Question 1

The adjusting entry used to record the estimated bad debts in the period credit sales occur decreases:

Accepted Answer

A)  both net income and net accounts receivable.
B)  net income and increases liabilities.
C)  assets and increases liabilities.
D)  both selling expenses and net income.E) B) and D)
F) B) and C)

Question 2

Match the term and its definition.There are more definitions than terms.
-Notes Receivable

Accepted Answer

A)  The total amount of money loaned through notes that the lender has not yet collected.
B)  A system used by companies to allocate their budgets over the different operating expenses.
C)  The interest that a company receives during the year divided by the principal of the loan.
D)  Another name for a company's total revenue,which is calculated by multiplying the quantity sold by the average price.
E)  The denominator of the receivables turnover ratio.F) The amount of interest a lender receives during a year.G) The costs of maintaining accounts with customers who have not made recent purchases.H) A separate record for each accounts receivable customer.I) Used by the percentage of credit sales method to estimate bad debts.J) The rate at which a company pays off its liabilities or debts.K) The numerator of the receivables turnover ratio.L) The portion of past credit sales that have not yet been collected.M) An accounting method which involves estimating bad debts.N) The average level of net sales revenue the firm earns each month.O) J) and N)
P) E) and N)

Question 3

Establishing a note receivable by loaning cash to another company will have which of the following net effects on the accounting equation?

Accepted Answer

A)  Increase assets;No effect on liabilities;Increase stockholders' equity
B)  Increase assets;No effect on liabilities;No effect on stockholders' equity
C)  No effect on assets;No effect on liabilities;Decrease stockholders' equity
D)  No effect on assets;No effect on liabilities;No effect on stockholders' equityE) A) and B)
F) All of the above

Question 4

On July 1,2018,Empire Inc.lends $8,000 to a customer and receives a 9% note due in two years.Interest is due in full on July 1,2020,the due date of the note.What is the amount of Interest Revenue that will be reported on Empire's income statement for the year ended December 31,2018?

Accepted Answer

A)  $1,440
B)  $720
C)  $420
D)  $360E) A) and D)
F) None of the above

Question 5

Accounts receivable:

Accepted Answer

A)  arise from the purchase of goods or services on credit.
B)  are amounts owed to a business by its customers.
C)  will be collected within the discount period or when due.
D)  are reported on the income statement.E) A) and B)
F) A) and C)

Question 6

Using the aging approach,management estimates that 10% of the $30,000 of Accounts Receivable will be uncollectible.The Allowance for Doubtful Accounts has a $300 unadjusted debit balance.The adjusting entry to record estimated bad debts includes a:

Accepted Answer

A)  debit to Bad Debt Expense of $3,300.
B)  debit to Bad Debt Expense of $2,700.
C)  debit to Bad Debt Expense of $3,000.
D)  credit to Allowance for Doubtful Accounts of $3,000.E) All of the above
F) A) and D)

Question 7

If a company did not extend credit to customers:

Accepted Answer

A)  gross revenue would increase.
B)  costs would increase but so would sales revenue.
C)  costs would decrease but so would sales revenue.
D)  gross profit would increase.E) None of the above
F) A) and C)

Question 8

When the direct write-off method is used:

Accepted Answer

A)  the estimated amount of bad debts is debited to Bad Debt Expense.
B)  the estimated amount of bad debts is debited to Allowance for Doubtful Accounts.
C)  the estimated amount of bad debts is debited to which account Accounts Receivable.
D)  bad debts are not estimated.E) A) and B)
F) A) and C)

Question 9

Geisel,Inc.reported net sales revenue of $600,000 in 2018 and $500,000 in 2019.The company's average net receivables were $120,000 during 2017 and $130,000 during 2018.At December 31,2019,the company had Accounts Receivable of $148,000 and an unadjusted debit balance in its Allowance for Doubtful Accounts account of $1,000.The company reported Bad Debt Expense of $6,000 during 2018.
Required:
a.Determine the net receivables at December 31,2019.
b.Calculate the receivables turnover ratio for 2018 and 2019.
c.Calculate the days to collect for 2018 and 2019.

Accepted Answer

a.

b.
Receivable Turnover = Net credi...

Question 10

Match the term and its definition.There are more definitions than terms.
-Principal

Accepted Answer

A)  The process of removing specific customers' accounts deemed uncollectible.
B)  When a company increases the amount of accounts receivable by adding the interest earned as accounts age without being collected.
C)  How much money you can expect to earn over a period of time selling your goods.
D)  Selling accounts receivable to another company for immediate cash.
E)  Credit that a company receives when one good is exchanged for another.F) Also known as net accounts receivable.G) The length of the credit period and any discounts offered for prompt payment.H) The amount of money lent.I) A method of estimating uncollectible debts by forecasting the probability of not collecting late accounts.J) The interest earned by money over a period of time.K) A method of estimating uncollectible debts by looking at the historical average of credit sales not collected.L) The account in which the estimated amount of accounts receivable expected to be uncollectible is recorded.M) D) and F)
N) F) and G)

Question 11

Using the aging method of accounts receivable method,$5,000 of the company's Accounts Receivable are estimated to be uncollectible.At the end of the year,the balance of Accounts Receivable is $100,000 and the unadjusted credit balance of the Allowance for Doubtful Accounts is $500.Credit sales during the year totaled $150,000.What is the current year's Bad Debt Expense?

Accepted Answer

A)  $4,500
B)  $5,000
C)  $7,000
D)  $7,500E) A) and D)
F) None of the above

Question 12

Generous Inc.lends Blue Inc.$40,000 on April 1 and receives a four-month,4.5% interest-bearing note.Generous Inc.prepares financial statements on April 30.What adjusting entry should be made by Generous Inc.before its financial statements are prepared?

Accepted Answer

A)  Debit Note Receivable and credit Cash for $40,000.
B)  Debit Interest Receivable and credit Interest Revenue for $150.
C)  Debit Cash and credit Interest Revenue for $150.
D)  Debit Interest Receivable and credit Interest Revenue for $600.E) A) and D)
F) All of the above

Question 13

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

Accepted Answer

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

Question 14

Bad Debt Expense is a:

Accepted Answer

A)  permanent account so its balance carries forward to the next accounting period.
B)  permanent account so its balance is closed (zeroed out) at the end of the accounting period.
C)  temporary account so its balance is closed (zeroed out) at the end of the accounting period.
D)  temporary account so its balance carries forward to the next accounting period.E) B) and C)
F) C) and D)

Question 15

The entry to record a recovery causes:

Accepted Answer

A)  an increase in net accounts receivable.
B)  a decrease in net accounts receivable.
C)  net accounts receivable to stay the same.
D)  an increase in total revenues.E) C) and D)
F) A) and D)

Question 16

Why are estimates of bad debts used to record uncollectible amounts of accounts receivable?

Accepted Answer

A)  Doing so avoids violating the expense recognition ("matching") principle.
B)  It is an easier method than waiting for accounts to actually become uncollectible.
C)  Because the actual amount of uncollectible accounts can never be known.
D)  It is the most conservative approach.E) None of the above
F) B) and C)

Question 17

Match the term and its definition.There are more definitions than terms.
-Annual Interest Rate

Accepted Answer

A)  The total amount of money loaned through notes that the lender has not yet collected.
B)  A system used by companies to allocate their budgets over the different operating expenses.
C)  The interest that a company receives during the year divided by the principal of the loan.
D)  Another name for a company's total revenue,which is calculated by multiplying the quantity sold by the average price.
E)  The denominator of the receivables turnover ratio.F) The amount of interest a lender receives during a year.G) The costs of maintaining accounts with customers who have not made recent purchases.H) A separate record for each accounts receivable customer.I) Used by the percentage of credit sales method to estimate bad debts.J) The rate at which a company pays off its liabilities or debts.K) The numerator of the receivables turnover ratio.L) The portion of past credit sales that have not yet been collected.M) An accounting method which involves estimating bad debts.N) The average level of net sales revenue the firm earns each month.O) G) and L)
P) C) and G)

Question 18

Match the term and its definition.There are more definitions than terms.
-Average Net Receivables

Accepted Answer

A)  The total amount of money loaned through notes that the lender has not yet collected.
B)  A system used by companies to allocate their budgets over the different operating expenses.
C)  The interest that a company receives during the year divided by the principal of the loan.
D)  Another name for a company's total revenue,which is calculated by multiplying the quantity sold by the average price.
E)  The denominator of the receivables turnover ratio.F) The amount of interest a lender receives during a year.G) The costs of maintaining accounts with customers who have not made recent purchases.H) A separate record for each accounts receivable customer.I) Used by the percentage of credit sales method to estimate bad debts.J) The rate at which a company pays off its liabilities or debts.K) The numerator of the receivables turnover ratio.L) The portion of past credit sales that have not yet been collected.M) An accounting method which involves estimating bad debts.N) The average level of net sales revenue the firm earns each month.O) A) and K)
P) L) and M)

Question 19

What effect does the adjusting entry for interest earned but yet not received have on the accounting equation?

Accepted Answer

A)  It results in an increase in assets and stockholders' equity.
B)  It results in a decrease in assets and stockholders' equity.
C)  It results in an increase in assets and liabilities.
D)  It results in an increase in assets and decrease in stockholders' equity.E) A) and D)
F) A) and C)

Question 20

Using the aging approach,management estimates that 10% of the $10,000 of Accounts Receivable will be uncollectible.The Allowance for Doubtful Accounts has a $100 unadjusted debit balance.After the bad debt adjusting entry is recorded,Bad Debt Expense on the income statement will be ________ the Allowance for Doubtful Accounts on the balance sheet.

Accepted Answer

A)  $100 less than
B)  $100 more than
C)  the same amount as
D)  $9,900 more thanE) A) and B)
F) B) and D)

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

Accounts receivable:

Correct Answer
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Why are estimates of bad debts used to record uncollectible amounts of accounts receivable?

Correct Answer
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a.

b.
Receivable Turnover = Net credi...
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If a company did not extend credit to customers:

Correct Answer
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The adjusting entry used to record the estimated bad debts in the period credit sales occur decreases:

Correct Answer
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On July 1,2018,Empire Inc.lends $8,000 to a customer and receives a 9% note due in two years.Interest is due in full on July 1,2020,the due date of the note.What is the amount of Interest Revenue that will be reported on Empire's income statement for the year ended December 31,2018?

Correct Answer
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Companies are concerned about the cost of extending credit for all the following reasons except the:

Correct Answer
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Using the aging approach,management estimates that 10% of the $30,000 of Accounts Receivable will be uncollectible.The Allowance for Doubtful Accounts has a $300 unadjusted debit balance.The adjusting entry to record estimated bad debts includes a:

Correct Answer
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Match the term and its definition.There are more definitions than terms. -Notes Receivable

Correct Answer
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Establishing a note receivable by loaning cash to another company will have which of the following net effects on the accounting equation?

Correct Answer
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Match the term and its definition.There are more definitions than terms. -Average Net Receivables

Correct Answer
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The entry to record a recovery causes:

Correct Answer
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Match the term and its definition.There are more definitions than terms. -Annual Interest Rate

Correct Answer
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Match the term and its definition.There are more definitions than terms. -Principal

Correct Answer
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What effect does the adjusting entry for interest earned but yet not received have on the accounting equation?

Correct Answer
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Generous Inc.lends Blue Inc.$40,000 on April 1 and receives a four-month,4.5% interest-bearing note.Generous Inc.prepares financial statements on April 30.What adjusting entry should be made by Generous Inc.before its financial statements are prepared?

Correct Answer
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When the direct write-off method is used:

Correct Answer
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Bad Debt Expense is a:

Correct Answer
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Exam 8: Receivables,Bad Debt Expense,and Interest Revenue

Accounts receivable:

Correct AnswerverifiedShow Answer

Why are estimates of bad debts used to record uncollectible amounts of accounts receivable?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answerverifieda. b.Receivable Turnover = Net credi...View AnswerShow Answer

If a company did not extend credit to customers:

Correct AnswerverifiedShow Answer

The adjusting entry used to record the estimated bad debts in the period credit sales occur decreases:

Correct AnswerverifiedShow Answer

On July 1,2018,Empire Inc.lends $8,000 to a customer and receives a 9% note due in two years.Interest is due in full on July 1,2020,the due date of the note.What is the amount of Interest Revenue that will be reported on Empire's income statement for the year ended December 31,2018?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Using the aging approach,management estimates that 10% of the $30,000 of Accounts Receivable will be uncollectible.The Allowance for Doubtful Accounts has a $300 unadjusted debit balance.The adjusting entry to record estimated bad debts includes a:

Correct AnswerverifiedShow Answer

Match the term and its definition.There are more definitions than terms. -Notes Receivable

Correct AnswerverifiedShow Answer

Establishing a note receivable by loaning cash to another company will have which of the following net effects on the accounting equation?

Correct AnswerverifiedShow Answer

Match the term and its definition.There are more definitions than terms. -Average Net Receivables

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The entry to record a recovery causes:

Correct AnswerverifiedShow Answer

Match the term and its definition.There are more definitions than terms. -Annual Interest Rate

Correct AnswerverifiedShow Answer

Match the term and its definition.There are more definitions than terms. -Principal

Correct AnswerverifiedShow Answer

What effect does the adjusting entry for interest earned but yet not received have on the accounting equation?

Correct AnswerverifiedShow Answer

Generous Inc.lends Blue Inc.$40,000 on April 1 and receives a four-month,4.5% interest-bearing note.Generous Inc.prepares financial statements on April 30.What adjusting entry should be made by Generous Inc.before its financial statements are prepared?

Correct AnswerverifiedShow Answer

When the direct write-off method is used:

Correct AnswerverifiedShow Answer

Bad Debt Expense is a:

Correct AnswerverifiedShow Answer

Correct Answer
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a.

b.
Receivable Turnover = Net credi...
View Answer

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