Deck 7: Cash and Receivables

Question 1

Sales returns and cash discounts are both examples of variable consideration that must be accounted for when receivables are recognized.

Answer 1

True

Question 2

The income statement approach to calculating bad debt expense should not be used if it results in a carrying value of accounts receivable that is materially different from what would be obtained under a balance sheet approach.

Answer 2

True

Question 3

Under IFRS, accounts receivable can be accounted for at fair value whenever company management wants to do so.

Answer 3

False

Question 4

The "income statement approach" and the "direct write-off method" are two ways to refer to the same method for recognizing bad debts expense.

Question 5

Unless specific sales criteria are met, the factoring of accounts receivable with recourse is accounted for as a loan.

Question 6

If cash has been collected from a customer, recognizing estimated sales returns results in recognizing a refund liability.

Question 7

Cash equivalents would include investments in marketable equity securities as long as management intends to sell the securities in the next three months.

Question 8

In a good system of internal control, the person who initiates a transaction should be allowed to effectively control the processing of the transaction through its final inclusion in the accounting records.

Question 9

Under IFRS, accounts receivable can be accounted for as "available for sale" if that approach is elected upon initial recognition of the receivable.

Question 10

Depending on the circumstances, the classification of a compensating balance may be either current or noncurrent, and the arrangement should be disclosed in the notes.

Question 11

From a financial accounting perspective, the main purposes of a system of internal control are to improve the accuracy and reliability of accounting information and to safeguard assets.

Question 12

Discounts on notes receivable are recognized as interest earned over the term of the related note.

Question 13

Recognizing sales returns only when merchandise is returned could result in an overstatement of income in the period of the related sale.

Question 14

Under IFRS, an overdraft in a cash account at one bank can be offset against a positive balance in the account at another bank for purposes of reporting cash on the company's balance sheet.

Question 15

Sales returns and trade discounts are both examples of variable consideration that must be accounted for when receivables are recognized.

Question 16

Using the balance sheet approach, bad debt expense is an indirect result of estimating the appropriate balance for the allowance for uncollectible accounts.

Question 17

If a long-term noninterest-bearing note is received in exchange for merchandise sold, the amount of sales revenue recognized will be greater than the amount of the note.

Question 18

Securitization of receivables is a type of secured borrowing.

Question 19

The net method of accounting for cash discounts requires adjusting entries for discounts taken.

Question 20

The allowance method for estimating bad debts requires an adjusting entry at the end of the period to reduce receivables to their appropriate carrying value.

Question 21

Compensating balances represent:

A) Funds in a bank account that can't be spent.
B) Balances in a payroll checking account.
C) Accounts that are subject to bank service charges.
D) Accounts on which banks pay interest, e.g., NOW accounts.

Question 22

Under the CECL approach used in U.S. GAAP, impairments are only recognized for losses that occur more than a year in the future when a receivable has deteriorated in credit quality.

Question 23

Under IFRS, accounts receivable impairments are not recognized.

Question 24

The receivables turnover ratio provides a way for an analyst to assess the effectiveness of a company in managing its investment in receivables.

Question 25

In a bank reconciliation, adjustments to the bank balance could include adding deposits in transit and deducting bank service charges.

Question 26

Cash equivalents do not include:

A) Money market funds.
B) High grade marketable equity securities.
C) U.S. treasury bills.
D) Commercial paper.

Question 27

Under IFRS, transfer of risks and rewards of ownership, rather than transfer of control, is the primary factor determining whether a factored receivable can be treated as sold rather than as part of a secured borrowing.

Question 28

Logistics Company had the following items listed in its trial balance at 12/31/2018: $\begin{array}{lr}\text { Balance in checking account, Bank of the East }&\$442,000\\\text {Treasury bills, purchased on 11/1/2018, }&\\\text {mature on 1/30/2019 }&20,000\\\text {Loan payable, long-term, Bank of the East }&300,000\\\end{array}$
Included in the checking account balance is $50,000 of restricted cash that Bank of the East requires as a compensating balance for the $300,000 note. What amount will Logistics include in its year-end balance sheet as cash and cash equivalents?

A) $412,000.
B) $462,000.
C) $392,000.
D) $442,000.

Question 29

Under the CECL approach, impairments are only recognized when it is probable that the receivable has been impaired.

Question 30

Cash may not include:

A) Foreign currency.
B) Money orders.
C) Restricted cash.
D) Undeposited customer checks.

Question 31

Cashmere Soap Corporation had the following items listed in its trial balance at 12/31/2018: $\begin{array}{lr}\text {Currency and coins }&\$650\\\text {Balance in checking account }&2,600\\\text { Customer checks waiting to be deposited}&1,200\\\text {Treasury bills, purchased on 11/1/2018, }&\\\text {mature on 4/30/2019 }&3,000\\\text {Marketable equity securities }&10,200\\\text { Commercial paper, purchased on \( 11 / 1 / 2018 \),}&\\\text {mature on \( 1 / 30 / 2019 \) }&5,000\\\end{array}$
What amount will Cashmere Soap include in its year-end balance sheet as cash and cash equivalents?

A) $9,450.
B) $12,450.
C) $7,450.
D) $19,650.

Question 32

Under the ECL approach used in IFRS, impairments are only recognized for losses that occur more than a year in the future when a receivable has deteriorated in credit quality.

Question 33

The journal entry to record the replenishment of a petty cash fund includes a credit to the petty cash fund.

Question 34

Which of the following is true about reporting cash under IFRS?

A) Cash accounts include loans made to customers, but not to related parties.
B) Overdrafts typically cannot be offset against positive balance in other cash accounts on the balance sheet.
C) Cash overdrafts are not allowed.
D) Overdrafts typically are not shown as current liabilities on the balance sheet.

Question 35

Cash that is restricted and not available for current operations is reported in the balance sheet as:

A) Equity.
B) Investments.
C) Liabilities.
D) A separate section between liabilities and equity.

Question 36

Important elements of an internal control system for cash disbursements include each of the following except:

A) Only authorized personnel should sign checks.
B) All expenditures should be authorized before a check is prepared.
C) All disbursements, other than very small disbursements, should be made by check.
D) The same person that prepares the check should also record it in the proper journal.

Question 37

In a bank reconciliation, adjustments to the book balance could include adding or subtracting company errors.

Question 38

When a creditor's receivable becomes impaired, the receivable is revalued based on the discounted present value of currently expected cash flows at the loan's original effective rate.

Question 39

Wilson Company had the following cash balance items listed in its trial balance at 12/31/2018: $\begin{array}{lr}\text {Peters on Savings and Loan: }&\$50,000\\\text {Right Bank: }&(5,000)\\\text {Clinton County Trust Bank: }&10,000\\\end{array}$
If Wilson reports under IFRS, its 12/31/2018 balance sheet would show what cash balance?

A) ($5,000).
B) $55,000.
C) $60,000.
D) None of these answer choices are correct.

Question 40

COSO defines internal control as a process, affected by an entity's board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in:

A) Effectiveness and efficiency of operations.
B) Reliability of financial advice.
C) Compliance with local ordinances.
D) All of these answer choices are correct.

Question 41

Oswego Clay Pipe Company sold $46,000 of pipe to Southeast Water District #45 on April 12 of the current year with terms 1/15, n/60. Oswego uses the gross method of accounting for cash discounts. What entry would Oswego make on April 12?

A) $\begin{array}{|c|r|r|}\hline \text { Accounts receivable } & 46,000 & \\\hline \text { Sales } & & 46,000 \\\hline\end{array}$
B) $\begin{array}{|c|r|r|}\hline \text { Accounts receivable } & 46,000 & \\\hline \text { Sales } & & 45,540 \\\hline \text { Sales discounts } & & 460 \\\hline\end{array}$
C) $\begin{array}{|c|r|r|}\hline \text { Accounts receivable } & 45,540 & \\\hline \text { Sales } & & 45,540 \\\hline\end{array}$
D) $\begin{array}{|l|r|r|}\hline \text { Accounts receivable } & 45,540 & \\\hline \text { Sales discounts } & 460 & \\\hline \text { Sales } & & 46,000 \\\hline\end{array}$

Question 42

Harvey's Wholesale Company sold supplies of $46,000 to Northeast Company on April 12 of the current year, with terms 1/15, n/60. Harvey uses the net method of accounting for cash discounts. What entry would Harvey's make on April 12?

A) $\begin{array}{|c|r|r|}\hline \text { Accounts receivable } & 46,000 & \\\hline \text { Sales } & & 46,000 \\\hline\end{array}$
B) $\begin{array}{|c|r|r|}\hline \text { Accounts receivable } & 46,000 & \\\hline \text { Sales } & & 45,540 \\\hline \text { Sales discounts } & & 460 \\\hline\end{array}$
C) $\begin{array}{|c|r|r|}\hline \text { Accounts receivable } & 45,540 & \\\hline \text { Sales } & & 45,540 \\\hline\end{array}$
D) $\begin{array}{|c|r|r|}\hline \text { Accounts receivable } & 45,540 & \\\hline \text { Sales discounts } & 460 & \\\hline \text { Sales } & & 46,000 \\\hline\end{array}$

Question 43

Harvey's Wholesale Company sold supplies of $46,000 to Northeast Company on April 12 of the current year, with terms 1/15, n/60. Harvey uses the net method of accounting for cash discounts. What entry would Harvey's make on April 23, assuming the customer made the correct payment on that date?

A) $\begin{array}{|c|c|c|}\hline \text { Cash } & 45,540 & \\\hline \text { Sales } & 460 & \\\hline \text { Accounts receivable } & & 46,000 \\\hline\end{array}$
B) $\begin{array}{|l|r|r|}\hline \text { Cash } & 46,000 & \\\hline \text { Sales discounts } & 460 & \\\hline \text { Accounts receivable } & & 46,000 \\\hline \text { Sales discounts forfeited } & & 460 \\\hline\end{array}$
C) $\begin{array}{|l|r|l|}\hline \text { Cash } & 45,540 & \\\hline \text { Sales discounts } & 460 & \\\hline \text { Accounts receivable } & & 46,000 \\\hline\end{array}$
D) $\begin{array}{|l|r|r|}\hline \text { Cash } & 45,540 & \\\hline \text { Accounts receivable } & & 45,540 \\\hline\end{array}$

Question 44

Harvey's Wholesale Company sold supplies of $46,000 to Northeast Company on April 12 of the current year, with terms 1/15, n/60. Harvey uses the net method of accounting for cash discounts. What entry would Harvey's make on June 10, assuming the customer made the correct payment on that date?

A) $\begin{array}{|l|r|r|}\hline \text { Cash } & 46,000 & \\\hline \text { Accounts receivable } & & 45,540 \\\hline \text { Discounts revenue } & & 460 \\\hline\end{array}$
B) $\begin{array}{|l|r|r|}\hline \text { Cash } & 46,000 & \\\hline \text { Accounts receivable } & & 45,540 \\\hline \text { Sales discounts forfeited } & & 460 \\\hline\end{array}$
C) $\begin{array}{|l|l|l|}\hline \text { Cash } & 46,000 & \\\hline \text { Accounts receivable } & & 46,000 \\\hline\end{array}$
D) $\begin{array}{|l|r|r|}\hline \text { Cash } & 46,460 & \\\hline \text { Accounts receivable } & & 46,000 \\\hline \text { Sales discounts forfeited } & & 460 \\\hline\end{array}$

Question 45

Oswego Clay Pipe Company sold $46,000 of pipe to Southeast Water District #45 on April 12 of the current year with terms 1/15, n/60. Oswego uses the gross method of accounting for cash discounts. What entry would Oswego make on June 10, assuming the customer made the correct payment on that date?

A) $\begin{array}{|l|r|r|}\hline \text { Cash } & 46,000 & \\\hline \text { Accounts receivable } & & 45,540 \\\hline \text { Discounts receivable } & & 460 \\\hline\end{array}$
B) $\begin{array}{|l|r|r|}\hline \text { Cash } & 46,000 & \\\hline \text { Accounts receivable } & & 45,540 \\\hline \text { Sales discounts forfeited } & & 460 \\\hline\end{array}$
C) $\begin{array}{|c|r|r|}\hline \text { Cash } & 46,000 & \\\hline \text { Accounts receivable } & & 46,000 \\\hline\end{array}$
D) $\begin{array}{|l|r|r|}\hline \text { Cash } & 46,460 & \\\hline \text { Accounts receivable } & & 46,000 \\\hline \text { Sales discounts forfeited } & & 460 \\\hline\end{array}$

Question 46

Memorex Disks sells computer disk drives with right-of-return privileges. Returns are material and reasonably predictable. Memorex should:

A) Not record sales until the right to return has expired.
B) Record an allowance for sales returns in the year of the sale.
C) Debit sales returns in the period of the return.
D) Debit sales in the period of the return.

Question 47

Gershwin Wallcovering Inc. shipped the wrong shade of paint to a customer. The customer agreed to keep the paint upon being offered a 15% price reduction. Gershwin would record this reduction by crediting accounts receivable and debiting:

A) Sales.
B) Sales discounts.
C) Sales returns.
D) Sales allowances.

Question 48

Galaxy sells used videogames for cash and provides a one-week return right. Returns are material and reasonably predictable. Galaxy should:

A) Not record sales until the right to return has expired.
B) Record a contra-receivable in the year of the sale.
C) Recognize a refund liability associated with estimated returns.
D) Credit sales in the period of the return.

Question 49

Rusty Hardware makes only cash sales. It began 2018 with a credit balance of $32,000 in the refund liability account. Sales during 2018 were $600,000. Rusty estimates that 6% of all sales will be returned. During 2018, customers returned merchandise for credit of $28,000 to their accounts.

-What is the balance in the allowance for sales returns account at the end of 2018?

A) $32,000.
B) $39,000.
C) $43,000.
D) $40,000.

Question 50

On November 10 of the current year, Flores Mills sold carpet to a customer for $8,000 with credit terms 2/10, n/30. Flores uses the gross method of accounting for cash discounts. What is the correct entry for Flores on November 17, assuming the correct payment was received on that date?

A) $\begin{array}{|c|c|c|}\hline \text { Cash } & 7,840 & \\\hline \text { Accounts receivable } & & 7,840 \\\hline\end{array}$
B) $\begin{array}{|l|r|r|}\hline \text { Cash } & 7,840 & \\\hline \text { Sales discounts } & 160 & \\\hline \text { Accounts receivable } & & 8,000 \\\hline\end{array}$
C) $\begin{array}{|l|r|r|}\hline \text { Cash } & 7,840 & \\\hline \text { Sales } & 160 & \\\hline {\text { Accounts receivable }} & & 8,000 \\\hline\end{array}$
D) $\begin{array}{|l|r|r|}\hline \text { Cash } & 8,000 & \\\hline \text { Sales discounts } & 160 & \\\hline \text { Accounts receivable } & & 8,000 \\\hline \text { Sales } & & 160 \\\hline\end{array}$

Question 51

On November 10 of the current year, Cherokee Industries sold materials to a customer for $8,000 with credit terms 2/10, n/30. Cherokee uses the net method of accounting for cash discounts. What entry would Cherokee make on December 10, assuming the correct payment was received on that date?

A) $\begin{array}{|l|r|r|}\hline \text { Cash } & 8,000 & \\\hline \text { Accounts receivable } & & 7,840 \\\hline \text { Discounts revenue } & & 160 \\\hline\end{array}$
B) $\begin{array}{|l|r|r|}\hline \text { Cash } & 8,000 & \\\hline \text { Accounts receivable } & & 7,840 \\\hline \text { Sales discounts forfeited } & & 160 \\\hline\end{array}$
C) $\begin{array}{|l|r|r|}\hline \text { Cash } & 8,160 & \\\hline \text { Accounts receivable } & & 8,000 \\\hline \text { Sales discounts forfeited } & & 160 \\\hline\end{array}$
D) $\begin{array}{|l|r|r|}\hline \text { Cash } & 8,000 & \\\hline \text { Accounts receivable } & & 8,000 \\\hline\end{array}$

Question 52

On November 10 of the current year, Flores Mills sold carpet to a customer for $8,000 with credit terms 2/10, n/30. Flores uses the gross method of accounting for cash discounts. What is the correct entry for Flores on November 10?

A) $\begin{array}{|c|r|r|}\hline \text { Accounts receivable } & 7,840 & \\\hline \text { Sales } & & 7,840 \\\hline\end{array}$
B) $\begin{array}{|c|r|r|}\hline \text { Accounts receivable } & 8,000 & \\\hline \text { Sales } & & 8,000 \\\hline\end{array}$
C) $\begin{array}{|c|r|r|}\hline \text { Accounts receivable } & 7,840 & \\\hline \text { Cash discounts } & 160 & \\\hline \text { Sales } & & 8,000 \\\hline\end{array}$
D) $\begin{array}{|c|r|r|}\hline \text { Accounts receivable } & 8,000 & \\\hline \text { Cash discounts } & & 160 \\\hline \text { Sales } & & 7,840 \\\hline\end{array}$

Question 53

Tom's Textiles shipped the wrong material to a customer, who refused to accept the order. Upon receipt of the material, Tom's would credit accounts receivable and debit:

A) Sales.
B) Sales discount.
C) Sales returns.
D) Sales allowances.

Question 54

On November 10 of the current year, Cherokee Industries sold materials to a customer for $8,000 with credit terms 2/10, n/30. Cherokee uses the net method of accounting for cash discounts. What entry would Cherokee make on November 10?

A) $\begin{array}{|c|r|r|}\hline \text { Accounts receivable } & 7,840 & \\\hline \text { Sales } & & 7,840 \\\hline\end{array}$
B) $\begin{array}{|c|r|r|}\hline \text { Accounts receivable } & 8,000 & \\\hline \text { Sales } & & 8,000 \\\hline\end{array}$
C) $\begin{array}{|l|r|r|}\hline \text { Accounts receivable } & 7,840 & \\\hline \text { Cash discounts } & 160 & \\\hline \text { Sales } & & 8,000 \\\hline\end{array}$
D) $\begin{array}{|c|r|r|}\hline \text { Accounts receivable } & 8,000 & \\\hline \text { Cash discounts } & & 160 \\\hline \text { Sales } & & 7,840 \\\hline\end{array}$

Question 55

Wilson Company had the following cash balance items listed in its trial balance at 12/31/2018: $\begin{array}{lr}\text {Peters on Savings and Loan: }&\$50,000\\\text {Right Bank: }&(5,000)\\\text {Clinton County Trust Bank: }&10,000\\\end{array}$
If Wilson reports under U.S. GAAP, its 12/31/2018 balance sheet would show what cash balance?

A) ($5,000).
B) $55,000.
C) $60,000.
D) None these answer choices are correct.

Question 56

On November 10 of the current year, Cherokee Industries sold materials to a customer for $8,000 with credit terms 2/10, n/30. Cherokee uses the net method of accounting for cash discounts. What entry would Cherokee make on November 17, assuming the correct payment was received on that date?

A) $\begin{array}{|l|r|r|}\hline \text { Cash } & 7,840 & \\\hline \text { Accounts receivable } & & 7,840 \\\hline\end{array}$
B) $\begin{array}{|l|r|r|}\hline \text { Cash } & 7,840 & \\\hline \text { Sales discounts } & 160 & \\\hline \text { Accounts receivable } & & 8,000 \\\hline\end{array}$
C) $\begin{array}{|c|c|c|}\hline \text { Cash } & 7,840 \\\hline \text { Sales } & 160 \\\hline \text { Accounts receivable } &&8,000 \\\hline\end{array}$
D) $\begin{array}{|l|r|r|}\hline \text { Cash } & 8,000 & \\\hline \text { Sales discounts } & 160 & \\\hline \text { Accounts receivable } & & 8,000 \\\hline \text { Sales } & & 160 \\\hline\end{array}$

Question 57

On November 10 of the current year, Flores Mills sold carpet to a customer for $8,000 with credit terms 2/10, n/30. Flores uses the gross method of accounting for cash discounts. What is the correct entry for Flores on December 5, assuming the correct payment was received on that date?

A) $\begin{array}{|c|c|c|}\hline \text { Cash } & 8,000 & \\\hline \text { Accounts receivable } & & 7,840 \\\hline \text { Discounts revenue } & & 160 \\\hline\end{array}$
B) $\begin{array}{|c|c|c|}\hline \text { Cash } & 8,000 & \\\hline \text { Accounts receivable } & & 7,840 \\\hline \text { Interest revenue } & & 160 \\\hline\end{array}$
C) $\begin{array}{|c|c|c|}\hline \text { Cash } & 8,160 & \\\hline \text { Accounts receivable } & & 8,000 \\\hline \text { Interest revenue } & & 160 \\\hline\end{array}$
D) $\begin{array}{|c|c|c|}\hline \text { Cash } & 8,000 & \\\hline \text { Accounts receivable } & & 8,000 \\\hline\end{array}$

Question 58

False Value Hardware began 2018 with a credit balance of $32,000 in the allowance for sales returns account. Sales and cash collections from customers during the year were $650,000 and $610,000, respectively. False Value estimates that 6% of all sales will be returned. During 2018, customers returned merchandise for credit of $28,000 to their accounts.

- What is the balance in the allowance for sales returns account at the end of 2018?

A) $11,000.
B) $39,000.
C) $43,000.
D) $21,000.

Question 59

Oswego Clay Pipe Company sold $46,000 of pipe to Southeast Water District #45 on April 12 of the current year with terms 1/15, n/60. Oswego uses the gross method of accounting for cash discounts. What entry would Oswego make on April 23, assuming the customer made the correct payment on that date?

A) $\begin{array}{|l|r|r|}\hline \text { Cash } & 45,540 & \\\hline \text { Sales } & 460 & \\\hline \text { Accounts receivable } & & 46,000 \\\hline\end{array}$
B) $\begin{array}{|l|r|r|}\hline \text { Cash } & 46,000 & \\\hline \text { Sales discounts } & 460 & \\\hline \text { Accounts receivable } & & 46,000 \\\hline \text { Sales discounts forfeited } & & 460 \\\hline\end{array}$
C) $\begin{array}{|l|r|l|}\hline \text { Cash } & 45,540 & \\\hline \text { Sales discounts } & 460 & \\\hline \text { Accounts receivable } & & 46,000 \\\hline\end{array}$
D) $\begin{array}{|l|r|r|}\hline \text { Cash } & 46,000 & \\\hline \text { Accounts receivable } & & 45,540 \\\hline \text { Sales } & & 460 \\\hline\end{array}$

Question 60

False Value Hardware began 2018 with a credit balance of $32,000 in the allowance for sales returns account. Sales and cash collections from customers during the year were $650,000 and $610,000, respectively. False Value estimates that 6% of all sales will be returned. During 2018, customers returned merchandise for credit of $28,000 to their accounts.

-False Value Hardware's 2018 income statement would report net sales of:

A) $622,000.
B) $607,000.
C) $646,000.
D) $611,000.

Question 61

A company uses the allowance method to account for bad debts. What is the effect on each of the following accounts of the collection of an account previously written off? $\begin{array}{lcc}&\text { Allowance for } & \text { Accounts } \\&\text { Uncollectible Accounts } & \text { Receivable } \\\text { a. } & \text { Increase } & \text { Decrease } \\\text { b. } & \text { No effect } & \text { Decrease } \\\text { c. } & \text { Increase } & \text { No effect } \\\text { d. } & \text { No effect } & \text { No effect }\end{array}$

A) Option a.
B) Option b.
C) Option c.
D) Option d.

Question 62

Which of the following does not reduce the balance in accounts receivable?

A) Returns on credit sales.
B) Collections from customers.
C) Recognizing bad debts expense.
D) Write-offs.

Question 63

Accounts receivable are normally reported at the:

A) Present value of future cash receipts.
B) Current value plus accrued interest.
C) Expected amount to be received.
D) Current value less expected collection costs.

Question 64

In the balance sheet at the end of its first year of operations, Dinty Inc. reported an allowance for uncollectible accounts of $82,000. During the year, Dinty wrote off $32,000 of accounts receivable it had attempted to collect and failed. Credit sales for the year were $2,200,000, and cash collections from credit customers totaled $1,950,000.

-What accounts receivable balance would Dinty report in its first year-end balance sheet?

A) $196,000.
B) $218,000.
C) $230,000.
D) None of these answer choices are correct.

Question 65

For 2018, Rahal's Auto Parts estimates bad debt expense at 1% of credit sales. The company reported accounts receivable and an allowance for uncollectible accounts of $86,500 and $2,100, respectively, at December 31, 2017. During 2018, Rahal's credit sales and collections were $404,000 and $408,000, respectively, and $2,340 in accounts receivable were written off.

- Rahal's final balance in its allowance for uncollectible accounts at December 31, 2018, is:

A) $4,340.
B) $4,100.
C) $3,800.
D) $4,040.

Question 66

The following aging information pertains to Jacobsen Co.'s accounts receivable at December 31, 2018: $\begin{array}{crr}&&\text { Estimated \% }\\\text { Days Outstanding }&\text { Amount }&\text { Uncollectible }\\\hline0-30 & \$ 420,000 & 2 \% \\ 31-60 & 140,000 & 5 \% \\61-120 & 100,000 & 10 \% \\\text { Over } 120 & 120,000 & 20 \%\end{array}$ During 2018, Jacobsen wrote off $18,000 in receivables and recovered $6,000 that had been written off in prior years. Jacobsen's December 31, 2017, allowance for uncollectible accounts was $40,000. Using the balance sheet approach, what amount of allowance for uncollectible accounts should Jacobsen report at December 31, 2018?

A) $55,400.
B) $28,000.
C) $49,400.
D) $31,400.

Question 67

Calistoga Produce estimates bad debt expense at ½% of credit sales. The company reported accounts receivable and allowance for uncollectible accounts of $471,000 and $1,650, respectively, at December 31, 2017. During 2018, Calistoga's credit sales and collections were $315,000 and $319,000, respectively, and $1,720 in accounts receivable were written off.

- Calistoga's final balance in its allowance for uncollectible accounts at December 31, 2018, is:

A) $1,575.
B) $1,505.
C) $1,650.
D) $1,720.

Question 68

Calistoga Produce estimates bad debt expense at ½% of credit sales. The company reported accounts receivable and allowance for uncollectible accounts of $471,000 and $1,650, respectively, at December 31, 2017. During 2018, Calistoga's credit sales and collections were $315,000 and $319,000, respectively, and $1,720 in accounts receivable were written off.

- Calistoga's accounts receivable at December 31, 2018, are:

A) $467,000.
B) $473,280.
C) $465,280.
D) $469,280.

Question 69

The allowance for uncollectible accounts is a:

A) Deferred charge to expense.
B) Contra asset account.
C) Deferred revenue account.
D) Quasi-liability account.

Question 70

The balance in accounts receivable at the beginning of 2018 was $300. During 2018, $1,600 of credit sales were recorded. If the ending balance in accounts receivable was $250 and $100 in accounts receivable were written off during the year, the amount of cash collected from customers during 2018 was:

A) $1,600.
B) $1,650.
C) $1,550.
D) $1,900.

Question 71

Collection of accounts receivable that previously have been written off results in an increase in cash and an increase in:

A) Accounts receivable.
B) Allowance for uncollectible accounts.
C) Bad debts expense.
D) Retained earnings.

Question 72

The following information relates to Halloran Co.'s accounts receivable for 2018: $\begin{array}{lr}\text {Accounts receivable balance, 1/1/2018 }&\$840,000\\\text {Credit sales for 2018 }&3,300,000\\\text {Accounts receivable written off during 2018 }&70,000\\\text { Collections from customers during 2018}&3,100,000\\\text {Allowance for uncollectible accounts balance, \( 12 / 31 / 2018 \) }&120,000\\\end{array}$
What amount should Halloran report for accounts receivable, before allowances, at December 31, 2018?

A) $1,040,000.
B) $970,000.
C) $760,000.
D) None of these answer choices are correct.

Question 73

Calistoga Produce estimates bad debt expense at ½% of credit sales. The company reported accounts receivable and allowance for uncollectible accounts of $471,000 and $1,650, respectively, at December 31, 2017. During 2018, Calistoga's credit sales and collections were $315,000 and $319,000, respectively, and $1,720 in accounts receivable were written off.

- Calistoga's 2018 bad debt expense is:

A) $1,720.
B) $1,650.
C) $1,505.
D) $1,575.

Question 74

Chez Fred Bakery estimates the allowance for uncollectible accounts at 3% of the ending balance of accounts receivable. During 2018, Chez Fred's credit sales and collections were $125,000 and $131,000, respectively. What was the balance of accounts receivable on January 1, 2018, if $180 in accounts receivable were written off during 2018 and if the allowance account had a balance of $750 on December 31, 2018?

A) $5,820.
B) $31,000.
C) $31,180.
D) None of these answer choices are correct.

Question 75

Rusty Hardware makes only cash sales. It began 2018 with a credit balance of $32,000 in the refund liability account. Sales during 2018 were $600,000. Rusty estimates that 6% of all sales will be returned. During 2018, customers returned merchandise for credit of $28,000 to their accounts.

-Rusty's 2018 income statement would report net sales of:

A) $600,000.
B) $564,000.
C) $568,000.
D) $604,000.

Question 76

For 2018, Rahal's Auto Parts estimates bad debt expense at 1% of credit sales. The company reported accounts receivable and an allowance for uncollectible accounts of $86,500 and $2,100, respectively, at December 31, 2017. During 2018, Rahal's credit sales and collections were $404,000 and $408,000, respectively, and $2,340 in accounts receivable were written off.

- Rahal's 2018 bad debt expense is:

A) $2,100.
B) $2,340.
C) $4,080.
D) None of these answer choices are correct.

Question 77

For 2018, Rahal's Auto Parts estimates bad debt expense at 1% of credit sales. The company reported accounts receivable and an allowance for uncollectible accounts of $86,500 and $2,100, respectively, at December 31, 2017. During 2018, Rahal's credit sales and collections were $404,000 and $408,000, respectively, and $2,340 in accounts receivable were written off.

- Rahal's accounts receivable at December 31, 2018, are:

A) $90,500.
B) $88,160.
C) $82,500.
D) $80,160.

Question 78

In the balance sheet at the end of its first year of operations, Dinty Inc. reported an allowance for uncollectible accounts of $82,000. During the year, Dinty wrote off $32,000 of accounts receivable it had attempted to collect and failed. Credit sales for the year were $2,200,000, and cash collections from credit customers totaled $1,950,000.

- In Dinty's adjusting entry for bad debts at year-end, which of these would be included?

A) Debit to bad debt expense for $114,000.
B) Credit to allowance for uncollectible accounts for $82,000.
C) Debit to accounts receivable for $32,000.
D) All of these answer choices are correct.

Question 79

When you use an aging schedule approach for estimating uncollectible accounts:

A) Bad debts expense is measured indirectly, and the allowance for uncollectible accounts balance is measured directly.
B) Bad debts expense is measured indirectly, and the allowance for uncollectible accounts balance is measured indirectly.
C) Bad debts expense is measured directly, and the allowance for uncollectible accounts balance is measured directly.
D) Bad debts expense is measured directly, and the allowance for uncollectible accounts balance is measured indirectly.

Question 80

In the balance sheet at the end of its first year of operations, Dinty Inc. reported an allowance for uncollectible accounts of $82,000. During the year, Dinty wrote off $32,000 of accounts receivable it had attempted to collect and failed. Credit sales for the year were $2,200,000, and cash collections from credit customers totaled $1,950,000.

-What bad debt expense would Dinty report in its first-year income statement?

A) $50,000.
B) $82,000.
C) $114,000.
D) Can't be determined from the given information