Question 1

Other receivables include non-trade receivables such as loans to company officers.

Accepted Answer

A) True 
 B)False

Question 2

Merry Co. sells Christmas angels. Merry determines that at the end of December, they have the following aging schedule of Accounts Receivable:  Compute the net receivables based on the above information at the end of December (There was no beginning balance in the Allowance for Doubtful Accounts).

Accepted Answer

($1,150 - ...

Question 3

Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $45,000. If the balance of the Allowance for Doubtful Accounts is $11,000 debit before adjustment what is the amount of bad debt expense for that period?

Accepted Answer

A)   $45,000
B)   $11,000
C)   $56,000
D)   $34,000E) B) and C)
F) A) and B)

Question 4

In the table below the information for four companies is provided.  Assuming all four companies are in the same industry, which company appears to have the greatest likelihood of paying its current obligations?

Accepted Answer

A)   Martin
B)   Lewis
C)   Danforth
D)   GarnerE) All of the above
F) C) and D)

Question 5

Barber Company lends Monroe Company $30,000 on April 1, accepting a four-month, 6% interest note. Barber Company prepares financial statements on April 30. What adjusting entry should be made before the financial statements can be prepared?

Accepted Answer

A)  
B)  
C)  
D)   E) A) and B)
F) C) and D)

Question 6

A note receivable is executed in December. When the note is paid the following February, the payee's entry includes (assuming a calendar-year accounting period and no reversing entries)  a

Accepted Answer

A)   credit to Interest Receivable.
B)   credit to Cash.
C)   debit to Notes Receivable.
D)   debit to Interest Income.E) A) and D)
F) A) and C)

Question 7

The direct write-off method of recognizing uncollectible accounts is not in accordance with good accounting practice.

Accepted Answer

A) True 
 B)False

Question 8

Which requires a two-tiered approach to test whether the value of loans and receivables are impaired?

Accepted Answer

The answer of Which requires a two-tiered approach to test...

Question 9

The allowance method of accounting for bad debts violates the matching principle.

Accepted Answer

A) True 
 B)False

Question 10

If a promissory note is dishonored, the payee should not record interest income.

Accepted Answer

A) True 
 B)False

Question 11

Receivables are valued and reported in the balance sheet at their gross amount less any sales returns and allowances and less any cash discounts.

Accepted Answer

A) True 
 B)False

Question 12

The allowance for doubtful accounts is similar to accumulated depreciation in that it shows the total of all accounts written off over the years.

Accepted Answer

A) True 
 B)False

Question 13

Your roommate is uncertain about the advantages of a promissory note. Compare the advantages of a note receivable with those of an account receivable.

Accepted Answer

A promissory note gives the holder a str...

Question 14

The financial statements of the Phelps Manufacturing Company reports net sales of $500,000 and accounts receivable of $80,000 and $40,000 at the beginning of the year and end of year, respectively. What is the accounts receivable turnover for Phelps?

Accepted Answer

A)   8.3 times
B)   12.5 times
C)   6.3 times
D)   4.2 timesE) None of the above
F) A) and B)

Question 15

If a company has significant concentrations of credit risk, it must discuss this risk in the notes to its financial statements.

Accepted Answer

A) True 
 B)False

Question 16

Under the allowance method of accounting for bad debts, why must uncollectible accounts receivable be estimated at the end of the accounting period?

Accepted Answer

A)   To allow the collection department to schedule work for the next accounting period.
B)   To determine the gross realizable value of accounts receivable.
C)   The IRS rules require the company to make the estimate.
D)   To match bad debt expense to the period in which the revenues were earned.E) A) and D)
F) B) and D)

Question 17

The balance of Allowance for Doubtful Accounts prior to making the adjusting entry to record Bad Debt Expense

Accepted Answer

A)   is relevant when using the percentage-of-receivables basis.
B)   is relevant when using the direct write-off method.
C)   is relevant to both the percentage-of-receivables basis and the direct write-off method.
D)   will never show a debit balance at this stage in the accounting cycle.E) B) and D)
F) None of the above

Question 18

A dishonored note receivable

Accepted Answer

A)   Is no longer negotiable.
B)   Must be written off by the lender.
C)   Creates a claim against the maker for the amount of principal only.
D)   Is one that is not paid in full within 10 days of maturity.E) A) and B)
F) None of the above

Question 19

On January 15, Nifty Company sells merchandise on account to Martinez Associates for $3,000 with terms 3/10, n/30. On January 20, Martinez returns merchandise worth $600 to Nifty. On January 24, payment is received from Martinez for the balance due. What is the amount of cash received?

Accepted Answer

A)   $2,400
B)   $2,328
C)   $2,310
D)   $1,680E) None of the above
F) C) and D)

Question 20

Young Company lends Dobson industries $40,000 on August 1, 2014, accepting a 9-month, 12% interest note. If Young prepares it financial statements as of December 31, 2014, what adjusting entry must it make?

Accepted Answer

A)  
B)  
C)  
D)   E) A) and C)
F) A) and D)

Exam 8: Reporting and Analyzing Receivables

A dishonored note receivable

Correct AnswerverifiedShow Answer

Merry Co. sells Christmas angels. Merry determines that at the end of December, they have the following aging schedule of Accounts Receivable: Compute the net receivables based on the above information at the end of December (There was no beginning balance in the Allowance for Doubtful Accounts).

Correct Answerverified($1,150 - ...View AnswerShow Answer

Which requires a two-tiered approach to test whether the value of loans and receivables are impaired?

Correct AnswerverifiedShow Answer

The financial statements of the Phelps Manufacturing Company reports net sales of $500,000 and accounts receivable of $80,000 and $40,000 at the beginning of the year and end of year, respectively. What is the accounts receivable turnover for Phelps?

Correct AnswerverifiedShow Answer

The allowance method of accounting for bad debts violates the matching principle.

Correct AnswerverifiedShow Answer

If a company has significant concentrations of credit risk, it must discuss this risk in the notes to its financial statements.

Correct AnswerverifiedShow Answer

The allowance for doubtful accounts is similar to accumulated depreciation in that it shows the total of all accounts written off over the years.

Correct AnswerverifiedShow Answer

The direct write-off method of recognizing uncollectible accounts is not in accordance with good accounting practice.

Correct AnswerverifiedShow Answer

Receivables are valued and reported in the balance sheet at their gross amount less any sales returns and allowances and less any cash discounts.

Correct AnswerverifiedShow Answer

Barber Company lends Monroe Company $30,000 on April 1, accepting a four-month, 6% interest note. Barber Company prepares financial statements on April 30. What adjusting entry should be made before the financial statements can be prepared?

Correct AnswerverifiedShow Answer

Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $45,000. If the balance of the Allowance for Doubtful Accounts is $11,000 debit before adjustment what is the amount of bad debt expense for that period?

Correct AnswerverifiedShow Answer

Your roommate is uncertain about the advantages of a promissory note. Compare the advantages of a note receivable with those of an account receivable.

Correct AnswerverifiedA promissory note gives the holder a str...View AnswerShow Answer

If a promissory note is dishonored, the payee should not record interest income.

Correct AnswerverifiedShow Answer

Young Company lends Dobson industries $40,000 on August 1, 2014, accepting a 9-month, 12% interest note. If Young prepares it financial statements as of December 31, 2014, what adjusting entry must it make?

Correct AnswerverifiedShow Answer

On January 15, Nifty Company sells merchandise on account to Martinez Associates for $3,000 with terms 3/10, n/30. On January 20, Martinez returns merchandise worth $600 to Nifty. On January 24, payment is received from Martinez for the balance due. What is the amount of cash received?

Correct AnswerverifiedShow Answer

Other receivables include non-trade receivables such as loans to company officers.

Correct AnswerverifiedShow Answer

Under the allowance method of accounting for bad debts, why must uncollectible accounts receivable be estimated at the end of the accounting period?

Correct AnswerverifiedShow Answer

A note receivable is executed in December. When the note is paid the following February, the payee's entry includes (assuming a calendar-year accounting period and no reversing entries) a

Correct AnswerverifiedShow Answer

The balance of Allowance for Doubtful Accounts prior to making the adjusting entry to record Bad Debt Expense

Correct AnswerverifiedShow Answer

In the table below the information for four companies is provided. Assuming all four companies are in the same industry, which company appears to have the greatest likelihood of paying its current obligations?

Correct AnswerverifiedShow Answer

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($1,150 - ...
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A promissory note gives the holder a str...
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