Question 1

Your company wrote off $350 in accounts receivable two months ago when a customer went bankrupt.That customer reorganizes and now pays the $350.Your company should:

Accepted Answer

A)  debit Bad Debt Expense and credit Cash.
B)  debit Accounts Receivable and credit Bad Debt Expense and then debit Allowance for Doubtful Accounts and credit Cash.
C)  debit Cash and credit Bad Debt Expense.
D)  debit Accounts Receivable and credit Allowance for Doubtful Accounts and then debit Cash and credit Accounts Receivable.E) C) and D)
F) A) and B)

Question 2

Which of the following methods is required by Revenue Canada for accounting for bad debt for tax purposes:

Accepted Answer

A)  Direct write-off method
B)  Allowance method
C)  Percentage of sales method
D)  Aging of accounts methodE) B) and C)
F) A) and D)

Question 3

A company lends a major client $90,000 for one year at a 7% annual interest rate.Interest payments are to be made twice a year but the company wants to recognize interest earned on a monthly basis.In a month in which the company does not receive any interest payments,interest is recorded with:

Accepted Answer

A)  a debit to Cash of $525 and a credit to Interest Revenue of $525.
B)  a debit to Notes Receivable of $525 and a credit to Cash of $525.
C)  a debit to Interest Receivable of $525 and a credit to Interest Revenue of $525.
D)  no adjusting entry,since no transaction has occurred.E) A) and B)
F) None of the above

Question 4

Companies are concerned about the cost of extending credit for all the following reasons EXCEPT:

Accepted Answer

A)  the time delay in receiving payment.
B)  the expense of the extra goods that must be produced or bought.
C)  the risk of non-payment.
D)  the administrative costs associated with extending credit.E) C) and D)
F) B) and C)

Question 5

When interest is calculated for periods shorter than a year,the formula to calculate interest is:

Accepted Answer

A)  I = P x R x T,where I = interest calculated,P = principal,R = annual interest rate,and T = number of months.
B)  I = P x R x T,where I = interest calculated,P = principal,R = annual interest rate,and T = (number of months /12) 
C)  I = P x R x T,where I = interest calculated,P = principal,R = monthly interest rate,and T = (number of months / 12) .
D)  none of the above.E) C) and D)
F) All of the above

Question 6

The allowance for doubtful accounts is not used in the direct write off method.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 7

The receivables turnover ratio indicates how many times,on average,the process of selling to and collecting the sales proceeds from customers occurs during the accounting period.
BT: Comprehension

Accepted Answer

A) True 
 B)False

Question 8

In normal circumstances,the allowance for doubtful accounts for a company should be a fairly consistent percentage of gross accounts receivable.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 9

When a company that uses the allowance method writes off an actual bad debt:

Accepted Answer

A)  total assets decrease.
B)  total liabilities increase.
C)  total expenses increase and total revenues increase.
D)  total assets,revenue,and expenses remain the same.E) A) and C)
F) A) and D)

Question 10

When an adjusting entry is made in anticipation of some receivables being uncollectible the adjustment reduces:

Accepted Answer

A)  both net income and net accounts receivable.
B)  net income and increases liabilities.
C)  net accounts receivable and increases liabilities.
D)  net income and selling expenses.E) All of the above
F) A) and C)

Question 11

Total doubtful accounts at the end of the year is estimated,using the aging of receivables method,to be $25,000.If the balance for the Allowance for Doubtful Accounts is a $7,000 debit before adjustment,what will be the amount of bad debts expense for the period?

Accepted Answer

A)  $7,000.
B)  $18,000.
C)  $25,000.
D)  $32,000.E) None of the above
F) A) and B)

Question 12

If a company did not extend credit to customers:

Accepted Answer

A)  its gross revenue would rise.
B)  its costs of credit would rise but so would its revenue.
C)  its costs of credit would fall but so would its revenue.
D)  gross profit would rise.E) A) and D)
F) All of the above

Question 13

There is a cost of extending credit to customers even when the company is able to collect in full its accounts receivable.
BT: Comprehension

Accepted Answer

A) True 
 B)False

Question 14

Your company lent a customer $5,000 to satisfy the customer's overdue accounts receivable.The loan is for one year at an annual interest rate of 5%.Six months later the customer repays the principal and interest.The principal part of the repayment should be recorded as a:

Accepted Answer

A)  debit to Cash and credit to Notes Receivable.
B)  debit to Notes Receivable and credit to Interest Revenue.
C)  debit to Cash and credit to Accounts Receivable.
D)  debit to Allowance for Bad Debts and credit to Cash.E) A) and D)
F) B) and C)

Question 15

Purrfect Pets,Inc.,has sales revenue of $1,748,380 during 2006.The company has credit card discounts of $16,280 and sales returns of $3,460.The balance in accounts receivable on December 31,2005 was $104,500 and on December 31,2006 it was $129,100.Calculate the receivables turnover ratio and days to collect measure for 2006.

Accepted Answer

Net Sales Revenue = Total sales revenue ...

Question 16

When a company makes an adjustment in anticipation of future uncollectible debt:

Accepted Answer

A)  it debits an asset account and credits a liability account.
B)  it debits a revenue account and credits an asset account.
C)  it debits a revenue account and credits an expense account.
D)  it debits an expense account and credits a contra-asset account.E) B) and D)
F) A) and B)

Question 17

When a company that uses the allowance method writes off an actual bad debt:
A.total assets decrease.
B.total liabilities increase.
C.total expenses increase and total revenues increase.
D.total assets,revenue,and expenses remain the same.

Accepted Answer

The answer of When a company that uses the allowance...

Question 18

A high accounts receivable turnover ratio indicates:

Accepted Answer

A)  the company's sales are increasing.
B)  a large proportion of the company's sales are on credit.
C)  customers are making payments very quickly.
D)  the company is taking longer to sell inventory.E) B) and C)
F) A) and B)

Question 19

As of December 31,Frappa Company has a balance of $5,000 in accounts receivable.Of this amount $500 is past due and the remainder is not yet due.Frappa has a credit balance of $45 in the allowance for doubtful accounts.Frappa Company estimates its bad debt losses using the aging of receivables method,with estimated bad debt loss rates equal to 1% of accounts not yet due and 10% of past due accounts.How would the required adjusting journal entry be recorded in the Allowance for Doubtful Accounts?

Accepted Answer

A)  $95 (credit) .
B)  $55 (credit) .
C)  $50 (credit) .
D)  $45 (debit) .E) A) and B)
F) None of the above

Question 20

When a company lends cash to a customer who then signs a promissory note:

Accepted Answer

A)  net income decreases for the current accounting period,but increases when the money is repaid.
B)  expenses increase in the current accounting period but revenues increase when the money is repaid.
C)  liabilities increase when the transaction occurs but decrease when the money is repaid.
D)  net assets and net income do not change when the transaction occurs.E) None of the above
F) A) and C)

Exam 8: Receivables, bad Debt Expense, and Interest Revenue

Correct Answer
verified
Net Sales Revenue = Total sales revenue ...
View Answer

When a company that uses the allowance method writes off an actual bad debt: A.total assets decrease. B.total liabilities increase. C.total expenses increase and total revenues increase. D.total assets,revenue,and expenses remain the same.

Correct Answer
verified

The allowance for doubtful accounts is not used in the direct write off method. BT: Knowledge

Correct Answer
verified

Your company lent a customer $5,000 to satisfy the customer's overdue accounts receivable.The loan is for one year at an annual interest rate of 5%.Six months later the customer repays the principal and interest.The principal part of the repayment should be recorded as a:

Correct Answer
verified

The receivables turnover ratio indicates how many times,on average,the process of selling to and collecting the sales proceeds from customers occurs during the accounting period. BT: Comprehension

Correct Answer
verified

If a company did not extend credit to customers:

Correct Answer
verified

Companies are concerned about the cost of extending credit for all the following reasons EXCEPT:

Correct Answer
verified

There is a cost of extending credit to customers even when the company is able to collect in full its accounts receivable. BT: Comprehension

Correct Answer
verified

In normal circumstances,the allowance for doubtful accounts for a company should be a fairly consistent percentage of gross accounts receivable. BT: Knowledge

Correct Answer
verified

A company lends a major client $90,000 for one year at a 7% annual interest rate.Interest payments are to be made twice a year but the company wants to recognize interest earned on a monthly basis.In a month in which the company does not receive any interest payments,interest is recorded with:

Correct Answer
verified

When an adjusting entry is made in anticipation of some receivables being uncollectible the adjustment reduces:

Correct Answer
verified

Correct Answer
verified

When a company makes an adjustment in anticipation of future uncollectible debt:

Correct Answer
verified

When a company that uses the allowance method writes off an actual bad debt:

Correct Answer
verified

When a company lends cash to a customer who then signs a promissory note:

Correct Answer
verified

Your company wrote off $350 in accounts receivable two months ago when a customer went bankrupt.That customer reorganizes and now pays the $350.Your company should:

Correct Answer
verified

Total doubtful accounts at the end of the year is estimated,using the aging of receivables method,to be $25,000.If the balance for the Allowance for Doubtful Accounts is a $7,000 debit before adjustment,what will be the amount of bad debts expense for the period?

Correct Answer
verified

A high accounts receivable turnover ratio indicates:

Correct Answer
verified

Which of the following methods is required by Revenue Canada for accounting for bad debt for tax purposes:

Correct Answer
verified

When interest is calculated for periods shorter than a year,the formula to calculate interest is:

Correct Answer
verified

Exam 8: Receivables, bad Debt Expense, and Interest Revenue

Correct AnswerverifiedNet Sales Revenue = Total sales revenue ...View AnswerShow Answer

When a company that uses the allowance method writes off an actual bad debt: A.total assets decrease. B.total liabilities increase. C.total expenses increase and total revenues increase. D.total assets,revenue,and expenses remain the same.

Correct AnswerverifiedShow Answer

The allowance for doubtful accounts is not used in the direct write off method. BT: Knowledge

Correct AnswerverifiedShow Answer

Your company lent a customer $5,000 to satisfy the customer's overdue accounts receivable.The loan is for one year at an annual interest rate of 5%.Six months later the customer repays the principal and interest.The principal part of the repayment should be recorded as a:

Correct AnswerverifiedShow Answer

The receivables turnover ratio indicates how many times,on average,the process of selling to and collecting the sales proceeds from customers occurs during the accounting period. BT: Comprehension

Correct AnswerverifiedShow Answer

If a company did not extend credit to customers:

Correct AnswerverifiedShow Answer

Companies are concerned about the cost of extending credit for all the following reasons EXCEPT:

Correct AnswerverifiedShow Answer

There is a cost of extending credit to customers even when the company is able to collect in full its accounts receivable. BT: Comprehension

Correct AnswerverifiedShow Answer

In normal circumstances,the allowance for doubtful accounts for a company should be a fairly consistent percentage of gross accounts receivable. BT: Knowledge

Correct AnswerverifiedShow Answer

A company lends a major client $90,000 for one year at a 7% annual interest rate.Interest payments are to be made twice a year but the company wants to recognize interest earned on a monthly basis.In a month in which the company does not receive any interest payments,interest is recorded with:

Correct AnswerverifiedShow Answer

When an adjusting entry is made in anticipation of some receivables being uncollectible the adjustment reduces:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When a company makes an adjustment in anticipation of future uncollectible debt:

Correct AnswerverifiedShow Answer

When a company that uses the allowance method writes off an actual bad debt:

Correct AnswerverifiedShow Answer

When a company lends cash to a customer who then signs a promissory note:

Correct AnswerverifiedShow Answer

Your company wrote off $350 in accounts receivable two months ago when a customer went bankrupt.That customer reorganizes and now pays the $350.Your company should:

Correct AnswerverifiedShow Answer

Total doubtful accounts at the end of the year is estimated,using the aging of receivables method,to be $25,000.If the balance for the Allowance for Doubtful Accounts is a $7,000 debit before adjustment,what will be the amount of bad debts expense for the period?

Correct AnswerverifiedShow Answer

A high accounts receivable turnover ratio indicates:

Correct AnswerverifiedShow Answer

Which of the following methods is required by Revenue Canada for accounting for bad debt for tax purposes:

Correct AnswerverifiedShow Answer

When interest is calculated for periods shorter than a year,the formula to calculate interest is:

Correct AnswerverifiedShow Answer

Correct Answer
verified
Net Sales Revenue = Total sales revenue ...
View Answer

Correct Answer
verified

Correct Answer
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