Question 1

What is the most likely reason for a company to have an increase in average collection period?

Accepted Answer

A)  The company has incurred additional marketing expenses to attract customers.
B)  Customers are paying in a timelier manner.
C)  The company has tightened its credit policies for its customers.
D)  The company has become more lenient in its credit policies and is extending credit terms to maintain customers.E) None of the above
F) A) and B)

Question 2

Beverage International reports net credit sales for the year of $240,000.The company's accounts receivable balance at the beginning of the year equaled $20,000 and the balance at the end of the year equaled $30,000.What is Beverage International's receivables turnover ratio?

Accepted Answer

A)  12.0.
B)  9.6.
C)  8.0.D) A) and B)
E) A) and C)

Question 3

Boynton Jewelers reported the following amounts at the end of the year: total sales = $550,000;sales discounts = $12,000;sales returns = $44,000;sales allowances = $17,000.What was the company's net revenues for the year?

Accepted Answer

A)  $489,000.
B)  $485,000.
C)  $477,000.
D)  $499,000. E) A) and C)
F) A) and B)

Question 4

One advantage of the allowance method for accounting for uncollectible accounts is that the company reports:

Accepted Answer

A)  Bad debt expense in the same period as the credit sale.
B)  Greater total sales to customers.
C)  Fewer returns by customers.D) All of the above
E) B) and C)

Question 5

The average collection period shows the approximate number of days the average accounts receivable balance is outstanding.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is recorded upon receipt of a payment on April 7,2018,by a customer who pays a $900 invoice dated March 3,2018,with terms 2/10,n/60?

Accepted Answer

A)  Debit Sales Discounts $18.
B)  Credit Purchase Discounts $18.
C)  Credit Accounts Receivable $882.
D)  Debit Cash $900.E) All of the above
F) A) and B)

Question 7

Fleming Corp.provided services on account.The transaction would be recorded with a debit to:

Accepted Answer

A)  Retained Earnings.
B)  Service Revenue.
C)  Accounts Receivable.
D)  Cash.E) A) and D)
F) C) and D)

Question 8

The Sales Returns account is an expense account.Sales Returns is a contra revenue account.

Accepted Answer

A) True 
 B)False

Question 9

Accounts receivable are normally reported at the:

Accepted Answer

A)  Present value of future cash receipts.
B)  Current value plus accrued interest.
C)  Expected amount to be received.
D)  Current value less expected collection costs.E) A) and B)
F) C) and D)

Question 10

The method of estimating uncollectible accounts based on the length of time the amount is owed by the customer is referred to as the:

Accepted Answer

A)  Activity method.
B)  Realization method.
C)  Direct write-off method.
D)  Aging method.E) All of the above
F) A) and D)

Question 11

The income statement approach for estimating bad debts uses a percentage of

Accepted Answer

A)  Credit sales.
B)  Accounts receivable.
C)  Allowance for uncollectible accounts.D) A) and B)
E) A) and C)

Question 12

Lail Inc.accounts for bad debts using the allowance method.On June 1,Lail Inc.wrote off Andrew Green's $2,500 account.Based on Lail's estimation,Andrew Green will never pay any portion of the balance in his account.What effect will this write-off have on Lail Inc.'s balance sheet at the time of the write-off?

Accepted Answer

A)  An increase to stockholders' equity and a decrease to liabilities.
B)  No effect.
C)  An increase to assets and an increase to stockholders' equity.D) All of the above
E) B) and C)

Question 13

A(n) ______ receivable is an informal credit arrangement with trade customers,whereas a(n) ______ receivable is a formal signed credit arrangement between a creditor and a debtor.

Accepted Answer

A)  Account;Note
B)  Revenue;Note
C)  Note;AccountD) All of the above
E) None of the above

Question 14

The direct write-off method involves recording an adjustment at the end of each period to account for the possibility of future uncollectible accounts.The allowance method records an adjustment for future uncollectible accounts.

Accepted Answer

A) True 
 B)False

Question 15

The normal balance of the account "Allowance for Uncollectible Accounts" is a _______ because _______.

Accepted Answer

A)  Debit;it is a contra account to Revenue (a credit account) 
B)  Credit;it is a contra account to Accounts Receivable (a debit account) 
C)  Debit;it is an expense in the income statementD) All of the above
E) B) and C)

Question 16

Which of the following items are classified as receivables?

Accepted Answer

A)  Tax refund claims.
B)  Amounts owed by customers.
C)  Amounts loaned and expected to be collected.
D)  All of the other answers are classified as receivables.E) None of the above
F) A) and B)

Question 17

Lewis Inc.had the following information taken from various accounts at the end of the year: What was Lewis Inc.'s net revenues for the year?
  Sales discounts $41,000 Deferred revenues $32,000 Total sales $459,000 Purchase discounts $15,000 Sales allowances $35,000 Accounts receivable $205,000\begin{array} { | l | r | } \hline 	ext { Sales discounts } & \$ 41,000 \\hline 	ext { Deferred revenues } & \$ 32,000 \\hline 	ext { Total sales } & \$ 459,000 \\hline 	ext { Purchase discounts } & \$ 15,000 \\hline 	ext { Sales allowances } & \$ 35,000 \\hline 	ext { Accounts receivable } & \$ 205,000 \\hline\end{array} Sales discounts  Deferred revenues  Total sales  Purchase discounts  Sales allowances  Accounts receivable ​$41,000$32,000$459,000$15,000$35,000$205,000​​

Accepted Answer

A)  $368,000.
B)  $434,000.
C)  $383,000.
D)  $437,000.  E) C) and D)
F) A) and B)

Question 18

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

Accepted Answer

A)  Sales revenue.
B)  Sales discount.
C)  Sales return.
D)  Sales allowance.E) None of the above
F) A) and B)

Question 19

Even though the percentage-of-receivables method and the percentage-of-credit-sales method use different accounts to estimate future uncollectible accounts,the amount of bad debt expense reported in the income statement will always be the same under the two methods.Bad debt expense will typically differ between the two methods.

Accepted Answer

A) True 
 B)False

Question 20

The percentage-of-receivables method for estimating uncollectible accounts is commonly referred to as the balance sheet method,because the estimate of bad debts is based on a balance sheet amount-accounts receivable.

Accepted Answer

A) True 
 B)False

Exam 5: Receivables and Sales

Beverage International reports net credit sales for the year of $240,000.The company's accounts receivable balance at the beginning of the year equaled $20,000 and the balance at the end of the year equaled $30,000.What is Beverage International's receivables turnover ratio?

Correct Answer
verified

A(n) receivable is an informal credit arrangement with trade customers,whereas a(n) receivable is a formal signed credit arrangement between a creditor and a debtor.

Correct Answer
verified

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

Correct Answer
verified

Fleming Corp.provided services on account.The transaction would be recorded with a debit to:

Correct Answer
verified

Boynton Jewelers reported the following amounts at the end of the year: total sales = $550,000;sales discounts = $12,000;sales returns = $44,000;sales allowances = $17,000.What was the company's net revenues for the year?

Correct Answer
verified

Which of the following is recorded upon receipt of a payment on April 7,2018,by a customer who pays a $900 invoice dated March 3,2018,with terms 2/10,n/60?

Correct Answer
verified

The percentage-of-receivables method for estimating uncollectible accounts is commonly referred to as the balance sheet method,because the estimate of bad debts is based on a balance sheet amount-accounts receivable.

Correct Answer
verified

Correct Answer
verified

Accounts receivable are normally reported at the:

Correct Answer
verified

One advantage of the allowance method for accounting for uncollectible accounts is that the company reports:

Correct Answer
verified

The Sales Returns account is an expense account.Sales Returns is a contra revenue account.

Correct Answer
verified

Correct Answer
verified

The direct write-off method involves recording an adjustment at the end of each period to account for the possibility of future uncollectible accounts.The allowance method records an adjustment for future uncollectible accounts.

Correct Answer
verified

Correct Answer
verified

The average collection period shows the approximate number of days the average accounts receivable balance is outstanding.

Correct Answer
verified

Which of the following items are classified as receivables?

Correct Answer
verified

What is the most likely reason for a company to have an increase in average collection period?

Correct Answer
verified

The income statement approach for estimating bad debts uses a percentage of

Correct Answer
verified

The method of estimating uncollectible accounts based on the length of time the amount is owed by the customer is referred to as the:

Correct Answer
verified

The normal balance of the account "Allowance for Uncollectible Accounts" is a _ because _.

Correct Answer
verified

Exam 5: Receivables and Sales

Beverage International reports net credit sales for the year of $240,000.The company's accounts receivable balance at the beginning of the year equaled $20,000 and the balance at the end of the year equaled $30,000.What is Beverage International's receivables turnover ratio?

Correct AnswerverifiedShow Answer

A(n) ______ receivable is an informal credit arrangement with trade customers,whereas a(n) ______ receivable is a formal signed credit arrangement between a creditor and a debtor.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Fleming Corp.provided services on account.The transaction would be recorded with a debit to:

Correct AnswerverifiedShow Answer

Boynton Jewelers reported the following amounts at the end of the year: total sales = $550,000;sales discounts = $12,000;sales returns = $44,000;sales allowances = $17,000.What was the company's net revenues for the year?

Correct AnswerverifiedShow Answer

Which of the following is recorded upon receipt of a payment on April 7,2018,by a customer who pays a $900 invoice dated March 3,2018,with terms 2/10,n/60?

Correct AnswerverifiedShow Answer

The percentage-of-receivables method for estimating uncollectible accounts is commonly referred to as the balance sheet method,because the estimate of bad debts is based on a balance sheet amount-accounts receivable.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Accounts receivable are normally reported at the:

Correct AnswerverifiedShow Answer

One advantage of the allowance method for accounting for uncollectible accounts is that the company reports:

Correct AnswerverifiedShow Answer

The Sales Returns account is an expense account.Sales Returns is a contra revenue account.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The direct write-off method involves recording an adjustment at the end of each period to account for the possibility of future uncollectible accounts.The allowance method records an adjustment for future uncollectible accounts.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The average collection period shows the approximate number of days the average accounts receivable balance is outstanding.

Correct AnswerverifiedShow Answer

Which of the following items are classified as receivables?

Correct AnswerverifiedShow Answer

What is the most likely reason for a company to have an increase in average collection period?

Correct AnswerverifiedShow Answer

The income statement approach for estimating bad debts uses a percentage of

Correct AnswerverifiedShow Answer

The method of estimating uncollectible accounts based on the length of time the amount is owed by the customer is referred to as the:

Correct AnswerverifiedShow Answer

The normal balance of the account "Allowance for Uncollectible Accounts" is a _______ because _______.

Correct AnswerverifiedShow Answer

Correct Answer
verified

A(n) receivable is an informal credit arrangement with trade customers,whereas a(n) receivable is a formal signed credit arrangement between a creditor and a debtor.

Correct Answer
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The normal balance of the account "Allowance for Uncollectible Accounts" is a _ because _.

Correct Answer
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