Question 1

On August 1,Kim Company accepted a 90-day note receivable as payment for services provided to Hsu Company.The terms of the note were $20,000 face value and 6% interest.On October 30,the journal entry to record the collection of the note should include a

Accepted Answer

The answer of On August 1,Kim Company accepted a 90-day...

Question 2

Match each description to the appropriate term (a-d). Each term may be used more than once.
-This method focuses on the balance sheet.

Accepted Answer

The answer of Match each description to the appropriate term...

Question 3

Match each description to the appropriate term (a-i).
-Operating expense recorded as a result of receivables becoming uncollectible

Accepted Answer

The operating expense recorded as a result of receivables becoming uncollectible is called Bad Debt Expense.

Question 4

Harper Company lends Hewell Company $40,000 on March 1,accepting a four-month,6% interest note.Harper Company prepares financial statements on March 31.What adjusting entry should be made before the financial statements can be prepared?

Accepted Answer

Since the interest on the note is not due until it matures in four months, interest revenue needs to be accrued for the month of March. This can be achieved by making an adjusting entry to increase interest receivable and interest revenue by $200 (i.e., $40,000 x 6% x 1/12). Option A is not correct because it records cash instead of interest revenue, which is not appropriate at this stage. Option B is incorrect because it overstates the interest revenue by recording the full amount of interest for four months. Option D is not relevant since these accounts were already recorded when the note was issued.

Question 5

Match each description to the appropriate term (a-d). Each term may be used more than once.
-This method records bad debts when specific accounts are deemed uncollectible.

Accepted Answer

The direct write-off method records bad debts at the moment specific accounts are deemed uncollectible, directly adjusting accounts receivable and recognizing the bad debt expense.

Question 6

Match each description to the appropriate term (a-d). Each term may be used more than once.
-This method is most often used by small companies with few receivables.

Accepted Answer

The direct write-off method is most often used by small companies with few receivables because it is simple and does not require the maintenance of an allowance account. However, it is not acceptable for financial reporting purposes because it does not match expenses with revenues.

Question 7

Match each description to the appropriate term (a-i).
-The process of analyzing the accounts receivable and classifying them according to various age groupings,with the due date being the base point for determining age

Accepted Answer

Aging the receivables is the process of analyzing the accounts receivable and classifying them according to various age groupings, with the due date being the base point for determining age.

Answer: B
 Net realizable value is the amount of accounts receivable that a company expects to collect, after subtracting expected bad debts.

Answer: C
 Accounts receivable refers to the money that a company is owed by its customers for goods or services that have already been delivered.

Answer: G
 Allowance for doubtful accounts is a contra asset account that is used to reduce the balance of accounts receivable to its net realizable value.

Answer: H
 Bad debt expense is the amount that a company writes off as uncollectible due to customers' failure to pay their bills.

Answer: I
 Notes receivable refers to written promises to pay a specified amount of money at a future date.

Note: The other terms (A, E, and F) were not described in the prompt.

Question 8

The accounts receivable turnover measures

Accepted Answer

The accounts receivable turnover measures how frequently during the year the accounts receivable are converted to cash. This ratio shows how efficiently a company collects its outstanding debts from customers. A high turnover ratio indicates that a company is converting its accounts receivable into cash quickly, while a low ratio indicates that a company is not collecting its outstanding debts as efficiently.

Question 9

Match each description to the appropriate term (a-i).
-A contra asset that represents the amount of estimated uncollectible receivables

Accepted Answer

Allowance for doubtful accounts is a contra asset that represents the amount of estimated uncollectible receivables.

Answer: B
 Net realizable value is the amount of accounts receivable that a company estimates it will collect after deducting estimates for doubtful accounts.

Answer: C
 Accounts receivable are amounts owed to a company by its customers for goods or services sold on credit.

Answer: D
 Aging the receivables is a process of classifying accounts receivable by age and estimating the likelihood of collection.

Answer: E
 Receivables refer to all amounts owed to a company, including accounts receivable and notes receivable.

Answer: F
 The direct write-off method is a method of accounting for bad debts in which the company waits until it is certain that an account won't be collected before writing it off as a bad debt.

Answer: H
 Bad debt expense is the amount of money that a company estimates it will lose on uncollectible accounts during a given period.

Answer: I
 Notes receivable are legally binding promises to pay a specified amount of money on a specific date or on demand.

Question 10

Given the following information,compute accounts receivable turnover.

Accepted Answer

The answer of Given the following information,compute accounts receivable turnover....

Question 11

Match each description to the appropriate term (a-d). Each term may be used more than once.
-This method is based on the theory that older accounts are less likely to be collected.

Accepted Answer

The description matches the aging of receivables method, which groups accounts receivable by age and applies a higher percentage of uncollectible to older accounts. The direct write-off method is not based on the age of accounts, but rather writes off uncollectible accounts as they are identified. The percent of sales method estimates bad debts based on a percentage of credit sales, and the allowance method involves estimating the total uncollectible amount and creating a contra asset account to reduce the net accounts receivable balance.

Question 12

Days' sales in receivables

Accepted Answer

Days' sales in receivables is an estimate of the length of time the receivables have been outstanding, representing the average number of days it takes for a company to collect on its credit sales. It is calculated by dividing the average accounts receivable by the average daily credit sales.

Question 13

Match each description to the appropriate term (a-i).
-A receivable created from selling merchandise or services on account

Accepted Answer

Accounts Receivable is a receivable created from selling merchandise or services on account.

Answer: B
 Net Realizable Value is the amount of accounts receivable that a company actually expects to collect, which is determined by subtracting the allowance for doubtful accounts from the accounts receivable balance.

Answer: E
 Receivables are amounts that a company is owed by customers and others, including accounts receivable and notes receivable.

Answer: D
 Aging the Receivables is the process of classifying accounts receivable by the length of time they have been outstanding, which helps to identify accounts that are likely to be uncollectible.

Answer: I
 Notes Receivable are receivables that are supported by promissory notes, which are legal instruments that make the borrower personally responsible for paying back the debt.

Answer: A
 Accounts Receivable Turnover is a ratio that measures how many times a company's accounts receivable are collected and replaced during a given period, which can help to identify potential problems with collecting receivables.

Answer: F
 The Direct Write-Off Method is a method of accounting for bad debts that involves writing off uncollectible accounts as they are identified, based on the actual or estimated amount of the loss.

Answer: G
 The Allowance for Doubtful Accounts is a contra-asset account that is used to reduce the amount of accounts receivable to their net realizable value, based on the estimated amount of uncollectible accounts.

Answer: H
 Bad Debt Expense is an expense account that is used to record the estimated amount of uncollectible accounts, which is based on the allowance for doubtful accounts or the direct write-off method.

Question 14

Match each description to the appropriate term (a-i).
-All money claims against other entities

Accepted Answer

Receivables refers to all money claims against other entities, including both accounts receivable and notes receivable.

Answer: C
 Accounts receivable specifically refers to money owed by customers for goods or services already provided.

Answer: I
 Notes receivable refers to money owed by a debtor in the form of a written promissory note.

Answer: D
 Aging the receivables is a method of analyzing the aging of accounts receivable to estimate the likelihood of collection and potential bad debts.

Answer: B
 Net realizable value is the expected amount of cash that will be collected from accounts receivable after accounting for any uncollectible amounts (i.e. the allowance for doubtful accounts).

Answer: G
 The allowance for doubtful accounts is a contra asset account that reduces the amount of accounts receivable on the balance sheet to reflect the estimated amount of uncollectible accounts.

Answer: H
 Bad debt expense is the expense recognized on the income statement to account for the estimated amount of uncollectible accounts.

Answer: F
 The direct write-off method is a method of accounting for bad debts where the uncollectible account is simply written off when it is deemed uncollectible. This method does not provide for a specific estimate of bad debts or an allowance for doubtful accounts.

Answer: A
 Accounts receivable turnover ratio measures the number of times a company's accounts receivable is collected during a period, and is useful in analyzing the efficiency of a company's credit and collection policies.

Question 15

Match each description to the appropriate term (a-i).
-Measures how frequently during the year accounts receivable are being turned into cash

Accepted Answer

Accounts receivable turnover measures how frequently during the year accounts receivable are being turned into cash.

Answer: B 
 Net realizable value is the difference between accounts receivable and the allowance for doubtful accounts, representing the amount the company actually expects to collect.

Answer: C 
 Accounts receivable refer to the amounts that customers owe for goods or services purchased on credit.

Answer: D 
 Aging the receivables is a method of estimating the allowance for doubtful accounts by categorizing unpaid receivables by age and applying different percentages for each category.

Answer: E 
 Receivables is a term that encompasses both accounts receivable (amounts owed by customers) and notes receivable (amounts owed by entities that have signed promissory notes).

Answer: F 
 The direct write-off method is a way of accounting for bad debts where money owed by customers is written off when deemed uncollectible.

Answer: G 
 The allowance for doubtful accounts is a contra asset account that represents the estimated amount of accounts receivable that the company is not expected to collect.

Answer: H 
 Bad debt expense represents the amount of accounts receivable that the company expects to be uncollectible and thus writes off as an expense.

Answer: I 
 Notes receivable are amounts owed to the company by entities that have signed promissory notes, which specify payment terms and interest rates.

Question 16

Match each description to the appropriate term (a-i).
-Amounts owed by customers documented by a formal written instrument of credit

Accepted Answer

Notes receivable are formal written instruments of credit that represent amounts owed by customers or others to the business.

Question 17

Match each description to the appropriate term (a-i).
-The difference between accounts receivable and allowance for doubtful accounts

Accepted Answer

The difference between accounts receivable and allowance for doubtful accounts is referred to as the net realizable value. This value represents the amount of receivables a company expects to actually collect, taking into account the estimated uncollectible accounts.

Question 18

Match each description to the appropriate term (a-d). Each term may be used more than once.
-When using this method,estimated bad debts are added to the existing allowance balance.

Accepted Answer

The answer of Match each description to the appropriate term...

Question 19

Match each description to the appropriate term (a-i).
-Records bad debt expense only when a specific customer's account is deemed worthless

Accepted Answer

The direct write-off method is used when bad debt expense is recorded only when a specific customer's account is deemed worthless.

Question 20

Current assets are usually listed in order

Accepted Answer

Current assets are usually listed in order of liquidity, which means that the assets that can be easily converted to cash are listed first. This allows users of financial statements to quickly assess a company's ability to pay its short-term obligations.

Quiz 9: Receivables

On August 1,Kim Company accepted a 90-day note receivable as payment for services provided to Hsu Company.The terms of the note were $20,000 face value and 6% interest.On October 30,the journal entry to record the collection of the note should include a

Match each description to the appropriate term (a-d) . Each term may be used more than once. -This method focuses on the balance sheet.

Match each description to the appropriate term (a-i) . -Operating expense recorded as a result of receivables becoming uncollectible

Harper Company lends Hewell Company $40,000 on March 1,accepting a four-month,6% interest note.Harper Company prepares financial statements on March 31.What adjusting entry should be made before the financial statements can be prepared?

Match each description to the appropriate term (a-d) . Each term may be used more than once. -This method records bad debts when specific accounts are deemed uncollectible.

Match each description to the appropriate term (a-d) . Each term may be used more than once. -This method is most often used by small companies with few receivables.

Match each description to the appropriate term (a-i) . -The process of analyzing the accounts receivable and classifying them according to various age groupings,with the due date being the base point for determining age

The accounts receivable turnover measures

Match each description to the appropriate term (a-i) . -A contra asset that represents the amount of estimated uncollectible receivables

Given the following information,compute accounts receivable turnover.

Match each description to the appropriate term (a-d) . Each term may be used more than once. -This method is based on the theory that older accounts are less likely to be collected.

Days' sales in receivables

Match each description to the appropriate term (a-i) . -A receivable created from selling merchandise or services on account

Match each description to the appropriate term (a-i) . -All money claims against other entities

Match each description to the appropriate term (a-i) . -Measures how frequently during the year accounts receivable are being turned into cash

Match each description to the appropriate term (a-i) . -Amounts owed by customers documented by a formal written instrument of credit

Match each description to the appropriate term (a-i) . -The difference between accounts receivable and allowance for doubtful accounts

Match each description to the appropriate term (a-d) . Each term may be used more than once. -When using this method,estimated bad debts are added to the existing allowance balance.

Match each description to the appropriate term (a-i) . -Records bad debt expense only when a specific customer's account is deemed worthless

Current assets are usually listed in order