year-end adjustment to accrue interest on a note receivable is an asset source transaction.

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Question 22

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Making a loan to another party is considered an investing activity on the statement of cash flows.

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Question 23

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[The following information applies to the questions displayed below.] On January 1, Year 2 Grande Company had a $16,000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During Year 2, Grande provided $104,000 of service on account. The company collected $97,000 cash from accounts receivable. Uncollectible accounts are estimated to be 2% of sales on account. -What is the amount of uncollectible accounts expense recognized on the Year 2 income statement?

The following information is available for Blankenship Company for the most recent year. $\begin{array}{lr}\text { Sales } & \$ 1,100,000 \\\text { Cost of goods sold } & 760,000 \\\text { Gross profit } & 340,000 \\\text { Net income } & 85,000 \\\text { Accounts receivable (average \# of days to sell inventory) } & 90,000 \\\text { Inventory (50 days) } & 105,000\end{array}$ What was Blankenship's operating cycle for the most recent year? (Round to the nearest whole day.)

The longer it takes to collect accounts receivable,the greater the implicit interest cost that is incurred.

The net realizable value of accounts receivable decreases when an account receivable is written off.

The face value of Accounts Receivable plus the balance in the Allowance for Doubtful Accounts is equal to the net realizable value of the receivables.

Glebe Company accepted a credit card account receivable in exchange for $1,100 of services provided to a customer.The credit card company charges a 5% fee for handling the transaction.What effect will the collection of cash from the credit card company have on the elements of the financial statements?

Indicate whether each of the following statements is true or false.

Which of the following is not considered a "cost" of extending credit to customers?

A company that uses the direct write-off method must still prepare a year-end adjustment to estimate its uncollectible accounts.

Rhodes Company reports the following information for the Year 1 fiscal year: Determine the average number of days it takes Rhodes to collect its accounts receivable.(Round intermediate calculations to 2 decimal places.)

How is the accounts receivable turnover ratio computed?

Other things being equal,the longer a company's operating cycle,the higher the company's operating costs are likely to be.

On December 31,Year 1,the West Corporation estimated that $6,000 of its receivables might not be collected.At the end of Year 1,the unadjusted balances of Accounts Receivable and Allowance for Doubtful Accounts were $150,000 and zero.On February 1,Year 2,West wrote-off of a delinquent account from one of its customers.West Corp.uses the allowance method.Indicate whether each of the following statements is true or false.

[The following information applies to the questions displayed below.] The Miller Company earned $190,000 of revenue on account during Year 1. There was no beginning balance in the accounts receivable and allowance accounts. During Year 1, Miller collected $136,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 3% of its sales on account. -What is the net realizable value of Miller's receivables at the end of Year 1?

How would accountants estimate the amount of a company's uncollectible accounts expense?

The longer an account receivable has been outstanding,the less likely it is to be collected.

The collection of an account receivable is an asset source transaction.

Many businesses find it more efficient to offer credit directly to customers rather than to accept third-party credit cards.