Question 1

Silver Company received a two-month,6% note for $16,000 on August 5.Which of the following statements is true?
A)Silver will receive $16,000 plus interest of $960 at maturity.
B)Silver should record a total receivable due of $16,080 on August 5.
C)The principal of the note plus interest is due on October 15.
D)The maturity value of this note is $16,160.

Accepted Answer

The maturity value of the note can be calculated as follows:

Principal amount = $16,000 
Interest for two months = ($16,000 x 6% x 2/12) = $160

Maturity value = Principal amount + Interest = $16,000 + $160 = $16,160

Therefore, option D is correct. Options A, B, and C are incorrect as the interest amount is already included in the maturity value and the entire amount will be due on the maturity date, which is October 5.

Question 2

On November 1,Willis Corporation sold merchandise in return for a 6%,three-month note receivable in the amount of $60,000.The proper adjusting entry at December 31 (end of Willis' fiscal year)includes a:
A)Credit to Interest Revenue of $600.
B)Debit to Cash of $600.
C)Debit to Interest Receivable of $300.
D)Credit to Notes Receivable of $900.

Accepted Answer

Since the note is for three months and was received on November 1, the maturity date would be on January 31. Therefore, the adjusting entry on December 31 would have an accrued interest of two months (November and December).

To calculate the interest:
$60,000 x 6% x 2/12 = $600

The proper adjusting entry would be to credit Interest Revenue for $600.

Question 3

Gold Company received a two-month,12% note for $8,000 on June 16.Which of the following statements is true?
A)Gold will receive $8,000 plus interest of $960 at maturity.
B)Gold should record a total receivable due of $8,080 on June 16.
C)The principal of the note plus interest is due on August 15.
D)The maturity value of this note is $8,000.

Accepted Answer

The note is for two months starting from June 16, so it matures on August 15, making statement C correct. Interest calculations or the maturity value specifics are not needed to determine this.

Question 4

In regard to the accounts receivable turnover rate:
A)The higher the better.
B)The lower the better.
C)In some industries it is better higher and in some industries it is better to be lower.
D)The auto industry prefers a lower rate.

Accepted Answer

A higher accounts receivable turnover rate indicates that a company is able to collect its outstanding debts more quickly, which is generally considered a positive sign of efficient operations. A lower rate could indicate that a company is having trouble collecting from customers, which could lead to cash flow problems. Therefore, a higher accounts receivable turnover rate is generally preferable.

Question 5

Deegan Industries has an accounts receivable turnover rate of 8.Which of the following statements is not true?
A)Deegan's accounts receivable are more liquid than those of a business whose accounts receivable turnover rate is 5.
B)Deegan waits approximately 46 days to make collections of its credit sales.(Use 365 days in a year. )
C)Deegan writes off accounts receivable as uncollectible if they are over 45 days old.
D)Deegan's net credit sales are about eight times the amount of its average accounts receivable.

Accepted Answer

If Deegan writes off accounts receivable as uncollectible if they are over 45 days old, it implies that their average collection period is less than or equal to 45 days (since they write off accounts older than 45 days). Therefore, statement B cannot be true, as it suggests that Deegan waits approximately 46 days to make collections of its credit sales. Statements A and D are true based on the given information.

Question 6

The accounts receivable turnover rate for Baldwin Corporation is 8,and for Basinger Company the turnover rate is 10.These statistics indicate that:
A)Basinger collects its accounts receivable within 10 days on average;Baldwin collects its accounts receivable in 8 days on average.
B)Basinger writes off as uncollectible a greater percentage of its accounts receivable than does Baldwin Company.
C)Basinger collects its accounts receivable faster than does Baldwin Company.
D)Basinger makes on average 10 credit sales annually to each of its customers,while Baldwin makes 8 credit sales to each customer.

Accepted Answer

The accounts receivable turnover rate measures how quickly a company collects its accounts receivables. A higher turnover rate indicates a company is collecting its receivables faster than a company with a lower turnover rate. Therefore, Basinger Company with a turnover rate of 10 collects its accounts receivable faster than Baldwin Corporation with a turnover rate of 8.

Question 7

Stanley,Inc.'s 2018 income statement reported net sales of $6,000,000,uncollectible accounts expense of $160,000,and net income of $700,000.Stanley's average accounts receivable during 2018 amounted to $1,200,000.Using 360 days to a year,Stanley's
A)Accounts receivable turnover rate is approximately 4.4 times.
B)Accounts receivable turnover rate is approximately 2.5 times.
C)Average number of days to collect an account receivable is 72 days.
D)Accounts receivable turnover rate is approximately 2 times.

Accepted Answer

The answer of Stanley,Inc.'s 2018 income statement reported net sales...

Question 8

If a 5%,four-month note receivable is acquired from a customer in settlement of an existing account receivable of $50,000,the accounting entry for acquisition of the note will:
A)Include a debit to Notes Receivable for $50,822.
B)Include a debit to Notes Receivable for $50,208.
C)Include a credit to Interest Revenue for $822.
D)Include a debit to Notes Receivable for $50,000 and no entry for interest.

Accepted Answer

The note receivable is recorded at its face value of $50,000, and interest is not recorded at the time of acquisition but rather accrued over time.

Question 9

Financial assets
(a. )Briefly explain what is meant by the term "financial assets."
(b. )List the three major categories of assets comprising a company's financial assets.For each category,indicate the basis for valuation in the balance sheet.

Accepted Answer

The answer of Financial assets
(a. )Briefly explain what is meant...

Question 10

On May 1,2018 (maturity date),the note is collected in full by Salem Corporation.Assuming a fiscal year-end of December 31,Salem recognizes which of the following in its income statement for 2018 with regard to this note?
A)$927,000 sales revenue.
B)$27,000 interest revenue.
C)$18,000 interest revenue.
D)$9,000 interest revenue.

Accepted Answer

The answer of On May 1,2018 (maturity date),the note is...

Question 11

Salem's balance sheet at December 31,2017,includes which of the following as a result of the sale of land on November 1?
A)Notes Receivable of $900,000 and Interest Receivable of $9,000.
B)Notes Receivable of $927,000 and Interest Receivable of $9,000.
C)Notes Receivable of $900,000 and Interest Receivable of $27,000.
D)Notes Receivable of $900,000 only.

Accepted Answer

The correct answer involves recognizing the sale of land as generating a note receivable for the principal amount (in this case, $900,000) and an interest receivable for the interest accrued from the sale date to the balance sheet date. The interest receivable of $9,000 indicates that interest has been calculated and recognized as receivable by the year-end.

Question 12

[The following information applies to the questions displayed below.]
On June 1,2018,Jensen Company acquired an 8%,ten-month note receivable from a customer in settlement of an existing account receivable of $130,000.Interest and principal are due at maturity.
-The proper adjusting entry at December 31,2018,with regard to this note receivable includes a:
A)Debit to Cash of $6,067.
B)Debit to Notes Receivable of $10,400.
C)Credit to Interest Revenue of $10,400.
D)Debit to Interest Receivable of $6,067.

Accepted Answer

The correct answer involves calculating the interest for the period the note has been held within the fiscal year. The note's annual interest rate is 8%, but since it's a ten-month note and we're adjusting for the end of the year (which would be 7 months into the note's term by December 31, 2018), we calculate interest for 7 months. The interest amount is $130,000 * 8% * (7/12) = $6,067. This amount hasn't been received in cash yet, so it's recognized as Interest Receivable, not as a debit to Cash or Notes Receivable, and not as a credit to Interest Revenue at this point.

Question 13

Assuming a 365-day year,Gore Industries calculated an average of 53 days to collect its accounts receivable in 2018.During 2018,Gore's accounts receivable turnover rate:
A)Was approximately 6.89.
B)Was equal to 53 times its average accounts receivable.
C)Was approximately 0.15.
D)Can't be determined from this information alone.

Accepted Answer

The accounts receivable turnover rate can be calculated as 365/average collection period. Therefore, Gore's accounts receivable turnover rate in 2018 would be 365/53 = approximately 6.89. Option A is the closest choice.

Question 14

Assuming a 365-day year,Bush Industries calculated an average of 47 days to collect its accounts receivable in 2019.During 2018,Bush's accounts receivable turnover rate:
A)Was approximately 7.77.
B)Was equal to 47 times its average accounts receivable.
C)Was approximately 0.13.
D)Can't be determined from this information alone.

Accepted Answer

To calculate the accounts receivable turnover rate, we divide the total credit sales by the average accounts receivable. We do not have information about credit sales, but we do know that it took 47 days on average to collect the accounts receivable. Since a year has 365 days, we can calculate the accounts receivable turnover rate as 365/47 = approximately 7.77. Therefore, the correct choice is A.

Question 15

Assuming the maker of the note defaults on May 1,2018,Salem will record on this date:
A)An accounts receivable of $900,000 from the maker of the note.
B)An accounts receivable in the amount of $900,000,as well as interest expense of 
C)An accounts receivable in the amount of $927,000,as well as interest revenue of 
D)An accounts receivable in the amount of $900,000,as well as interest revenue of

Accepted Answer

If the maker of the note defaults on May 1, 2018, Salem will record an accounts receivable of $927,000, which includes the amount of the note ($900,000) plus the interest that has accrued ($27,000). Additionally, Salem will record interest revenue of $27,000 to reflect the interest earned on the note. Therefore, the correct choice is C.

Question 16

Dorfmann Industries has an accounts receivable turnover rate of 12.Which of the following statements is not true?
A)Dorfmann's accounts receivable are more liquid than those of a business whose accounts receivable turnover rate is 8.
B)Dorfmann waits approximately 30 days to make collections of its credit sales.(Use 365 days in a year. )
C)Dorfmann writes off accounts receivable as uncollectible if they are over 30 days old.
D)Dorfmann's net credit sales are about twelve times the amount of its average accounts receivable.

Accepted Answer

If Dorfmann writes off accounts receivable as uncollectible if they are over 30 days old, then it is not true that their accounts receivable turnover rate is 12, as turnover rate implies all accounts receivable are being collected within a year. This statement contradicts the others, which are consistent with a high accounts receivable turnover rate.

Question 17

Watins,Inc.'s 2018 income statement reported net sales of $5,000,000.Watin's average accounts receivable during 2018 amounted to $450,000.Using 360 days to a year,Watin's:
A)Accounts receivable turnover rate is approximately 13.8 times.
B)Accounts receivable turnover rate is approximately 1.25 times.
C)Average number of days to collect an account receivable is 32 days.
D)Accounts receivable turnover rate is approximately 2 times.

Accepted Answer

The answer of Watins,Inc.'s 2018 income statement reported net sales...

Question 18

The accounts receivable turnover rate:
A)Indicates how many times the receivables were converted into cash during the year.
B)Is computed by dividing average receivables by sales.
C)Indicates the average number of days a business waits to make collection on a credit sale.
D)Indicates the proportion of a company's accounts receivable that the independent auditors were unable to confirm.

Accepted Answer

The accounts receivable turnover rate measures how efficiently a company is able to collect its accounts receivable by measuring the number of times accounts receivable are converted to cash during a given period. It is calculated by dividing net credit sales by average accounts receivable.

Question 19

If a 15%,two-month note receivable is acquired from a customer in settlement of an existing account receivable of $5,000,the accounting entry for acquisition of the note will:
A)Include a debit to Notes Receivable for $5,750.
B)Include a debit to Notes Receivable for $5,062.50.
C)Include a credit to Interest Revenue for $62.50.
D)Include a debit to Notes Receivable for $5,000 and no entry for interest.

Accepted Answer

The note receivable is recorded at its face value of $5,000. Interest is not recorded at the time of acquisition but rather recognized over time.

Question 20

[The following information applies to the questions displayed below.]
On June 1,2018,Jensen Company acquired an 8%,ten-month note receivable from a customer in settlement of an existing account receivable of $130,000.Interest and principal are due at maturity.
-Jensen's entry to record the collection of this note at maturity includes a:
A)Credit to Interest Receivable of $6,067.
B)Credit to Interest Revenue of $6,067.
C)Credit to Interest Receivable of $2,600.
D)Credit to Notes Receivable of $140,400.

Accepted Answer

The answer of [The following information applies to the questions...

Quiz 7: Financial Assets

Silver Company received a two-month,6% note for $16,000 on August 5.Which of the following statements is true?

On November 1,Willis Corporation sold merchandise in return for a 6%,three-month note receivable in the amount of $60,000.The proper adjusting entry at December 31 (end of Willis' fiscal year) includes a:

Gold Company received a two-month,12% note for $8,000 on June 16.Which of the following statements is true?

In regard to the accounts receivable turnover rate:

Deegan Industries has an accounts receivable turnover rate of 8.Which of the following statements is not true?

The accounts receivable turnover rate for Baldwin Corporation is 8,and for Basinger Company the turnover rate is 10.These statistics indicate that:

Stanley,Inc.'s 2018 income statement reported net sales of $6,000,000,uncollectible accounts expense of $160,000,and net income of $700,000.Stanley's average accounts receivable during 2018 amounted to $1,200,000.Using 360 days to a year,Stanley's

If a 5%,four-month note receivable is acquired from a customer in settlement of an existing account receivable of $50,000,the accounting entry for acquisition of the note will:

Financial assets (a. )Briefly explain what is meant by the term "financial assets." (b. )List the three major categories of assets comprising a company's financial assets.For each category,indicate the basis for valuation in the balance sheet.

On May 1,2018 (maturity date) ,the note is collected in full by Salem Corporation.Assuming a fiscal year-end of December 31,Salem recognizes which of the following in its income statement for 2018 with regard to this note?

Salem's balance sheet at December 31,2017,includes which of the following as a result of the sale of land on November 1?

Assuming a 365-day year,Gore Industries calculated an average of 53 days to collect its accounts receivable in 2018.During 2018,Gore's accounts receivable turnover rate:

Assuming a 365-day year,Bush Industries calculated an average of 47 days to collect its accounts receivable in 2019.During 2018,Bush's accounts receivable turnover rate:

Assuming the maker of the note defaults on May 1,2018,Salem will record on this date:

Dorfmann Industries has an accounts receivable turnover rate of 12.Which of the following statements is not true?

Watins,Inc.'s 2018 income statement reported net sales of $5,000,000.Watin's average accounts receivable during 2018 amounted to $450,000.Using 360 days to a year,Watin's:

The accounts receivable turnover rate:

If a 15%,two-month note receivable is acquired from a customer in settlement of an existing account receivable of $5,000,the accounting entry for acquisition of the note will: