Expert Answers

1.The maturity value of a $20,000, 9%, 40-day note receivable dated July 3 is
2.In the table below the information for four companies is provided.

If Garner’s net credit sales are $290,000, what are its average net receivables?
B) $20,000
3.Nance Co. holds Gant Inc.’s $20,000, 120 day, 9% note. The entry made by Nance Co. when the note is collected, assuming no interest has previously been accrued is:
Option  C

4.Allowance for Doubtful Accounts is debited under the direct write-off method when an account is determined to be uncollectible.
A) True
B) False

5.Nichols Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $200,000 and credit sales are $1,000,000. Management estimates that 5% of accounts receivable will be uncollectible. What adjusting entry will Nichols Company make if the Allowance for Doubtful Accounts has a credit balance of $2,000 before adjustment?
Option B

6.Selling accounts receivables to factors and allowing credit terms such as 2/10, n/30
A) represent common business practices.
B) represent ways to accelerate receivables collections.
C) result in collections that are less than the gross accounts receivable.
D) All of the above statements are correct.

7.An analysis and aging of the accounts receivable of Watts Company at December 31 reveal these data:

What is the cash realizable value of the accounts receivable at December 31 after adjustment?
B) $1,500,000
C) $1,600,000

8.Wilton sells softball equipment. On November 14, they shipped $1,000 worth of softball uniforms to Paola Middle School, terms 2/10, n/30. On November 21, they received an order from Douglas High School for $600 worth of custom printed bats to be produced in December. On November 30, Paola Middle School returned $100 of defective merchandise. Wilton has received no payments from either school as of month end. What amount will be recognized as net accounts receivable on the balance sheet as of November 30?
A) $1,600
B) $1,500
C) $1,000
D) $ 900

9.Three accounting issues associated with accounts receivable are
A) depreciating, returns, and valuing.
B) depreciating, valuing, and collecting.
C) recognizing, valuing, and accelerating collections.
D) accrual, bad debts, and accelerating collections.
10.During 2010 Sedgewick Inc. had sales on account of $132,000, cash sales of $54,000, and collections on account of $84,000. In addition, they collected $1,450 which had been written off as uncollectible in 2009. As a result of these transactions the change in the accounts receivable balance indicates a
A) $100,550 increase.
B) $ 48,000 increase.
C) $ 46,550 increase.
D) $102,000 increase.

11.When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when
A) a sale is made.
B) an account becomes bad and is written off.
C) management estimates the amount of uncollectibles.
D) a customer’s account becomes past due.

12.Young Company lends Dobson industries $30,000 on August 1, 2010, accepting a 9-month, 12% interest note. If Young prepares it financial statements as of December 31, 2010, what adjusting entry must it make?
Option A

13.The financial statements of the Phelps Manufacturing Company reports net sales of $400,000 and accounts receivable of $80,000 and $40,000 at the beginning of the year and end of year, respectively. What is the receivables turnover ratio for Phelps?
A)6.7 times
B)10 times
C)5 times
D)8 times

14.Doane Company receives a $5,000, 3-month, 6% promissory note from Ray Company in settlement of an open accounts receivable. What entry will Doane Company make upon receiving the note?
Option D
15.In 2010 Wilkinson Company had net credit sales of $1,125,000. On January 1, 2010, Allowance for Doubtful Accounts had a credit balance of $27,000. During 2010, $45,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage of receivables basis). If the accounts receivable balance at December 31 was $300,000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2010?
A)$ 30,000
C)$ 48,000
D)$ 45,000

16.Simonic Retailers accepted $75,000 of Citibank Visa credit card charges for merchandise sold on July 1. Citibank charges 4% for its credit card use. The entry to record this transaction by Simonic Retailers will include a credit to Sales of $75,000 and a debit(s) to:
A) Cash $72,000 and Service Charge Expense $3,000.
B) Accounts Receivable $72,000 and Service Charge Expense $3,000.
C) Cash $72,000 and Interest Expense $3,000.
D) Accounts Receivable $75,000

17.An aging of a company’s accounts receivable indicates that $4,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 credit balance, the adjustment to record bad debts for the period will require a
A) debit to Bad Debts Expense for $4,000.
B) debit to Allowance for Doubtful Accounts for $2,800.
C) debit to Bad Debts Expense for $2,800.
D) credit to Allowance for Doubtful Accounts for $4,000.
18. Which of the following is least likely to help a company minimize losses as credit standards are relaxed?
A) Require potential customers to provide bank guarantees.
B) Ask a potential customer for references regarding payment history.
C) Increase the estimate of uncollectible accounts at the end of each period.
D) Check a potential customer’s credit rating.
19. A dishonored note is a note that is not paid in full at maturity.
A) True
B) False
Allowance for Doubtful Accounts on the balance sheet
A) is offset against total current assets.
B) increases the cash realizable value of accounts receivable.
C) appears under the heading “Other Assets.”
D) is deducted from accounts receivable.