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Exam 5: Receivables and Sales

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Question 81

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A company reports the following amounts at the end of the year: Total sales = $400,000;cash = $35,000;sales discounts = $10,000;accounts receivable = $20,000;sales returns = $15,000;operating expenses = $70,000;sales allowances = $25,000.Compute net revenues.

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Question 82

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At the time of a credit sale,a company would record an increase in assets and an increase in revenues.

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Question 83

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When a company sells a $100 service with a 20% trade discount,$80 of revenue is recognized.

Under the direct write-off method,recording an estimate of future uncollectible accounts includes a debit to Bad Debt Expense and a credit to the Allowance for Uncollectible Accounts.

Under the allowance method,when a company collects cash from an account previously written off,total assets increase.

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.

Hughes Aircraft sold a four-passenger airplane for $380,000,receiving a $50,000 down payment and a 12% note for the balance.This transaction would include a:

The aging method for estimating uncollectible accounts considers that a higher percentage of "older" accounts will not be collected compared to "newer" accounts.

On September 8,a company provides services on account to a customer for $1,500,terms 2/10,n/30.The customer pays for those services on September 15.Record the transactions for the company when the services are provided on September 8 and when the cash is collected on September 15.

Accrued interest on a note receivable has the effects of increasing assets and increasing liabilities.

Below are amounts for two companies: For each company,calculate the receivables turnover ratio.Which company appears more efficient in collecting cash from sales?

Two important ratios that help in understanding the company's effectiveness in managing receivables are the receivables turnover ratio and the average collection period.

On October 22,a company provides services on account to a customer for $1,800,terms 3/15,n/30.The customer pays for those services on December 19.Record the transactions for the company when the services are provided on October 22 and when cash is collected on December 19.

A $10,000 note that has a stated interest rate of 10% and is due in six months would have interest of $1,000.

At December 31,Gill Co.reported accounts receivable of $238,000 and an allowance for uncollectible accounts of $600 (credit) .An analysis of accounts receivable suggests that the allowance for uncollectible accounts should be 3% of accounts receivable.The amount of the adjustment for uncollectible accounts would be:

The percentage-of-credit-sales method for estimating uncollectible accounts is sometimes described as:

Timkin creates the following accounts receivable aging report at the end of the year: Prior to adjusting entries,the Allowance for Uncollectible Accounts has a debit balance of $500.The year-end adjustment would include a:

A company expects 5% of its newer accounts receivable to be uncollectible and 20% of its older accounts to be uncollectible.If the company has $40,000 of newer accounts and $5,000 of older accounts,the total estimate of uncollectible accounts is $2,000.

Lewis Inc.had the following information taken from various accounts for 2015: What was Lewis Inc.'s net revenues in 2015?

At December 31,Gill Co.reported accounts receivable of $238,000 and an allowance for uncollectible accounts of $600 (debit) .An analysis of accounts receivable suggests that the allowance for uncollectible accounts should be 3% of accounts receivable.The amount of the adjustment for uncollectible accounts would be: