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Exam 5: Receivables and Sales

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Question 31

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The Sales Discounts account is an example of a contra revenue account.

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B) False

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Question 32

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On March 13,a company writes off a customer's account of $3,800.On June 3,the customer unexpectedly pays the $3,800 balance.Using the allowance method,record the write-off on March 13 and the cash collection on June 3.

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Question 33

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A company reports the following amounts at the end of the year: Total sales = $500,000; sales discounts = $10,000; sales returns = $30,000; sales allowances = $20,000.Compute net sales.

Under the allowance method,which of the following does not change the balance in the Accounts Receivable account?

Calculate the missing amount for each of the following notes receivable. $\begin{array} { c c c c } \begin{array} { c } \text { Face } \\\text { Value }\end{array} & \begin{array} { c } \text { Annual } \\\text { Interest rate }\end{array} & \begin{array} { c } \text { Fraction of } \\\text { the Year }\end{array} & \text { Interest } \\\hline \$ 15,000 & 4 \% & 8 \text { months } & ( \text { a) } \\\$ 25,000 & 8 \% & \text { (b) } & \$ 500 \\\$ 30,000 & ( \text { c) } & 4 \text { months } & \$ 500 \\\text { (d) } & 6 \% & 6 \text { months } & \$ 600\end{array}$

Under the allowance method,when a company collects cash from an account previously written off,total assets increase.

Sandburg Veterinarian reports the following information for the year: $\begin{array}{lr}\text { Net credit sales } & \$ 120,000 \\\text { Average accounts receivable } & 20,000 \\\text { Cash collections on credit sales } & 100,000\end{array}$ What is Sandburg's receivables turnover ratio?

At the beginning of 2012,the balance in Jackson Enterprises' Allowance for Uncollectible Accounts was $31,800.During 2012,the company wrote off $38,000 of accounts receivable.Writing off the individual bad debts would include a:

Tom's Textiles shipped the wrong material to a customer,who refused to accept the order.This is an example of a:

Accounts receivable are reported at their net realizable value.

One disadvantage of the allowance method (over the direct write-off method)for recording uncollectible accounts is that it generally matches bad debt expense with the revenue it helped to generate.

When customers purchase products on account,Spitz Manufacturing offers them a 2% reduction in the amount owed if they pay within 10 days.This is an example of a:

The following information pertains to Lightning,Inc.at the end of December: $\begin{array} { l r } \text { Credit Sales } & \$ 60,000 \\\text { Accounts Payable } & 10,000 \\\text { Accounts Receivable } & 7,000 \\\text { Allowance for Uncollectible Accounts } & \$ 400 \text { credit } \\\text { Cash Sales } & 20,000\end{array}$ Lightning uses the aging method and estimates it will not collect 2% of accounts receivable not yet due,10% of receivables less than 30 days past due,and 40% of receivables greater than 30 days past due.The accounts receivable balance of $7,000 consists of $3,500 not yet due,$2,000 less than 30 days past due,and $1,500 greater than 30 days past due.What is the appropriate amount of Bad Debt Expense?

Collections of accounts receivable that previously have been written off are credited to:

On December 31,2012,Coolwear Inc.had balances in Accounts Receivable and Allowance for Uncollectible Accounts of $48,400 and $940,respectively.During 2013,Coolwear wrote off $820 in accounts receivable and determined that there should be an allowance for uncollectible accounts of $1,140 at December 31,2013.Bad debt expense for 2013 would be:

The Sales Returns account is an expense account.

A company has the following balances on December 31,2012,after year-end adjustments: Accounts Receivable = $75,000; Service Revenue = $400,000; Allowance for Uncollectible Accounts = $5,000; Cash = $20,000.Calculate the net realizable value of accounts receivable.

If the direct write-off method is used to account for uncollectible accounts,which of the following statements is false?

A $10,000 note that has a stated interest rate of 10% and is due in six months would have interest of $1,000.

A company provides services on account.Indicate how this transaction would affect the following five financial statement items: $\begin{array}{llllll}&&& \text { Stockholders' } \\&\text { Assets } &\text { Liabilities } &\underline{\text { Equity }}& \underline{\text { Revenues }} &\underline{\text { Expenses }}\\\text { a. } & \text { Increase } & \text { Decrease } & \text { Increase } & \text { Decrease } & \text { No effect } \\\text { b. } & \text { Increase } & \text { No effect } & \text { Increase } & \text { Increase } & \text { Decrease } \\\text { c. } & \text { Increase } & \text { No effect } & \text { Increase } & \text { Increase } & \text { No effect } \\\text { d. } & \text { No effect } & \text { No effect } & \text { No effect } & \text { No effect } & \text { No effect }\\\end{array}$