 |
| 1.
| |
Which is the appropriate way to disclose the credit card expense on the income statement? |
| | A) | as an addition to sales |
| | B) | as a selling expense |
| | C) | as an administrative expense |
| | D) | as part of cost of goods sold |
|
|
|
| 2.
| |
When a firm writes off a bad debt under the allowance method of accounting for bad debts |
| | A) | the realizable value of accounts receivable decreases |
| | B) | total net current assets will decrease |
| | C) | the cash account will decrease |
| | D) | the realizable value of accounts receivable will not change |
|
|
|
| 3.
| |
When a firm collects (recovers) an account receivable that was previously written off under the allowance method of accounting for bad debts, |
| | A) | the realizable value of accounts receivable will decrease |
| | B) | the cash account will decrease by the full amount of the recovery |
| | C) | the allowance account will decrease by the amount collected |
| | D) | the realizable value of accounts receivable will increase |
|
|
|
| 4.
| |
The Allowance for Doubtful Accounts account has a year-end credit balance, prior to adjustment, of $450. The bad debts are estimated at 3% of $650,000, the net credit sales. After the appropriate adjusting entry for bad debts, the Allowance for Doubtful Accounts should have a credit balance of |
| | A) | $19,500 |
| | B) | $19,950 |
| | C) | $19,050 |
| | D) | $20,400 |
|
|
|
| 5.
| |
The Allowance for Doubtful Accounts account has a year-end credit balance, prior to adjustment of $500. The bad debts are estimated at 7% of $60,000 of outstanding accounts receivable. After the appropriate adjusting entry to recognize the bad debt expense, the Allowance for Doubtful Accounts should have a ___________ credit balance. |
| | A) | $4,200 |
| | B) | $3,200 |
| | C) | $3,700 |
| | D) | $5,200 |
|
|
|
| 6.
| |
Which accounting principle or concept permits the direct write-off method of accounting for bad debts? |
| | A) | full-disclosure principle |
| | B) | business entity concept |
| | C) | matching principle |
| | D) | materiality principle |
|
|
|
| 7.
| |
A firm using the allowance method of accounting for bad debts expense has recovered a bad debt that was written off one year ago. The appropriate journal entry to record the recovery would include a |
| | A) | credit to the Allowance for Doubtful Accounts account |
| | B) | debit to the Bad Debt Expense account |
| | C) | credit to the Bad Debt Expense account |
| | D) | debit to the Allowance for Doubtful Accounts account |
|
|
|
| 8.
| |
On July 18, a firm received from one of its customers, Algo Rythym, a written promise to pay the firm $1,200, at 12% interest, on September 17, for merchandise that Algo had purchased from the firm. Which of the following statements is true? |
| | A) | Algo is the payee of the note |
| | B) | the firm is the maker of the note |
| | C) | the firm is the endorser of the note |
| | D) | Algo is the maker of the note |
|
|
|
| 9.
| |
A 90-day, 11%, promissory note that is dated June 13 will have a maturity date of |
| | A) | September 11 |
| | B) | September 10 |
| | C) | September 9 |
| | D) | September 8 |
|
|
|
| 10.
| |
The interest on a $1,500, 15%, 120-day note is |
| | A) | $7.50 |
| | B) | $73.97 |
| | C) | $1,575.00 |
| | D) | $225.00 |
|
|
|
| 11.
| |
Which of the following is not true with regard to a $3,000, 14%, 90-day note that is dishonored? |
| | A) | an account receivable is charged with the maturity value of the note |
| | B) | the Interest Earned account is credited |
| | C) | the Notes Receivable account is credited for the maturity value |
| | D) | interest may be charged on the outstanding balance |
|
|
|
| 12.
| |
A $10,000, 12%, 60-day note receivable is received on January 12. The note is discounted at 12% on January 18. The maturity value of the note is |
| | A) | $10,000 |
| | B) | $197.26 |
| | C) | $10,200 |
| | D) | $11,200 |
|
|
|
| 13.
| |
A $10,000, 12%, 60-day note receivable is received on January 12. The note is discounted at 12% on January 18. The proceeds of the note will be |
| | A) | $10,000.00 |
| | B) | $10,016.22 |
| | C) | $10,184.60 |
| | D) | $11,200.00 |
|
|
|
| 14.
| |
Which of the following statements is true? |
| | A) | The balance sheet approach to estimating bad debt focusing on the percentage of receivables emphasizes the matching principle. |
| | B) | The balance sheet approach to estimating bad debt focusing on the aging of receivables emphasizes the realized value. |
| | C) | The income statement approach to estimating bad debt focusing on the percentage of sales emphasizes realized value. |
| | D) | All of the above |
|
|
|
| 15.
| |
Which of the following journal entries is correct under the allowance method to record estimated bad debt expense? |
| | A) | debiting Bad Debt Expense and crediting Accounts Receivable |
| | B) | debiting Allowance for Doubtful Accounts and crediting Accounts Receivable |
| | C) | debiting Accounts Receivable and crediting Bad Debt Expense |
| | D) | debiting Bad Debt Expense and crediting Allowance for Doubtful Accounts |
|
|
|
| 16.
| |
Which of the following statements is true regarding the allowance method for writing off bad debt? |
| | A) | It satisfies the matching principle. |
| | B) | It satisfies the conservatism principle. |
| | C) | It satisfies the materiality principle. |
| | D) | a and b |
|
|
|
| 17.
| |
A company's financial statements show the following information: Net sales in Year 2 $298,000, Accounts Receivable in Year 1 $35,800, in Year 2 $42,300. What is the Accounts Receivable Turnover for Year 2? |
| | A) | 7.63 |
| | B) | 0.13 |
| | C) | 8.32 |
| | D) | d.7.04 |
|
|
|
| 18.
| |
What is the Days' Sales Uncollected for Year 2 in Question 10-17? |
| | A) | 51.81 days. |
| | B) | 48 days. |
| | C) | 44 days. |
| | D) | 2,785 days. |
|
|
.