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Exam 9: Receivables

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Question 61

Multiple Choice

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Under the direct write-off method, which of the following is included in the entry to write off an uncollectible account?

A) a credit to the Allowance for Bad Debts
B) a credit to the customer's Account Receivable
C) a debit to Allowance for Uncollectible Accounts
D) No entry is made to write off uncollectible accounts.

E) A) and C)
F) None of the above

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Question 62

Multiple Choice

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National Art is a new business. During its first year of operations, credit sales were $40,000 and collections were credit sales of $31,000. One account, $525 was written off. Management uses the percent-of-sales method to account for bad debts expense and estimates 2% of credit sales to be uncollectible. The ending balance of Allowance for Bad Debts account is ________.

A) $275
B) $800
C) $170
D) $1,410

E) C) and D)
F) All of the above

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Question 63

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The days' sales in receivables ratio indicates the number of days it takes to collect the average level of accounts receivable.

Which of the following statements is true?

Which of the following is included in the numerator of the acid-test ratio?

On January 1, Davidson Services has the following balances: Accounts Receivable $21,000 Bad Debts Expense $0 Davidson has the following transactions during January: Credit sales of $150,000, collections of credit sales of $83,000, and write-offs of $20,000. Davidson uses the direct write-off method. The amount of Bad Debts Expense for January is ________.

Use the following to calculate the acid-test ratio. (Round your answer to two decimal places.)

Companies that follow GAAP are required to use the direct write-off method for uncollectible accounts receivable.

On December 1, 2017, Going Places, Inc. sold machinery to a customer for $25,000. The customer could not pay at the time of sale but agreed to pay 9 months later and signed an 9-month note at 9% interest. What was the total amount of cash collected by Going Places on the maturity of the note? (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)

Which of the following is not a method of estimating the amount of bad debt expense at the end of the accounting period?

Sales through credit cards or debit cards transfer the risk of collection of receivables from the seller to the card issuer.

If the maker of the note fails to pay on the maturity date, the note is said to be dishonored.

Westwood Clothing Store reported the following selected items at June 30, 2017 (last year - 2016 - amounts are also given as needed): Compute Westwood's acid-test ratio for 2017. Show your computations. (Round the answer to 2 decimal places.)

When a business accepts payment by credit cards or debit cards, a fee is paid to the card processor.

For a promissory note, the entity to whom the promise of future payment is made is the ________.

On October 1, 2016, Lee's Electronic sold merchandise in exchange for a 4 month, $20,000 note receivable, with 6% interest. Interest revenue of $400 is earned in 2017.

The Allowance for Bad Debts account has a credit balance of $2,000 before the adjusting entry for bad debts expense. The company's management estimates that 2% of net credit sales will be uncollectible for the year 2017. Net credit sales for the year were $250,000. Prepare the journal entry to record the bad debts expense on December 31, 2017.

Dividends receivable, interest receivable, and taxes receivable are generally categorized as other receivables.

Martin Sales provides the following information: Net credit sales: $790,000 Beginning net accounts receivable: $43,000 Ending net accounts receivable: $20,000 Calculate the accounts receivable turnover ratio. (Round your answer to the nearest whole number.)

Days' sales in receivables is also called the collection period.