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| 1 | |
Some credit card sales are recorded with a debit to Cash and other credit card sales are recorded with a debit to Accounts Receivable. |
| | A) | True |
| | B) | False |
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| 2 | |
The maturity date of a 90-day note receivable dated August 29 is November 28. |
| | A) | True |
| | B) | False |
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| 3 | |
A 90-day, 6%, $1,000 note receivable has a maturity value of $1,500. |
| | A) | True |
| | B) | False |
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| 4 | |
Amounts owed by customers for credit sales for which periodic payments are is required over an extended period of time are called factored accounts receivable. |
| | A) | True |
| | B) | False |
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| 5 | |
Pledging receivables transfers ownership of the assets. |
| | A) | True |
| | B) | False |
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| 6 | |
The accounts receivable turnover ratio is useful in measuring both the quality and liquidity of receivables. |
| | A) | True |
| | B) | False |
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| 7 | |
When the allowance method is used, the entry to write-off a bad debt using the allowance method includes a debit to the Bad Debt Expense account. |
| | A) | True |
| | B) | False |
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| 8 | |
When the direct write-off method is used, the entry to write-off a bad debt using the allowance method includes a debit to the Bad Debt Expense account. |
| | A) | True |
| | B) | False |
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| 9 | |
The Allowance for Doubtful accounts is a liability account and has a normal credit balance. |
| | A) | True |
| | B) | False |
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| 10 | |
When the allowance method is used, the entry to record a recovery of a bad debt includes a debit to the Allowance for Doubtful Accounts account. |
| | A) | True |
| | B) | False |
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| 11 | |
The aging of accounts receivable method is usually the most reliable of the estimation methods (compared to the percent of sales and percent of receivables methods). |
| | A) | True |
| | B) | False |
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| 12 | |
When the percent of sales method is used, the existing unadjusted balance in the Allowance for Doubtful Accounts account is not considered in the determining the amount of the related adjusting entry. |
| | A) | True |
| | B) | False |
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| 13 | |
When the percent of receivable method is used, the existing unadjusted balance in the Allowance for Doubtful Accounts account must be considered in determining the amount of the related adjusting entry. |
| | A) | True |
| | B) | False |
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| 14 | |
The entry to record the receipt of a note at the time of a product sale to a customer includes a credit to Accounts Receivable. |
| | A) | True |
| | B) | False |
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| 15 | |
A short-term, $1,000 note receivable is received as payment on account. The note is received on December 1 and pays 12% interest. The adjusting entry on December 31 will include a credit to Interest revenue for $120. |
| | A) | True |
| | B) | False |
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| 16 | |
What is the supplementary record that a company creates and maintains in a separate account for each customer called? |
| | A) | The controlling account |
| | B) | The schedule of accounts receivable |
| | C) | The accounts receivable ledger |
| | D) | Any of the above |
| | E) | None of the above |
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| 17 | |
Which of the following statements is true about debit cards? |
| | A) | Amounts are withdrawn from the customer's cash account when the debit card (issued by a bank) is used. |
| | B) | The use of a debit card creates a receivable on the retailer's books. |
| | C) | Debit cards are not commonly used in places of business. |
| | D) | Interest fees are usually imposed on those customers that use the card. |
| | E) | All of the above. |
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| 18 | |
Which is an appropriate way to report credit card expense on the income statement? |
| | A) | As an addition to net sales |
| | B) | As a selling expense |
| | C) | As an administrative expense |
| | D) | Either B or C |
| | E) | None of the above |
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| 19 | |
What is the total interest (360-day year) on a $1,500, 12%, 120-day note? |
| | A) | $6.00 |
| | B) | $60.00 |
| | C) | $180.00 |
| | D) | $1680.00 |
| | E) | None of the above |
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| 20 | |
A 60-day, 11%, promissory note that is dated June 10 will have a maturity date of which of the following? |
| | A) | August 6 |
| | B) | August 7 |
| | C) | August 8 |
| | D) | August 9 |
| | E) | August 10 |
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| 21 | |
Accounts receivable valued at $40,000 are sold for $38,000. How is the difference of $2,000 treated in the entry to record the sale? |
| | A) | As a debit to Interest Expense |
| | B) | As a debit to Factoring Fee Expense |
| | C) | As a credit to Interest Earned |
| | D) | As a credit to Bad Debt Expense |
| | E) | As a debit to Allowance for Doubtful Accounts |
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| 22 | |
Beginning accounts receivable were $100,000 and the ending accounts receivable are $130,000. Net sales for the period total $1,265,000. What is the accounts receivable turnover? |
| | A) | 11.00 |
| | B) | 12.00 |
| | C) | 9.73 |
| | D) | 12.65 |
| | E) | None of the above |
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| 23 | |
Which of the following is a method used to account for uncollectible accounts? |
| | A) | Direct write-off method |
| | B) | Allowance method |
| | C) | Bad debt expense method |
| | D) | Installment method |
| | E) | Both A and B above |
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| 24 | |
A company that uses the direct write-off method of accounting for bad debts expense has recovered a bad debt that was written off one year ago. Which of the following would be included in the two entries used to record this transaction? |
| | A) | A credit to the Allowance for Doubtful Accounts account |
| | B) | A debit to the Bad Debts Recovered |
| | C) | A credit to the Bad Debt Expense account |
| | D) | A debit to the Allowance for Doubtful Accounts account |
| | E) | None of the above |
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| 25 | |
What 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 constraint |
| | E) | Discounting constraint |
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| 26 | |
A company had a debit balance of $1,700 in the Allowance for Doubtful Accounts account and a debit balance of $450,000 in the Accounts Receivable account prior to the year-end adjustment. Past experience suggests that 2% of receivables will be uncollectible. What amount should be in the adjusting entry for bad debts? |
| | A) | $7,300 |
| | B) | $9,000 |
| | C) | $10,700 |
| | D) | $12,500 |
| | E) | None of the above |
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| 27 | |
The Allowance for Doubtful Accounts account has a credit balance of $600 prior to the year-end adjustment. The bad debts are estimated at 4% of $650,000, the net credit sales. After the appropriate adjusting entry for bad debts is recorded, what will be the balance of the Allowance for Doubtful Accounts account? |
| | A) | $25,400 |
| | B) | $26,000 |
| | C) | $26,600 |
| | D) | $28,400 |
| | E) | None of the above |
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| 28 | |
What entry should be recorded to recognize the receipt of a note from a customer in granting a customer a time extension on a past-due account receivable? |
| | A) | Debit Notes Receivable; credit Sales |
| | B) | Debit Accounts Receivable; credit Notes Receivable |
| | C) | Debit Notes Receivable; credit Accounts Receivable |
| | D) | Debit Notes Receivable; credit Allowance for Doubtful Accounts |
| | E) | Debit Allowance for Doubtful Accounts; credit Accounts Receivable |
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| 29 | |
On December 1, ABH Company accepts a $5,000, 6-month 12% note from a customer. What adjusting entry should be made at December 31 relating to this note on ABH's books? |
| | A) | Debit Interest Expense $600; credit Interest Payable $600 |
| | B) | Debit Interest Revenue $600; credit Interest Receivable |
| | C) | Debit Interest Receivable $600; credit Interest Revenue $600 |
| | D) | Debit Interest Revenue $50; credit Interest Receivable $50 |
| | E) | Debit Interest Receivable $50; credit Interest Revenue $50 |
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| 30 | |
Which of the following is not true regarding a $3,000, 14%, 90-day note that is dishonored? |
| | A) | The Account Receivable account is debited with the maturity value of the note. |
| | B) | The Interest Revenue account is credited with the interest earned. |
| | C) | The Notes Receivable account is credited for the maturity value of the note. |
| | D) | A dishonored note does not relieve the maker of the note from the obligation. |
| | E) | Total assets increase by the amount of the interest earned. |
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