Question 1

Credit sales are recorded by crediting an Accounts Receivable.

Accepted Answer

A) True 
 B)False

Question 2

A promissory note:

Accepted Answer

A)   Is a short-term investment for the maker.
B)   Is a written promise to pay a specified amount of money at a certain date.
C)   Is a liability to the payee.
D)   Is another name for an installment receivable.
E)   Cannot be used in payment of an account receivable.F) None of the above
G) A) and C)

Question 3

ABC Co. sold $80,000 of accounts receivable to First Bank and incurred a 2% factoring fee. Prepare the journal entry for ABC Co. to record the sale.

Accepted Answer

The answer of ABC Co. sold $80,000 of accounts receivable...

Question 4

For legal reasons, it is always a good business practice to accept a note receivable in exchange for an overdue account receivable.

Accepted Answer

A) True 
 B)False

Question 5

Pledging receivables:

Accepted Answer

A)   Allows firms to raise cash.
B)   Allows a firm to retain ownership of its receivables.
C)   Does not transfer risk of bad debts to the lender.
D)   Should be disclosed in the financial statements.
E)   All of these.F) C) and D)
G) B) and E)

Question 6

The maturity date of a note refers to the date the note must be repaid.

Accepted Answer

A) True 
 B)False

Question 7

Companies can report credit card expense as a discount deducted from sales or as a selling expense.

Accepted Answer

A) True 
 B)False

Question 8

All of the following statements regarding recognition of receivables under U.S. GAAP and IFRS are True except:

Accepted Answer

A)   U.S. GAAP and IFRS have similar asset criteria that apply to recognition of receivables.
B)   Receivables that arise from revenue-generating activities are subject to broadly similar criteria for U.S. GAAP and IFRS.
C)   The realization principle under IFRS implies an arm's length transaction occurs.
D)   Both refer to the realization principle and an earnings process.
E)   Differences arise mainly from industry-specific guidance under U.S. GAAP.F) A) and C)
G) None of the above

Question 9

A Company had net sales of $23,000 million, and its average account receivables were $5,860 million. Its accounts receivable turnover is 0.92.
$23,000/$5,860 = 3.9

Accepted Answer

A) True 
 B)False

Question 10

Teller purchased merchandise from TechCom on October 17 of the current year and TechCom accepted Teller's $4,800, 90-day, 10% note. What entry should TechCom make on December 31, to record the accrued interest on the note?

Accepted Answer

A)   Debit Cash $20; credit Notes Receivable $20.
B)   Debit Cash $100; credit Notes Receivable $100.
C)   Debit Interest Receivable $20; credit Interest Revenue $20.
D)   Debit Interest Receivable $100; credit Interest Revenue $100.
E)   Debit Cash $120; credit Interest Revenue $100; credit Interest Receivable $20.F) B) and E)
G) C) and D)

Question 11

Companies use two methods to account for uncollectible accounts, the direct write-off method and the allowance method.

Accepted Answer

A) True 
 B)False

Question 12

On August 9, Pierce Company receives a $8,500, 90-day, 8% note from customer Eric Simms as payment on his account. Compute the amount due at maturity for the note.

Accepted Answer

A)   $8,628
B)   $8,192
C)   $8,613
D)   $8,500
E)   $8,670F) All of the above
G) C) and E)

Question 13

A company used the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts:  All sales are made on credit. Based on past experience, the company estimates 1% of credit sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Accepted Answer

A)   Debit Bad Debts Expense $19,750; credit Allowance for Doubtful Accounts $19,750.
B)   Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225.
C)   Debit Bad Debts Expense $22,250; credit Allowance for Doubtful Accounts $22,250.
D)   Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350.
E)   Debit Bad Debts Expense $21,000; credit Allowance for Doubtful Accounts $21,000.F) A) and B)
G) D) and E)

Question 14

Describe how accounts receivable arise and how they accounted for, including the use of a subsidiary ledger and an allowance account.

Accepted Answer

Accounts receivable arise from credit sa...

Question 15

Calco accepts all major bank credit cards, including First Bank's, which assesses a 3.5% charge on sales for using its card. On May 25, Calco had $4,800 in First Bank Card credit sales. What entry should Calco make on May 25 to record the deposit?

Accepted Answer

A)   Debit Accounts Receivable $4,800; credit Sales $4,800.
B)   Debit Cash $4,632; debit Credit Card Expense $168; credit Sales $4,800.
C)   Debit Cash $4,800; credit Sales $4,800.
D)   Debit Cash $4,968; credit Credit Card Expense $168; credit Sales $4,800.
E)   Debit Accounts Receivable $4,632; debit Credit Card Expense $168; credit Sales $4,800.F) B) and D)
G) A) and D)

Question 16

If a customer owes interest on accounts receivable, Interest Revenue is debited and Accounts Receivable is credited.

Accepted Answer

A) True 
 B)False

Question 17

A company allows its customers to use bank credit cards to charge purchases. When customers use the credit cards, the net amount is deposited in the company's checking account. The company also is charged a 2.5% service charge for these credit card sales. Assume that on April 13, the company sold $25,000 worth of merchandise to customers who used credit cards. Prepare the company's journal entry to record the credit card sales for April 13 assuming the company deposited the receipts that same day.

Accepted Answer

The answer of A company allows its customers to use...

Question 18

When using the allowance method of accounting for uncollectible accounts, the entry to record the bad debts expense is a debit to Bad Debts Expense and a credit to Accounts Receivable.

Accepted Answer

A) True 
 B)False

Question 19

If a credit card sale is made, the seller can either debit Cash or debit Accounts receivable at the time of the sale depending on the type of credit card.

Accepted Answer

A) True 
 B)False

Question 20

The buyer who purchases and takes ownership of another company's accounts receivable is called a:

Accepted Answer

A)   Payer.
B)   Pledgor.
C)   Factor.
D)   Payee.
E)   Pledgee.F) B) and D)
G) None of the above

Exam 9: Accounting for Receivables

Describe how accounts receivable arise and how they accounted for, including the use of a subsidiary ledger and an allowance account.

Correct Answer
verified
Accounts receivable arise from credit sa...
View Answer

Correct Answer
verified

Correct Answer
verified

All of the following statements regarding recognition of receivables under U.S. GAAP and IFRS are True except:

Correct Answer
verified

Companies can report credit card expense as a discount deducted from sales or as a selling expense.

Correct Answer
verified

If a credit card sale is made, the seller can either debit Cash or debit Accounts receivable at the time of the sale depending on the type of credit card.

Correct Answer
verified

Pledging receivables:

Correct Answer
verified

When using the allowance method of accounting for uncollectible accounts, the entry to record the bad debts expense is a debit to Bad Debts Expense and a credit to Accounts Receivable.

Correct Answer
verified

The maturity date of a note refers to the date the note must be repaid.

Correct Answer
verified

For legal reasons, it is always a good business practice to accept a note receivable in exchange for an overdue account receivable.

Correct Answer
verified

If a customer owes interest on accounts receivable, Interest Revenue is debited and Accounts Receivable is credited.

Correct Answer
verified

Calco accepts all major bank credit cards, including First Bank's, which assesses a 3.5% charge on sales for using its card. On May 25, Calco had $4,800 in First Bank Card credit sales. What entry should Calco make on May 25 to record the deposit?

Correct Answer
verified

A promissory note:

Correct Answer
verified

Credit sales are recorded by crediting an Accounts Receivable.

Correct Answer
verified

A Company had net sales of $23,000 million, and its average account receivables were $5,860 million. Its accounts receivable turnover is 0.92. $23,000/$5,860 = 3.9

Correct Answer
verified

ABC Co. sold $80,000 of accounts receivable to First Bank and incurred a 2% factoring fee. Prepare the journal entry for ABC Co. to record the sale.

Correct Answer
verified

The buyer who purchases and takes ownership of another company's accounts receivable is called a:

Correct Answer
verified

Companies use two methods to account for uncollectible accounts, the direct write-off method and the allowance method.

Correct Answer
verified

On August 9, Pierce Company receives a $8,500, 90-day, 8% note from customer Eric Simms as payment on his account. Compute the amount due at maturity for the note.

Correct Answer
verified

Teller purchased merchandise from TechCom on October 17 of the current year and TechCom accepted Teller's $4,800, 90-day, 10% note. What entry should TechCom make on December 31, to record the accrued interest on the note?

Correct Answer
verified

Exam 9: Accounting for Receivables

Describe how accounts receivable arise and how they accounted for, including the use of a subsidiary ledger and an allowance account.

Correct AnswerverifiedAccounts receivable arise from credit sa...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

All of the following statements regarding recognition of receivables under U.S. GAAP and IFRS are True except:

Correct AnswerverifiedShow Answer

Companies can report credit card expense as a discount deducted from sales or as a selling expense.

Correct AnswerverifiedShow Answer

If a credit card sale is made, the seller can either debit Cash or debit Accounts receivable at the time of the sale depending on the type of credit card.

Correct AnswerverifiedShow Answer

Pledging receivables:

Correct AnswerverifiedShow Answer

When using the allowance method of accounting for uncollectible accounts, the entry to record the bad debts expense is a debit to Bad Debts Expense and a credit to Accounts Receivable.

Correct AnswerverifiedShow Answer

The maturity date of a note refers to the date the note must be repaid.

Correct AnswerverifiedShow Answer

For legal reasons, it is always a good business practice to accept a note receivable in exchange for an overdue account receivable.

Correct AnswerverifiedShow Answer

If a customer owes interest on accounts receivable, Interest Revenue is debited and Accounts Receivable is credited.

Correct AnswerverifiedShow Answer

Calco accepts all major bank credit cards, including First Bank's, which assesses a 3.5% charge on sales for using its card. On May 25, Calco had $4,800 in First Bank Card credit sales. What entry should Calco make on May 25 to record the deposit?

Correct AnswerverifiedShow Answer

A promissory note:

Correct AnswerverifiedShow Answer

Credit sales are recorded by crediting an Accounts Receivable.

Correct AnswerverifiedShow Answer

A Company had net sales of $23,000 million, and its average account receivables were $5,860 million. Its accounts receivable turnover is 0.92. $23,000/$5,860 = 3.9

Correct AnswerverifiedShow Answer

ABC Co. sold $80,000 of accounts receivable to First Bank and incurred a 2% factoring fee. Prepare the journal entry for ABC Co. to record the sale.

Correct AnswerverifiedShow Answer

The buyer who purchases and takes ownership of another company's accounts receivable is called a:

Correct AnswerverifiedShow Answer

Companies use two methods to account for uncollectible accounts, the direct write-off method and the allowance method.

Correct AnswerverifiedShow Answer

On August 9, Pierce Company receives a $8,500, 90-day, 8% note from customer Eric Simms as payment on his account. Compute the amount due at maturity for the note.

Correct AnswerverifiedShow Answer

Teller purchased merchandise from TechCom on October 17 of the current year and TechCom accepted Teller's $4,800, 90-day, 10% note. What entry should TechCom make on December 31, to record the accrued interest on the note?

Correct AnswerverifiedShow Answer

Correct Answer
verified
Accounts receivable arise from credit sa...
View Answer

Correct Answer
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