Question 1

Use the information above to answer the following question.What is the amount of current assets on the balance sheet at December 31,2014?

Accepted Answer

A)  $32,000
B)  $34,700
C)  $31,600
D)  $32,400E) All of the above
F) C) and D) C

Question 2

For each scenario below,indicate the appropriate change in current revenue,expenses and net income.Use the following symbols:  ,  ,or NE for no effect.

Accepted Answer

a.

,NE,

b.NE,

,

...

Question 3

The Grass is Greener Corporation's receivables turnover ratio decreases from 14.1 to 11.8.Which of the following statements is true?

Accepted Answer

A)  This indicates that the company is taking longer to collect credit payments.
B)  This is an indication that the company is experiencing declining credit costs.
C)  This could be an indication that the company is using more efficient collection methods.
D)  This is an indication that the company is buying and selling financial assets less rapidly.E) B) and D)
F) None of the above

Question 4

Your company uses the percentage of credit sales method for calculating bad debt expense.If your company has $216,000 in total sales,of which $178,000 are on credit,and its historical bad debt loss is 6% of credit sales,bad debt expense is:

Accepted Answer

A)  $12,960.
B)  $10,680.
C)  $38,000.
D)  $11,000E) C) and D)
F) A) and B) B

Question 5

The days to collect receivables increases from 32 to 48.Which of the following statements is true?

Accepted Answer

A)  The company is likely to see its bad debt expense decrease.
B)  The receivables turnover rate increases by 50%.
C)  The company is becoming more efficient at collecting payment.
D)  The receivables turnover rate falls from approximately 11.4 to 7.6.E) None of the above
F) A) and B)

Question 6

A company lends its supplier $150,000 for 3 years at a 6% annual interest rate.Interest payments are to be made twice a year.The company initially records the transaction by:

Accepted Answer

A)  debiting Notes Receivable for $150,000 and crediting Cash for $150,000.
B)  debiting Cash for $150,000 and crediting Notes Payable for $150,000.
C)  debiting Cash for $9,000 and crediting Interest Revenue for $9,000.
D)  debiting Interest Receivable for $4,500 and crediting Interest Revenue for $4,500.E) A) and C)
F) C) and D)

Question 7

Bolster Soda had an accounts receivable turnover ratio of 9.9 this year and 11.0 last year.Castor Soda had a turnover ratio of 9.3 this year and 9.3 last year.This implies

Accepted Answer

A)  Castor had a better receivables turnover than Bolster did for both years.
B)  Bolster had a better receivables turnover than Castor did for both years.
C)  Castor has credit policies that need to be tightened.
D)  Castor collected receivables more quickly than Bolster in both years.E) A) and C)
F) B) and C)

Question 8

A company lends its supplier $150,000 for 3 years at a 6% annual interest rate.Interest payments are to be made twice a year.Each interest payment will be for:

Accepted Answer

A)  $9,000.
B)  $13,500.
C)  $4,500.
D)  $27,000.E) None of the above
F) C) and D)

Question 9

Your company has net sales of $468,300 and average trade receivables of $111,500 for the year.Which of the following is true? (Round all calculations to one decimal place. )

Accepted Answer

A)  The receivables turnover ratio is 4.2 and the days-to-collect is 0.01.
B)  The receivables turnover ratio is .2 and the days-to-collect is 1,520.
C)  The receivables turnover ratio is 4.2 and the days-to-collect is 86.9.
D)  The receivables turnover ratio is .2 and the days-to-collect is 87.6.E) None of the above
F) B) and C)

Question 10

When credit card sales occur,the seller may receive cash immediately,or within a few days,depending upon the specific credit card program being used.

Accepted Answer

A) True 
 B)False

Question 11

Use the information above to answer the following question.The days to collect for 2014 is closest to:

Accepted Answer

A)  40
B)  41
C)  43
D)  42E) A) and B)
F) B) and D)

Question 12

On average,5% of total accounts receivable has been uncollectible in the past.At the end of the year,the current balance of accounts receivable is $100,000.The allowance for doubtful accounts has an unadjusted debit balance of $500 using the aging of accounts receivable method.Credit sales during the year were $150,000.The estimated bad debt expense is:

Accepted Answer

A)  $4,500.
B)  $5,000.
C)  $5,500.
D)  $7,000.E) B) and C)
F) None of the above

Question 13

Use the information above to answer the following question.The unadjusted balance of the allowance for doubtful accounts of Johnstone Supplies,Inc. ,is a credit balance in the amount of $28,947 on July 31,2014.Based on the accounts receivable aging report,bad debt expense will be:

Accepted Answer

A)  $34,012.
B)  $5,065.
C)  $62,959.
D)  $50,434.E) A) and B)
F) A) and C)

Question 14

If the receivables turnover ratio rises significantly,the increase may be a signal that the company is extending credit to high-risk borrowers or allowing an overly generous repayment schedule.

Accepted Answer

A) True 
 B)False

Question 15

Use the information above to answer the following question.The journal entry to record the write-off on May 1 would include which of the following?

Accepted Answer

A)  Debit to Bad Debt Expense and credit to Allowance for Doubtful Accounts
B)  Debit to Accounts Receivable and credit to Allowance for Doubtful Accounts
C)  Debit to Allowance for Doubtful Accounts and credit to Bad Debt Expense
D)  Debit to Allowance for Doubtful Accounts and credit to Accounts ReceivableE) A) and B)
F) A) and C)

Question 16

Factoring refers to an arrangement in which a company sells its receivables to another company and receives cash immediately.

Accepted Answer

A) True 
 B)False

Question 17

Use the information above to answer the following question.If the company changes its credit granting policies and begins granting credit to less creditworthy customers,which of the following statements is true regarding the likely effect on the receivables turnover ratio and the days to collect measure?

Accepted Answer

A)  The receivables turnover ratio will decrease and days to collect will increase.
B)  The receivables turnover ratio will increase and days to collect will increase.
C)  The receivables turnover ratio will decrease and days to collect will decrease.
D)  The receivables turnover ratio will not change and days to collect will decrease.E) A) and B)
F) A) and C)

Question 18

What is the annual rate of interest being charged on a 9-month note receivable of $50,000 if the total interest is $3,000?

Accepted Answer

A)  6%
B)  8%
C)  12%
D)  10%E) B) and D)
F) A) and C) B

Question 19

Receivables might be sold ("factored") to:

Accepted Answer

A)  lengthen the time to collect from customers.
B)  reduce the receivables turnover ratio.
C)  generate cash quickly.
D)  generate a gain on sale.E) A) and B)
F) A) and D)

Question 20

When the direct write-off method is used to account for uncollectible accounts,which of the following accounts would not be used?

Accepted Answer

A)  Bad Debt Expense
B)  Accounts Receivable
C)  Allowance for Doubtful Accounts
D)  Notes ReceivableE) B) and D)
F) All of the above

Exam 8: Receivables, Bad Debt Expense, and Interest Revenue

Use the information above to answer the following question.What is the amount of current assets on the balance sheet at December 31,2014?

Correct Answer
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C

For each scenario below,indicate the appropriate change in current revenue,expenses and net income.Use the following symbols: , ,or NE for no effect.

Correct Answer
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a. ,NE, b.NE, , ...
View Answer

The Grass is Greener Corporation's receivables turnover ratio decreases from 14.1 to 11.8.Which of the following statements is true?

Correct Answer
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Your company uses the percentage of credit sales method for calculating bad debt expense.If your company has $216,000 in total sales,of which $178,000 are on credit,and its historical bad debt loss is 6% of credit sales,bad debt expense is:

Correct Answer
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B

The days to collect receivables increases from 32 to 48.Which of the following statements is true?

Correct Answer
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A company lends its supplier $150,000 for 3 years at a 6% annual interest rate.Interest payments are to be made twice a year.The company initially records the transaction by:

Correct Answer
verified

Bolster Soda had an accounts receivable turnover ratio of 9.9 this year and 11.0 last year.Castor Soda had a turnover ratio of 9.3 this year and 9.3 last year.This implies

Correct Answer
verified

A company lends its supplier $150,000 for 3 years at a 6% annual interest rate.Interest payments are to be made twice a year.Each interest payment will be for:

Correct Answer
verified

Your company has net sales of $468,300 and average trade receivables of $111,500 for the year.Which of the following is true? (Round all calculations to one decimal place. )

Correct Answer
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When credit card sales occur,the seller may receive cash immediately,or within a few days,depending upon the specific credit card program being used.

Correct Answer
verified

Use the information above to answer the following question.The days to collect for 2014 is closest to:

Correct Answer
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Correct Answer
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Use the information above to answer the following question.The unadjusted balance of the allowance for doubtful accounts of Johnstone Supplies,Inc. ,is a credit balance in the amount of $28,947 on July 31,2014.Based on the accounts receivable aging report,bad debt expense will be:

Correct Answer
verified

If the receivables turnover ratio rises significantly,the increase may be a signal that the company is extending credit to high-risk borrowers or allowing an overly generous repayment schedule.

Correct Answer
verified

Use the information above to answer the following question.The journal entry to record the write-off on May 1 would include which of the following?

Correct Answer
verified

Factoring refers to an arrangement in which a company sells its receivables to another company and receives cash immediately.

Correct Answer
verified

Correct Answer
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What is the annual rate of interest being charged on a 9-month note receivable of $50,000 if the total interest is $3,000?

Correct Answer
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B

Receivables might be sold ("factored") to:

Correct Answer
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When the direct write-off method is used to account for uncollectible accounts,which of the following accounts would not be used?

Correct Answer
verified

Exam 8: Receivables, Bad Debt Expense, and Interest Revenue

Use the information above to answer the following question.What is the amount of current assets on the balance sheet at December 31,2014?

Correct AnswerverifiedC

For each scenario below,indicate the appropriate change in current revenue,expenses and net income.Use the following symbols: , ,or NE for no effect.

Correct Answerverifieda. ,NE, b.NE, , ...View AnswerShow Answer

The Grass is Greener Corporation's receivables turnover ratio decreases from 14.1 to 11.8.Which of the following statements is true?

Correct AnswerverifiedShow Answer

Your company uses the percentage of credit sales method for calculating bad debt expense.If your company has $216,000 in total sales,of which $178,000 are on credit,and its historical bad debt loss is 6% of credit sales,bad debt expense is:

Correct AnswerverifiedB

The days to collect receivables increases from 32 to 48.Which of the following statements is true?

Correct AnswerverifiedShow Answer

A company lends its supplier $150,000 for 3 years at a 6% annual interest rate.Interest payments are to be made twice a year.The company initially records the transaction by:

Correct AnswerverifiedShow Answer

Bolster Soda had an accounts receivable turnover ratio of 9.9 this year and 11.0 last year.Castor Soda had a turnover ratio of 9.3 this year and 9.3 last year.This implies

Correct AnswerverifiedShow Answer

A company lends its supplier $150,000 for 3 years at a 6% annual interest rate.Interest payments are to be made twice a year.Each interest payment will be for:

Correct AnswerverifiedShow Answer

Your company has net sales of $468,300 and average trade receivables of $111,500 for the year.Which of the following is true? (Round all calculations to one decimal place. )

Correct AnswerverifiedShow Answer

When credit card sales occur,the seller may receive cash immediately,or within a few days,depending upon the specific credit card program being used.

Correct AnswerverifiedShow Answer

Use the information above to answer the following question.The days to collect for 2014 is closest to:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Use the information above to answer the following question.The unadjusted balance of the allowance for doubtful accounts of Johnstone Supplies,Inc. ,is a credit balance in the amount of $28,947 on July 31,2014.Based on the accounts receivable aging report,bad debt expense will be:

Correct AnswerverifiedShow Answer

If the receivables turnover ratio rises significantly,the increase may be a signal that the company is extending credit to high-risk borrowers or allowing an overly generous repayment schedule.

Correct AnswerverifiedShow Answer

Use the information above to answer the following question.The journal entry to record the write-off on May 1 would include which of the following?

Correct AnswerverifiedShow Answer

Factoring refers to an arrangement in which a company sells its receivables to another company and receives cash immediately.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What is the annual rate of interest being charged on a 9-month note receivable of $50,000 if the total interest is $3,000?

Correct AnswerverifiedB

Receivables might be sold ("factored") to:

Correct AnswerverifiedShow Answer

When the direct write-off method is used to account for uncollectible accounts,which of the following accounts would not be used?

Correct AnswerverifiedShow Answer

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C

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a. ,NE, b.NE, , ...
View Answer

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B

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B

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