Question 1

Countryside Corporation provides $6,000 worth of lawn care on account during the month.Experience suggests that about 2% of net credit sales will not be collected.In conformity with the expense recognition principle,the company should:

Accepted Answer

A)  record an estimate of Bad Debt Expense in the same period as the lawn care is provided.
B)  not report the sales revenue until it collects payment.
C)  increase the value of its liabilities with an adjustment.
D)  wait until the accounts are determined to be uncollectible before making an entry to record the related Bad Debt Expense.E) A) and B)
F) All of the above

Question 2

A company decides to start allowing its customers to pay with national credit cards and PayPal.This decision would:

Accepted Answer

A)  slow down its cash collection.
B)  speeds up its cash collection,but increase losses from customers writing bad checks.
C)  speeds up its cash collection and reduces losses from customers writing bad checks.
D)  slow down its cash collection,but decrease losses from customers writing bad checks.E) B) and C)
F) A) and D)

Question 3

Interest Receivable:

Accepted Answer

A)  is an asset reported on the balance sheet.
B)  is a temporary account reported on the income statement.
C)  is a permanent account reported on the income statement.
D)  represents the amount of interest the company has received on promissory notes.E) All of the above
F) A) and D)

Question 4

The days-to-collect measures the:

Accepted Answer

A)  number of days it takes to collect accounts receivable.
B)  average number of times the firm completes the selling and collecting cycle during the year.
C)  average number of days for a customer's payment to clear the banking system.
D)  average number of days before the company receives a customer's payment and uses the cash to re-order merchandise.E) A) and D)
F) A) and C)

Question 5

The following summarizes the aging of accounts receivable for Johnston Supplies,Inc.as of July 31,2019:
  Required:
Part a.The unadjusted balance of the Allowance for Doubtful Accounts of Johnston Supplies,Inc.is a credit balance in the amount of $28,947 on July 31,2019.Prepare the required adjusting entry to record Bad Debt Expense for the year.
Part b.Johnston Supplies,Inc.writes off $3,081 of uncollectible accounts on August 15,2019.Prepare the required adjusting entry to record the write-off.
Part c.Use a T-account to determine the account balance in the Allowance for Doubtful Accounts on August 15,2019.

Accepted Answer

Part a.
Estimated amount uncollectible i...

Question 6

When the direct write-off method is used to account for uncollectible accounts,which of the following accounts would not be used?

Accepted Answer

A)  Bad Debt Expense
B)  Accounts Receivable
C)  Allowance for Doubtful Accounts
D)  Notes ReceivableE) B) and D)
F) B) and C)

Question 7

The write-off of a specific customer account receivable involves decreasing an asset account and:

Accepted Answer

A)  increasing an expense account.
B)  decreasing a liability account.
C)  decreasing a revenue account.
D)  decreasing a contra-asset account.E) A) and B)
F) B) and C)

Question 8

On December 31,2018,Infinity Inc.records an adjusting entry to accrue interest on a note.On January 31,2019,Infinity receives a check for $4,680,which represents two months of accumulated interest on the note.Upon receipt of this interest payment,Infinity should debit:

Accepted Answer

A)  Interest Receivable for $2,340,debit Cash $2,340,and credit Interest Revenue for $4,680.
B)  Cash for $4,680,credit Interest Receivable for $2,340,and credit Interest Revenue for $2,340.
C)  Cash for $4,680 and credit Interest Receivable for $4,680.
D)  Cash for $4,680 and credit Interest Revenue for $4,680.E) C) and D)
F) B) and D)

Question 9

On August 1,Jackson Radiology signed a one-year note receivable of $60,000 with interest at of 15% payable every six months.Jackson properly accrued interest on the note on December 31.What journal entry would Jackson make on the following February 1 to record the interest payment received on that date?

Accepted Answer

A)  Debit Cash and credit Interest Revenue for $4,500.
B)  Debit Cash and credit Interest Revenue for $750.
C)  Debit Cash for $4,500,credit Interest Receivable for $3,750,and credit Interest Revenue for $750.
D)  Debit Cash for $750,debit Interest Receivable for $3,750,and credit Interest Revenue for $4,500.E) A) and B)
F) A) and C)

Question 10

What does a low receivable turnover ratio indicate?

Accepted Answer

A)  Cash collections are sluggish,taking longer to collect.
B)  Sales are growing.
C)  Credit sales are much greater than cash sales.
D)  Customer payments are collected relatively soon after the sale has been made.E) A) and D)
F) A) and C)

Question 11

Using its aging of accounts receivable,Age Old,Inc.estimates that $90,000 of its $4,000,000 of accounts receivable will be uncollectible.Prior to making its adjusting entry,the unadjusted Allowance for Doubtful Accounts has a debit balance of $1,000.After the adjustment,the:

Accepted Answer

A)  Allowance for Doubtful Accounts will have a $90,000 credit balance.
B)  Allowance for Doubtful Accounts will have an $89,000 credit balance.
C)  Allowance for Doubtful Accounts will have a $91,000 credit balance.
D)  Bad Debt Expense will equal $90,000.E) A) and B)
F) None of the above

Question 12

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

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) C) and H)
N) F) and H)

Question 13

Legacy,Inc.'s receivables turnover ratio increased from 11.8 last year to 14.1 this year.Which of the following statements is correct?

Accepted Answer

A)  This could be an indication that the company is using more efficient collection methods.
B)  This is an indication that the company is experiencing declining credit costs.
C)  This indicates that the company is taking longer to collect credit payments.
D)  This is an indication that the company is buying and selling financial assets less rapidly.E) B) and D)
F) None of the above

Question 14

Cedar Mill,Inc.uses the Aging of Accounts Receivable method for estimating uncollectible accounts.The accounting records show the following information at the end of the year:  If the unadjusted credit balance in the Allowance for Doubtful Accounts account before is $30,000,what would be the amount of the adjustment for bad debts?

Accepted Answer

A)  $128,000
B)  $158,000
C)  $90,000
D)  $69,000E) All of the above
F) A) and C)

Question 15

The entry to record the collection of a previously written-off account needs to be recorded because a customer paid $9,600 after its accounts receivable had been written off.This entry includes a:

Accepted Answer

A)  debit to Allowance for Doubtful Accounts of $9,600.
B)  debit to Bad Debt Expense of $9,600.
C)  credit to Bad Debt Expense of $9,600.
D)  credit to Allowance for Doubtful Accounts of $9,600.E) All of the above
F) A) and B)

Question 16

The adjusting entry to record the estimated bad debts in the period credit sales occur would normally include a debit to:

Accepted Answer

A)  Accounts Receivable and a credit to Allowance for Doubtful Accounts.
B)  Bad Debt Expense and a credit to Allowance for Doubtful Accounts.
C)  Allowance for Doubtful Accounts and a credit to Accounts Receivable.
D)  Bad Debt Expense and a credit to Accounts Receivable.E) None of the above
F) B) and C)

Question 17

Grayhawk Company reported net credit sales of $588,000 for the year ending December 31,2019.On January 1,2019,the Allowance for Doubtful Accounts had a credit balance of $14,400.During 2019,$24,000 of uncollectible accounts receivable were written off.Grayhawk has experienced bad debt losses of 3% of credit sales in prior periods.Using the percentage of credit sales method,what is the adjusted balance in the Allowance for Doubtful Accounts at December 31,2019?

Accepted Answer

A)  $8,040
B)  $8,400
C)  $17,640
D)  $27,600E) A) and B)
F) A) and C)

Question 18

Rimrock,Inc.used the aging of accounts receivable method.At December 31,management determined that the net realizable value of accounts receivable was $608,000.The balance in Accounts Receivable was $768,000 and the unadjusted credit balance in Allowance for Doubtful Accounts was $32,000.What was the amount of Bad Debt Expense for the year?

Accepted Answer

A)  $192,000
B)  $128,000
C)  $160,000
D)  $32,000E) A) and D)
F) C) and D)

Question 19

A company uses the direct write-off method.The company writes off a $3,000 customer account balance when it becomes clear that the particular customer will never pay.What is the journal entry that would be prepared to record this write-off?

Accepted Answer

A)  Debit Bad Debt Expense and credit Accounts Receivable for $3,000.
B)  Debit Allowance for Doubtful Accounts and credit Bad Debt Expense for $3,000.
C)  Debit Bad Debt Expense and credit Allowance for Doubtful Accounts for $3,000.
D)  Debit Accounts Receivable and credit Bad Debt Expense for $3,000.E) B) and D)
F) B) and C)

Question 20

Match the term and its definition.There are more definitions than terms.
-Bad Debt Expense

Accepted Answer

A)  The portion of Accounts Receivable that the company expects to collect.
B)  The time at which a loan must be repaid.
C)  An agreement by a borrower to repay the lending company with interest during a specified time period.
D)  The days of the year divided by the net sales revenue.
E)  A financial statement that shows the calculation of Bad Debt Expense for a company.F) Total money owed the company for sales made on credit.G) An account that is debited for the amount of credit sales estimated as uncollectible.H) A contra-asset account.I) The time at which a borrower must make annual interest payments.J) Net credit sales revenue divided by the average net receivables.K) Net credit sales revenue divided by the net income.L) The days of the year divided by the receivables turnover ratio.M) A) and B)
N) D) and K)

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

Legacy,Inc.'s receivables turnover ratio increased from 11.8 last year to 14.1 this year.Which of the following statements is correct?

Correct Answer
verified

The adjusting entry to record the estimated bad debts in the period credit sales occur would normally include a debit to:

Correct Answer
verified

The write-off of a specific customer account receivable involves decreasing an asset account and:

Correct Answer
verified

When the direct write-off method is used to account for uncollectible accounts,which of the following accounts would not be used?

Correct Answer
verified

Match the term and its definition.There are more definitions than terms. -Bad Debt Expense

Correct Answer
verified

The days-to-collect measures the:

Correct Answer
verified

Interest Receivable:

Correct Answer
verified

A company decides to start allowing its customers to pay with national credit cards and PayPal.This decision would:

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

On December 31,2018,Infinity Inc.records an adjusting entry to accrue interest on a note.On January 31,2019,Infinity receives a check for $4,680,which represents two months of accumulated interest on the note.Upon receipt of this interest payment,Infinity should debit:

Correct Answer
verified

A company uses the direct write-off method.The company writes off a $3,000 customer account balance when it becomes clear that the particular customer will never pay.What is the journal entry that would be prepared to record this write-off?

Correct Answer
verified

Correct Answer
verified

Using its aging of accounts receivable,Age Old,Inc.estimates that $90,000 of its $4,000,000 of accounts receivable will be uncollectible.Prior to making its adjusting entry,the unadjusted Allowance for Doubtful Accounts has a debit balance of $1,000.After the adjustment,the:

Correct Answer
verified

What does a low receivable turnover ratio indicate?

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
Part a.
Estimated amount uncollectible i...
View Answer

The entry to record the collection of a previously written-off account needs to be recorded because a customer paid $9,600 after its accounts receivable had been written off.This entry includes a:

Correct Answer
verified

Countryside Corporation provides $6,000 worth of lawn care on account during the month.Experience suggests that about 2% of net credit sales will not be collected.In conformity with the expense recognition principle,the company should:

Correct Answer
verified

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

Legacy,Inc.'s receivables turnover ratio increased from 11.8 last year to 14.1 this year.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The adjusting entry to record the estimated bad debts in the period credit sales occur would normally include a debit to:

Correct AnswerverifiedShow Answer

The write-off of a specific customer account receivable involves decreasing an asset account and:

Correct AnswerverifiedShow Answer

When the direct write-off method is used to account for uncollectible accounts,which of the following accounts would not be used?

Correct AnswerverifiedShow Answer

Match the term and its definition.There are more definitions than terms. -Bad Debt Expense

Correct AnswerverifiedShow Answer

The days-to-collect measures the:

Correct AnswerverifiedShow Answer

Interest Receivable:

Correct AnswerverifiedShow Answer

A company decides to start allowing its customers to pay with national credit cards and PayPal.This decision would:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

On December 31,2018,Infinity Inc.records an adjusting entry to accrue interest on a note.On January 31,2019,Infinity receives a check for $4,680,which represents two months of accumulated interest on the note.Upon receipt of this interest payment,Infinity should debit:

Correct AnswerverifiedShow Answer

A company uses the direct write-off method.The company writes off a $3,000 customer account balance when it becomes clear that the particular customer will never pay.What is the journal entry that would be prepared to record this write-off?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Using its aging of accounts receivable,Age Old,Inc.estimates that $90,000 of its $4,000,000 of accounts receivable will be uncollectible.Prior to making its adjusting entry,the unadjusted Allowance for Doubtful Accounts has a debit balance of $1,000.After the adjustment,the:

Correct AnswerverifiedShow Answer

What does a low receivable turnover ratio indicate?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedPart a.Estimated amount uncollectible i...View AnswerShow Answer

The entry to record the collection of a previously written-off account needs to be recorded because a customer paid $9,600 after its accounts receivable had been written off.This entry includes a:

Correct AnswerverifiedShow Answer

Countryside Corporation provides $6,000 worth of lawn care on account during the month.Experience suggests that about 2% of net credit sales will not be collected.In conformity with the expense recognition principle,the company should:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Part a.
Estimated amount uncollectible i...
View Answer

Correct Answer
verified

Correct Answer
verified