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Accounting
Q:
the basic formula for computing interest on an interest-bearing note is face value of note x annual interest rate x time in terms of one year = interest.
Q:
interest on a 6-month, 10 percent, $10,000 note is calculated by multiplying $10,000 0.10 6/12.
Q:
the holder of a note adjusts for accrued interest by debiting interest receivable and crediting interest revenue.
Q:
if a promissory note is dishonored, the payee should not record interest income.
Q:
Match each of the following general and subsidiary ledger postings to the description (a through e) that best applies.a. Purchase on accountb. Collection from customer on accountc. Adjustment for expired insuranced. Payment to creditor on accounte. Sale on accountNo subsidiary ledger posting
Q:
a dishonored note is a note that is not paid in full at maturity.
Q:
if a company has a significant concentration of credit risk, it is not required to discuss that in its notes to its financial statements as that could increase the related risk.
Q:
bad debt expense and interest revenue are reported in the income statement under other revenues and expenses.
Q:
both the gross amount of receivables and the allowance for doubtful accounts should be reported in the balance sheet.
Q:
if a retailer accepts a national credit card such as visa, the retailer must maintain detailed records of customer accounts.
Q:
Match each of the following transactions to the journal (a through c) in which it would be entered.a. Purchases journalb. Cash payments journalc. General journalPaid the balance on an account payable
Q:
a major advantage of national credit cards to retailers is that there is no charge to the retailer by the credit card companies for their services.
Q:
a factor buys receivables from businesses for a fee and collects the payment directly from customers.
Q:
the average collection period is frequently used to assess the effectiveness of a companys credit and collection policies.
Q:
the receivables turnover ratio is computed by dividing total sales by the average net receivables during the year.
Q:
if a companys credit risk ratio is increasing over time, it may suggest that the companys overall credit risk is decreasing.
Q:
a concentration of credit risk is a threat of nonpayment from a single customer or class of customers that could adversely affect the financial health of the company.
Q:
M. Cornett is a corporation that sells breakfast cereal. Based on the accounts listed below, what are M. Cornett’s total trade receivables?Income tax refund due $ 500Advance due to the company fromthe company president 3003-month note due from M. Cornett’s main customer 2,000Interest due this month on the above note 100Due and unpaid from this month’s sales 5,000Due and unpaid from last month’s sales 1,000a. $6,000b. $8,000c. $7,000d. $8,900
Q:
Match each of the following transactions to the journal (a through e) in which it would be entered.a. Revenue journalb. Cash receipts journalc. Purchases journald. Cash payments journale. General journalClosed the revenue account at the end of the period
Q:
non-trade receivables should be reported separately from trade receivables. why is this statement either true or false? a.it is true because trade receivables are current assets and non-trade receivables are long term b.it is false because all current receivables must be grouped together in one account c.it is true because non-trade receivables do not result from business operations and should not be included with accounts receivable d.it is false because management can decide how to report receivables
Q:
receivables are a.one of the most liquid assets and thus are always considered current assets b.claims that are expected to be collected in cash c.shown on the income statement at cash realizable value d.always the result of revenue recognition
Q:
the term "receivables" refers to 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
Q:
notes or accounts receivables that result from sales transactions are often called a.sales receivables b.non-trade receivables c.trade receivables d.merchandise receivables
Q:
which of the following receivables would not be classified as an "other receivable? a.advance to an employee b.refundable income tax c.notes receivable d.interest receivable
Q:
the receivable that is usually evidenced by a formal instrument of credit is a(n) a.trade receivable b.note receivable c.accounts receivable d.income tax receivable
Q:
interest is usually associated with a.accounts receivable b.notes receivable c.doubtful accounts d.bad debts
Q:
which of the following would probably be the most significant type of a claim held by a company? a.notes receivable b.non-trade receivables c.accounts receivable d.interest receivable
Q:
under the allowance method of accounting for uncollectible accounts, a.the cash realizable value of accounts receivable is greater before an account is written off than after it is written off b.bad debts expense is debited when a specific account is written off as uncollectible c.the cash realizable value of accounts receivable in the balance sheet is the same before and after an account is written off d.allowance for doubtful accounts is closed each year to income summary
Q:
to record estimated uncollectible accounts using the allowance method, the adjusting entry would be a a.debit to accounts receivable and a credit to allowance for doubtful accounts b.debit to bad debts expense and a credit to allowance for doubtful accounts c.debit to allowance for doubtful accounts and a credit to accounts receivable d.debit to loss on credit sales and a credit to accounts receivable
Q:
when the allowance method of accounting for uncollectible accounts is used, bad debt expense is recorded a.in the year after the credit sale is made b.in the same year as the credit sale c.as each credit sale is made d.when an account is written off as uncollectible
Q:
bad debts expense is reported on the income statement as a.part of cost of goods sold b.an expense subtracted from net sales to determine gross profit c.an operating expense d.a contra revenue account
Q:
the allowance method of accounting for uncollectible accounts is required if a.the company makes any credit sales b.bad debts are significant in amount c.the company is a retailer d.the company charges interest on accounts receivable
Q:
two methods of accounting for uncollectible accounts are the 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
Q:
bad debts expense is considered 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
Q:
an alternative name for bad debts expense is a.deadbeat expense b.uncollectible accounts expense c.collection expense d.credit loss expense
Q:
under the direct write-off method of accounting for uncollectible accounts, bad debts expense is debited a.when a credit sale is past due b.at the end of each accounting period c.whenever a pre-determined amount of credit sales have been made d.when an account is determined to be uncollectible
Q:
a debit balance in the allowance for doubtful accounts a.is the normal balance for that account b.indicates that actual bad debt write-offs have exceeded previous provisions for bad debts c.indicates that actual bad debt write-offs have been less than what was estimated d.cannot occur if the percentage of receivables method of estimating bad debts is used
Q:
an aging of a company's accounts receivable indicates that $4,000 are estimated to be uncollectible. if allowance for doubtful accounts has a $1,200 debit balance, the adjustment to record bad debts for the period will require a a.debit to bad debts expense for $4,000 b.debit to allowance for doubtful accounts for $5,200 c.debit to bad debts expense for $5,200 d.credit to allowance for doubtful accounts for $4,000
Q:
an aging of a company's accounts receivable indicates that $4,000 are estimated to be uncollectible. if allowance for doubtful accounts has a $1,600 credit balance, the adjustment to record bad debts for the period will require a a.debit to bad debts expense for $4,000 b.debit to allowance for doubtful accounts for $2,400 c.debit to bad debts expense for $2,400 d.credit to allowance for doubtful accounts for $4,000
Q:
an aging of a company's accounts receivable indicates that $4,000 are estimated to be uncollectible. if allowance for doubtful accounts has a $1,600 debit balance, the adjustment to record bad debts for the period will require a a.debit to bad debts expense for $4,000 b.debit to bad debt expense for $5,600 c.debit to bad debts expense for $2,400. d.credit to allowance for doubtful accounts for $5,000
Q:
an aging of a company's accounts receivable indicates that $4,000 are estimated to be uncollectible. if allowance for doubtful accounts has a $1,200 credit balance, the adjustment to record bad debts for the period will require a a.debit to bad debts expense for $4,000 b.debit to allowance for doubtful accounts for $2,800 c.debit to bad debts expense for $2,800 d.credit to allowance for doubtful accounts for $4,000
Q:
the direct write-off method of accounting for uncollectible accounts a.emphasizes the matching of expenses with revenues b.emphasizes balance sheet relationships c.emphasizes cash realizable value d.is not generally accepted as a basis for estimating bad debts
Q:
The following transactions were completed by Franklin Company during January, its first month of operations. Assume that Franklin Company uses the following journals: cash receipts (CR), cash payments (CP), revenue (R), purchases (P), and general (G). Assume that it uses accounts receivable (AR) and accounts payable (AP) subsidiary ledgers as well as a general ledger. Match each of the following transactions to the journal entry and subsidiary ledger posting (a through k) that best applies.a. CR, no subsidiary postingb. CP, no subsidiary postingc. R, no subsidiary postingd. P, no subsidiary postinge. G, no subsidiary postingf. CR, ARg. CP, APh. R, ARi. P, APj. G, ARk. G, APJournalized the adjusting entry for supplies used during the month
Q:
the collection of an account that had been previously written off under the allowance method of accounting for uncollectibles a.will increase income in the period it is collected b.will decrease income in the period it is collected c.requires a correcting entry for the period in which the account was written off d.does not affect income in the period it is collected
Q:
when an account becomes uncollectible and must be written off a.allowance for doubtful accounts should be credited b.accounts receivable should be credited c.bad debts expense should be credited d.sales should be debited
Q:
when an account is written off using the allowance method, accounts receivable 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
Q:
you have just received notice that a customer of yours with an account receivable balance of $100 has gone bankrupt and will not make any future payments. assuming you use the allowance method, the entry you make is to a.debit allowance for doubtful accounts and credit bad debt expense b.debit allowance for doubtful accounts and credit accounts receivable c.debit bad debt expense and credit allowance for doubtful accounts d.debit bad debt expense and credit accounts receivable
Q:
if an account is collected after having been previously written off a.the allowance account should be debited b.only the control account needs to be credited c.both income statement and balance sheet accounts will be affected d.there will be both a debit and a credit to accounts receivable
Q:
when an account is written off using the allowance method, the a.cash realizable value of total accounts receivable will increase b.net accounts receivable will decrease c.allowance account will increase d.net accounts receivable will stay the same
Q:
allowance for doubtful accounts on the balance sheet a.is offset against total current assets b.increases the cash realizable value of accounts receivable c.appears under the heading "other assets." d.is deducted from accounts receivable
Q:
when using the balance sheet approach, the balance in allowance for doubtful accounts must be considered prior to the end of period adjustment when using which of the following methods? a.net realizable method b.direct write-off method c.accrual method d.allowance method
Q:
Nichols Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $200,000 and credit sales are $1,000,000. Management estimates that 5% of accounts receivable will be uncollectible. What adjusting entry will Nichols Company make if the Allowance for Doubtful Accounts has a credit balance of $2,000 before adjustment?
Q:
the percentage of receivables basis for estimating uncollectible accounts emphasizes a.cash realizable value b.the relationship between accounts receivable and bad debts expense c.income statement relationships d.the relationship between sales and accounts receivable
Q:
under the allowance method, when a specific account is written off a.total assets will be unchanged b.net income will decrease c.total assets will decrease d.total assets will increase
Q:
using the percentage of receivables method for recording bad debts expense, estimated uncollectible accounts are $35,000. if the balance of the allowance for doubtful accounts is $11,000 debit before adjustment what is the balance after adjustment? a.$35,000 b.$11,000 c.$43,000 d.$27,000
Q:
In which journal would the payment of salaries be posted? a. cash receipts journal b. special journal c. cash payments journal d. expense journal
Q:
the balance of allowance for doubtful accounts prior to making the adjusting entry to record bad debts expense a.is relevant when using the percentage of receivables basis b.is relevant when using the direct write-off method c.is relevant to both the percentage of receivables basis and the direct write-off method d.will never show a debit balance at this stage in the accounting cycle
Q:
Waller Company does business in two regional segments: North and South. The following annual revenue information was determined from the accounting system’s invoice data:SegmentCurrent YearPrior YearNorth$ 80,000$100,000South 260,000 200,000Total revenues$340,000$300,000Using horizontal analysis, determine the percentage change in revenues for the North region.Round to one decimal place. a. 22.4% b. (20.0)% c. 20.0% d. (22.4)%
Q:
under the accounts receivable aging method, the balance in allowance for doubtful accounts must be considered carefully prior to adjusting for estimated uncollectible accounts.
Q:
allowance for doubtful accounts is debited under the direct write-off method when an account is determined to be uncollectible.
Q:
Subsidiary ledgers a. are used only for accounts payable and accounts receivable b. may be used for various general ledger accounts c. may be used only for the cash account d. are never used for more than four accounts
Q:
under the direct write-off method, no attempt is made to match bad debt expense to sales revenues in the same accounting period.
Q:
A(n) ____ system is the methods and procedures for collecting, classifying, summarizing, and reporting a business’s financial and operating information. a. accounting b. fiduciary c. operations d. auditing
Q:
allowance for doubtful accounts is a contra account that is deducted from accounts receivable on the balance sheet.
Q:
Processing methods a. are the policies and procedures that protect assets from misuse b. must be computerized c. are the means by which the accounting system collects, summarizes, and reports accounting information d. ensure that business laws and regulations are followed
Q:
when the allowance method is used, the write-off of an account receivable results in an expense at the time of write-off.
Q:
A cash payments journal would not include a(n) a. Cash Cr. column b. Sales Discounts Cr. column c. Accounts Payable Dr. column d. Other Accounts Dr. column
Q:
What is meant by the term B2C? a. balance to cash b. business to cash c. book to capital d. business to consumer
Q:
when the allowance method is used to account for uncollectible accounts, bad debts expense is debited when a.a sale is made b.an account becomes bad and is written off c.management estimates the amount of uncollectibles d.a customer's account becomes past due
Q:
Business may be segmented by all of the following except a. region b. product line c. customer type d. time period
Q:
the matching rule relates to credit losses by stating that bad debt expense should be recorded a.in the same period as allowed for tax purposes b.in the period of the sale c.for an exact amount d.in the period of the loss
Q:
When using a revenue journal, a. separate “Fees Earned” and “Accounts Receivable” columns are included b. both cash sales and sales on account are recorded in the journal c. revenues are normally recorded when the company sends customer invoices d. postings to customer accounts are done at month's end
Q:
if the amount of uncollectible account expense is overstated at year end a.net income will be overstated b.stockholders equity will be overstated c.allowance for doubtful accounts will be understated d.net accounts receivable will be understated
Q:
if the amount of uncollectible account expense is understated at year end a.net income will be understate b.stockholders equity will be understated c.allowance for doubtful accounts will be overstated d.net accounts receivable will be overstated
Q:
Which of the following is always recorded in the general journal? a. rendering services for cash b. purchases of supplies on account c. rendering services on account d. closing entries
Q:
if a company fails to record estimated bad debts expense, a.cash realizable value is understated b.expenses are understated c.revenues are understated d.receivables are understated
Q:
Which of the following is not considered a special journal? a. purchases journal b. cash receipts journal c. general journal d. cash payments journal
Q:
When there are a large number of individual accounts with a common characteristic, it is common to place them in a separate ledger called a(n) a. general ledger b. income statement ledger c. group ledger d. subsidiary ledger
Q:
the net amount expected to be received in cash from receivables is termed the a.cash realizable value b.cash-good value c.gross cash value d.cash-equivalent value
Q:
Services performed for cash should be recorded in the a. revenue journal b. purchases journal c. cash receipts journal d. cash payments journal