Deck 8: Receivables

Question 1

receivable are more formal than accounts receivable.

Answer 1

True

Question 2

A listing of all a company's credit customers would be called a:

A) control account.
B) subsidiary ledger.
C) receivables account.
D) liability account.

Answer 2

subsidiary ledger.

Question 3

Which of the following statement are true?

A) Accounts are listed as miscellaneous assets
B) Notes receivable rarely charge interest
C) Notes receivable are similar to promissory notes
D) Accounts receivable always charge interest

Answer 3

Notes receivable are similar to promissory notes

Question 4

Which of the following statements is true?

A) Companies pay service charges to accept credit and bank cards.
B) Visa and MasterCard sales are treated as receivables.
C) All bank cards and credit cards charge the same service charge fees.
D) All bank cards and credit card sales are treated as receivables.

Question 5

A creditor is a person or business who has a:

A) note or account receivable.
B) note or account payable.
C) dishonored note payable.
D) dishonored note receivable.

Question 6

Which of the following statements is false?

A) Accounts receivable are generally less liquid than cash.
B) Accounts receivable are listed as current assets.
C) Notes receivable are less formal than accounts receivable.
D) Accounts receivable are matched to revenues.

Question 7

of the main issues in controlling and managing receivables is to pursue collection from customers to maximize cash flow.

Question 8

of the main issues in controlling and managing receivables is to extend credit only to customers who are likely to pay.

Question 9

of the following are key issues in controlling and managing receivables?

A) Separate cash-handling, credit, and accounting duties to keep employees from stealing cash collected from customers.
B) Extend credit only to customers who are most likely to pay.
C) Pursue collection from customers to maximize cash flow.
D) All of the above are key issues in controlling and managing receivables.

Question 10

of the following is not a plan of action to be taken in accounting for receivables?

A) Run a credit check on prospective customers.
B) Estimate the amount of uncollectible receivables.
C) Keep a close eye on collections from customers.
D) Design the internal control system to separate duties.

Question 11

Extending credit to anyone who applies would violate what part of internal control?

A) Separation of cash-handling and credit approval
B) Pursuing collections from customers
C) Extend credit to customers most likely to pay
D) None of the above

Question 12

benefit of offering credit to customers is:

A) that it allows for a bigger customer base.
B) that it allows for greater revenues.
C) that it allows for greater profit potential.
D) all of the above.

Question 13

allowance method is a method of recording collection losses on the basis of an estimate.

Question 14

percent-of-sales method is a balance sheet approach of estimating uncollectible accounts.

Question 15

what method does the balance in allowance for doubtful accounts have no bearing on the journal adjusting journal entry?

A) Percentage of sales
B) Aging of receivables
C) Percentage of Accounts receivable
D) All have to use the balance

Question 16

a company has written off an account receivable and the client sends in a check:

A) Reopen the client's account at the amount written off.
B) Reopen the client's account at the amount sent in.
C) Debit cash and credit revenue.
D) None of the above

Question 17

The allowance for uncollectible accounts currently has a credit balance of $900. After analyzing the accounts in the accounts receivable subsidiary ledger, the company's management estimates that uncollectible accounts will be $15,000. What will be the amount of allowance for uncollectible accounts reported on the balance sheet?

A) $15,000
B) $14,900
C) $15,900
D) $14,100

Question 18

The allowance for uncollectible accounts currently has a debit balance of $900. After analyzing the accounts in the accounts receivable subsidiary ledger, the company's management estimates that uncollectible accounts will be $15,000. What will be the amount of allowance for uncollectible accounts reported on the balance sheet?

A) $14,100
B) $15,000
C) $14,900
D) $15,900

Question 19

The following information is from the 2009 records of Rawhide Leather Products.
$$\begin{array} { | l | r | } \hline \text { Accounts receivable, December 31, 2009 } & \$ 330,000 \text { (debit) } \\\hline \begin{array} { l } \text { Allowance for uncollectible accounts, December 31, 2009 } \\\text { prior to adjustment }\end{array} & 4,500 \text { (credit) } \\\hline \text { Net credit sales for } 2009 & 1,500,000 \\\hline \text { Accounts written off as uncollectible during } 2009 & 25,500 \\\hline \text { Cash sales during } 2009 & 270,000 \\\hline\end{array}$$ Uncollectible accounts expense is estimated by the percent-of-sales method. Management estimates that 2% of net sales is uncollectible. Which of the following will be the amount of Uncollectible accounts expense?

A) $25,500
B) $30,000
C) $34,500
D) $30,500

Question 20

The following information is from the 2009 records of Rawhide Leather Products.
$$\begin{array} { | l | r | } \hline \text { Accounts receivable, December 31, 2009 } & \$ 330,000 \text { (debit) } \\\hline \begin{array} { l } \text { Allowance for uncollectible accounts, December 31, 2009 } \\\text { prior to adjustment }\end{array} & 4,500 \text { (credit) } \\\hline \text { Net credit sales for } 2009 & 1,500,000 \\\hline \text { Accounts written off as uncollectible during } 2009 & 25,500 \\\hline \text { Cash sales during } 2009 & 270,000 \\\hline\end{array}$$ Uncollectible accounts expense is estimated by the percent-of-sales method. Management estimates that 2% of net sales is uncollectible. Which of the following will be the adjusting entry to record uncollectible accounts expense for 2009?

A)
$$\begin{array} { | l | l | l | l | } \hline \begin{array} { l } \text { Uncollectible accounts } \\\text { expense }\end{array} & & 30,500 & \\\hline & \begin{array} { l } \text { Allowance for uncollectible } \\\text { accounts }\end{array} & & 30,500 \\\hline\end{array}$$
B)
$$\begin{array} { | l | l | l | l | } \hline \begin{array} { l } \text { Allowance for uncollectible } \\\text { accounts }\end{array} & & 34,500 & \\\hline & \text { Accounts receivable } & & 34,500 \\\hline\end{array}$$
C)
$$\begin{array} { | l | l | l | l | } \hline \begin{array} { l } \text { Uncollectible accounts } \\\text { expense }\end{array} & & 30,000 & \\\hline & \begin{array} { l } \text { Allowance for uncollectible } \\\text { accounts }\end{array} & & 30,000 \\\hline\end{array}$$
D)
$$\begin{array} { | l | l | l | l | } \hline \begin{array} { l } \text { Uncollectible accounts } \\\text { expense }\end{array} & & 25,500 & \\\hline & \text { Accounts receivable } & & 25,500 \\\hline\end{array}$$

Question 21

The following information is from the 2009 records of Rawhide Leather Products.
$$\begin{array} { | l | r | } \hline \text { Accounts receivable, December 31, 2009 } & \$ 330,000 \text { (debit) } \\\hline \begin{array} { l } \text { Allowance for uncollectible accounts, December 31, 2009 } \\\text { prior to adjustment }\end{array} & 4,500 \text { (credit) } \\\hline \text { Net credit sales for } 2009 & 1,500,000 \\\hline \text { Accounts written off as uncollectible during } 2009 & 25,500 \\\hline \text { Cash sales during } 2009 & 270,000 \\\hline\end{array}$$ Uncollectible accounts expense is estimated by the aging-of-accounts-receivable method. Management estimates that $35,000 of accounts receivable will be uncollectible. Which of the following will be the journal entry to record Uncollectible accounts expense under the allowance method?

A)
$$\begin{array} { | l | l | l | l | } \hline \begin{array} { l } \text { Uncollectible accounts } \\\text { expense }\end{array} & & 25,500 & \\\hline & \text { Accounts receivable } & & 25,500 \\\hline\end{array}$$
B)
$$\begin{array} { | l | l | l | l | } \hline \begin{array} { l } \text { Allowance for uncollectible } \\\text { accounts }\end{array} & & 34,500 & \\\hline & \text { Accounts receivable } & & 34,500 \\\hline\end{array}$$
C)
$$\begin{array} { | l | l | l | l | } \hline \begin{array} { l } \text { Uncollectible accounts } \\\text { expense }\end{array} & & 30,500 & \\\hline & \begin{array} { l } \text { Allowance for uncollectible } \\\text { accounts }\end{array} & & 30,500 \\\hline\end{array}$$
D)
$$\begin{array} { | l | l | l | l | } \hline \begin{array} { l } \text { Uncollectible accounts } \\\text { expense }\end{array} & & 30,000 & \\\hline & \begin{array} { l } \text { Allowance for uncollectible } \\\text { accounts }\end{array} & & 30,000 \\\hline\end{array}$$

Question 22

The following information is from the 2009 records of Rawhide Leather Products.
$$\begin{array} { | l | r | } \hline \text { Accounts receivable, December 31, 2009 } & \$ 330,000 \text { (debit) } \\\hline \begin{array} { l } \text { Allowance for uncollectible accounts, December 31, 2009 } \\\text { prior to adjustment }\end{array} & 4,500 \text { (credit) } \\\hline \text { Net credit sales for } 2009 & 1,500,000 \\\hline \text { Accounts written off as uncollectible during } 2009 & 25,500 \\\hline \text { Cash sales during } 2009 & 270,000 \\\hline\end{array}$$ Uncollectible accounts expense is estimated by the aging-of-accounts-receivable method. Management estimates that $35,000 of accounts receivable will be uncollectible. Which of the following will be the amount of Uncollectible accounts expense?

A) $30,000
B) $25,500
C) $34,500
D) $30,500

Question 23

A company uses the allowance method to account for uncollectible receivables. A $1,200 account receivable that had been written off as uncollectible is collected. In addition to the entry to record the receipt of the cash, what other entry must be recorded?

A)
$$\begin{array} { | l | l | l | l | } \hline \text { Accounts receivable } & & 1,200 & \\\hline & \begin{array} { l } \text { Allowance for uncollectible } \\\text { accounts }\end{array} & & 1,200 \\\hline\end{array}$$
B)
$$\begin{array} { | l | l | l | l | } \hline \begin{array} { l } \text { Uncollectible accounts } \\\text { expense }\end{array} & & 1,200 & \\\hline & \text { Accounts receivable } & & 1,200 \\\hline\end{array}$$
C)
$$\begin{array} { | l | l | l | l | } \hline \text { Accounts receivable } & & 1,200 & \\\hline & \begin{array} { l } \text { Uncollectible accounts } \\\text { expense }\end{array} & & 1,200 \\\hline\end{array}$$
D) Only one entry is required.

Question 24

direct write-off method is the method of recording losses from customers from whom the company will NOT collect.

Question 25

direct write-off method is acceptable ONLY when uncollectible receivables are very low.

Question 26

direct write-off method is acceptable ONLY when an aging of accounts receivable is unrealistic due to a large volume of receivables.

Question 27

following information is from the 2009 records of Rawhide Leather Products.
$$\begin{array} { | l | r | } \hline \text { Accounts Receivable, December } 31,2009 & \$ 330,000 \text { (debit) } \\\hline \begin{array} { l } \text { Allowance for uncollectible accounts, December } 31,2009 \\\text { prior to adjustment }\end{array} & 4,500 \text { (credit) } \\\hline \text { Net credit sales for } 2009 & 1,500,000 \\\hline \text { Accounts written off as uncollectible during } 2009 & 25,500 \\\hline \text { Cash sales during } 2009 & 270,000 \\\hline\end{array}$$ Uncollectible accounts expense is determined by the direct write-off method. Which of the following will be the journal entry to record uncollectible accounts expense?

A)
$$\begin{array} { | l | l | l | l | } \hline \text { Uncollectible accounts expense } & & 30,000 & \\\hline & \text { Allowance for uncollectible accounts } & & 30,000 \\\hline\end{array}$$
B)
$$\begin{array} { | l | l | l | l | } \hline \text { Uncollectible accounts expense } & & 30,500 & \\\hline & \text { Allowance for uncollectible accounts } & & 30,500 \\\hline\end{array}$$
C)
$$\begin{array} { | l | l | l | l | } \hline \text { Allowance for uncollectible accounts } & & 34,500 & \\\hline & \text { Accounts receivable } & & 34,500 \\\hline\end{array}$$
D)
$$\begin{array} { | l | l | l | l | } \hline \text { Uncollectible accounts expense } & & 25,500 & \\\hline & \text { Accounts receivable } & & 25,500 \\\hline\end{array}$$

Question 28

The following information is from the 2009 records of Rawhide Leather Products.
$$\begin{array} { | l | r | } \hline \text { Accounts receivable, December 31, 2009 } & \$ 330,000 \text { (debit) } \\\hline \begin{array} { l } \text { Allowance for uncollectible accounts, December 31, } \\\text { prior to adjustment }\end{array} & 4,500 \text { (credit) } \\\hline \text { Net credit sales for 2009 } & 1,500,000 \\\hline \text { Accounts written off as uncollectible during } 2009 & 25,500 \\\hline \text { Cash sales during 2009 } & 270,000 \\\hline\end{array}$$ Uncollectible accounts expense is determined by the direct write-off method. Which of the following will be the amount of Uncollectible accounts expense?

A) $34,500
B) $25,500
C) $30,500
D) $30,000

Question 29

A company uses the direct write-off method to account for uncollectible receivables. Which of the following is included in the entry to estimate the Uncollectible account expense?

A) A credit to the Allowance for uncollectible accounts
B) A debit to the customer's Account receivable
C) A debit to Uncollectible account expense
D) No entry is made to estimate uncollectible accounts

Question 30

are listed in order of liquidity on the balance sheet.

Question 31

balance sheet lists cash first because it is the most liquid asset.

Question 32

Balance sheets generally report the acid-test ratio in the current assets section.

Question 33

of the following is the income statement approach to estimating bad debts?

A) The percent-of-sales method
B) The aging-of-accounts-receivable method
C) The direct write-off method
D) The allowance method

Question 34

of the following is the value used to report accounts receivable on the balance sheet?

A) Net realizable value
B) Maturity value
C) Market value
D) Historical cost

Question 35

of the following is TRUE about the listing of assets in order of their liquidity on a balance sheet?

A) Short-term investments are less liquid than short-term current receivables because the company must collect the receivables.
B) Receivables are less liquid than merchandise inventory because the goods must first be sold.
C) Cash is listed first because it is the most liquid asset.
D) All of the statements above are true.

Question 36

Which of the following would be the proper treatment of a significant credit balance in an account receivable?

A) Contra-asset
B) Owner's equity
C) Liability
D) Asset

Question 37

Which of the following is the balance sheet approach to estimating bad debts?

A) The percent-of-sales method
B) The aging-of-accounts-receivable method
C) The direct write-off method
D) The allowance method

Question 38

of the following is NOT avoided by a company that accepts national credit cards?

A) Paying a credit card discount expense.
B) Checking a customer's credit rating.
C) Keeping an accounts receivable subsidiary ledger for each customer.
D) Having to collect cash from customers.

Question 39

of the following cards does not require a third party to process?

A) Bank cards like Visa or MasterCard
B) Credit card like Macy's
C) Bank debit card
D) All require a third party

Question 40

allows customers to use MasterCard. They report sales of $24,000 for the week. MasterCard charges Target a 3% fee. The journal entry for this transaction would be:

A)
$$\begin{array} { | l | l | l | l | } \hline \text { Sales } & & 24,000 & \\\hline \text { Bankcard discount expense } & & 720 & \\\hline & \text { Cash } & & 24,720 \\\hline\end{array}$$
B)
$$\begin{array} { | l | l | l | l | } \hline \text { Cash } & & 24,000 & \\\hline \text { Bankcard discount expense } & & 720 & \\\hline & \text { Sales } & & 24,720 \\\hline\end{array}$$
C)
$$\begin{array} { | l | l | l | l | } \hline \text { Cash } & & 23,280 & \\\hline \text { Bankcard discount expense } & & 720 & \\\hline & \text { Sales } & & 24,000 \\\hline\end{array}$$
D) none of the above

Question 41

note is dishonored when the payee fails to pay the note receivable at maturity.

Question 42

is the principal amount of a 60-day, 12% note for $11,000?

A) $11,000
B) $ 220
C) $11,220
D) $10,780

Question 43

On October 2, 2009, Allen Jewelry Company accepted a 120-day, 10% note for $2,400 in settlement of an overdue account receivable. What is the journal entry to record the acceptance of the note?

A)
$$\begin{array} { | l | l | l | l | } \hline \text { Notes receivable } & & 2,400 & \\\hline & \text { Accounts receivable } & & 2,400 \\\hline\end{array}$$ 2,400
B)
$$\begin{array} { | l | l | l | l | } \hline \text { Notes receivable } & & 2,400 & \\\hline & \text { Cash } & & 2,400 \\\hline\end{array}$$
C)
$$\begin{array} { | l | l | l | l | } \hline \text { Notes receivable } & & 2,400 & \\\hline & \text { Sales revenue } & & 2,400 \\\hline\end{array}$$
D) None of the above

Question 44

On October 2, 2009, Allen Jewelry Company accepted a 120-day, 10% note for $2,400 in settlement of an overdue account receivable. Interest revenue was accrued on December 31, 2009. Allen receives the maturity value of the note (the original principle plus all of the interest) on the due date. Which of the following credits will be included in the entry to record the receipt of the maturity value of the note on the due date?

A) A $20 credit to Interest receivable
B) A $80 credit to Interest receivable
C) A $20 credit to Interest revenue
D) A $80 credit to Interest revenue

Question 45

On October 2, 2009, Allen Jewelry Company accepted a 120-day, 10% note for $2,400 in settlement of an overdue account receivable. Interest revenue was accrued on December 31, 2009. Which of the following will be included in the entry to record the default of the note on the due date?

A) A $80 credit to Interest revenue
B) A $20 credit to Interest revenue
C) A $20 credit to Interest receivable
D) A $80 credit to Interest receivable

Question 46

Total interest accrued on a $7,500, 5%, 90-day note is:

A) 93.75
B) 375.00
C) 31.25
D) 125.00

Question 47

A nine-month note receivable @ 8% for $2500 dated November 1, 2009, has accrued interest revenue of _____________ on December 31, 2009.

A) $200.00
B) $116.67
C) $150.00
D) $ 33.33

Question 48

A nine-month note receivable @ 8% for $2500 dated November 1, 2009, has accrued interest revenue of $33.33 on December 31, 2009. The journal entry on November 1, 2009 would be:

A)
$$\begin{array} { | l | l | l | l | } \hline \text { Cash } & & 2,500 & \\\hline & \text { Notes receivable } & & 2,500 \\\hline\end{array}$$
B)
$$\begin{array} { | l | l | l | l | } \hline \text { Notes receivable } & & 33.33 & \\\hline & \text { Interest revenue } & & 33.33 \\\hline\end{array}$$
C) $$\begin{array} { | l | l | l | l | } \hline \text { Note receivable } & & 2,500 & \\\hline & \text { Sales revenue } & & 2,500 \\\hline\end{array}$$
D) $$\begin{array} { | l | l | l | l | } \hline \text { Note receivable } & & 2,533.33 & \\\hline & \text { Cash } & & 2,533.33 \\\hline\end{array}$$

Question 49

Which of the following is the amount loaned out by the payee and borrowed by the maker of the note?

A) Principal of the note
B) Interest of the note
C) Principal + interest of the note
D) None of the above

Question 50

On November 1, 2010, Allen Jewelry Company accepted a 3-month, 10% note for $12,000 in settlement of an overdue account receivable. How much interest revenue should be accrued on December 31, 2010?

A) $ 200
B) $ 300
C) $ 100
D) $1,200

Question 51

acid test ratio of at least _________ means that current liabilities may be paid without using inventory.

A) 0.25
B) 0.50
C) 0.75
D) 1.00

Question 52

company has the following account balances. What is the acid-test ratio?
$$\begin{array} { | l | r | } \hline \text { Cash } & \$ 60,000 \\\hline \text { Short-term investments } & \$ 75,000 \\\hline \text { Net current receivables } & \$ 140,000 \\\hline \text { Inventory } & \$ 145,000 \\\hline \text { Total current liabilities } & \$ 395,000 \\\hline\end{array}$$

A) .91
B) .94
C) 1.06
D) .70

Question 53

company has the following account balances. What is the acid-test ratio?
$$\begin{array} { | l | r | } \hline \text { Cash } & \$ 50,000 \\\hline \text { Short-term investments } & \$ 85,000 \\\hline \text { Net current receivables } & \$ 120,000 \\\hline \text { Inventory } & \$ 145,000 \\\hline \text { Total current liabilities } & \$ 275,000 \\\hline\end{array}$$

A) .93
B) 1.45
C) .64
D) 1.76

Question 54

of the following is TRUE of days' sales in receivables?

A) Days' sales in receivables measures how many days it takes to order and receive inventory.
B) Days' sales in receivables measures how frequently during the year the accounts receivable are converted into cash.
C) Days' sales in receivables measures how many days it takes to sell inventory.
D) None of the above is true.

Question 55

Which of the following is included in the numerator of days' sales in receivables?

A) Average net accounts receivable
B) One day's sales
C) 365 days
D) Net sales

Question 56

Which of the following in included in the denominator of days' sales in receivables?

A) 365 days
B) Average net accounts receivable
C) Net sales
D) One day's sales

Question 57

Which of the following is included in the numerator of one days' sales?

A) Net sales
B) One day's sales
C) 365 days
D) Average net accounts receivable

Question 58

Which of the following in included in the denominator of one days' sales?

A) Net sales
B) 365 days
C) Average net accounts receivable
D) One day's sales