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Exam 7: Reporting and Analyzing Receivables

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Question 41

Multiple Choice

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To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a

A) debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts.
B) debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts.
C) debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable.
D) debit to Loss on Credit Sales and a credit to Accounts Receivable.

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

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Question 42

Multiple Choice

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The term "receivables" refers to

A) amounts due from individuals or companies.
B) merchandise to be collected from individuals or companies.
C) cash to be paid to creditors.
D) cash to be paid to debtors.

E) A) and B)
F) All of the above

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Question 43

Multiple Choice

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Under the allowance method, when a year-end adjustment is made for estimated uncollectible accounts

Wilton sells softball equipment. On November 14, they shipped $4,000 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 $2,400 worth of custom printed bats to be produced in December. On November 30, Paola Middle School returned $400 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 note receivable is a written promise by the maker to the payee to pay a specified amount of money at a definite time.

The accounts receivable turnover ratio is computed by dividing total sales by the average net receivables during the year.

IFRS

Thompson Corporation's unadjusted trial balance includes the following balances (assume normal balances) : - Accounts receivable $\quad \quad \quad \quad \quad \$ 1,865,000$ - Allowance for doubtful accounts $\quad \$ 35,500$ Bad debts are estimated to be 6% of outstanding receivables. What amount of bad debt expense will the company record?

All of the following statements regarding the financial statement presentation of receivables are true except:

A promissory note

When using the allowance method year-end adjustments for bad debt expense must be made.

Under the allowance method, Bad Debt Expense is debited when an account is deemed uncollectible and must be written off.

Windsor Corporation sells its goods on terms of 2/10, n/30. It has an accounts receivable turnover of 6. What is its average collection period (days) ?

One might infer from a debit balance in Allowance for Doubtful Accounts that

Dorman Company had the following items to report on its balance sheet: $\begin{array}{|l|r|}\hline \text { Em ployee advances } & \$ 1,580 \\\hline \text { Amounts owed by customers for the sale of services (due in 30 days) } & 3,050 \\\hline \text { Refundable income taxes } & 1,120 \\\hline \text { Interest receivable } & 950 \\\hline \text { Accepted a formal instrum ent of credit for services (due in 18 months) } & 2,220 \\\hline \text { A loan to company president } & 10,000 \\\hline \text { Dishonored a note for principal and interest which will eventually be collected } & 1,380 \\\hline\end{array}$ Based on this information, what amount should appear in the "Other Receivables" category?

If a retailer accepts a national credit card such as Visa, the retailer must maintain detailed records of customer accounts.

The receivable that is usually evidenced by a formal instrument of credit is a(n)

When an account is written off using the allowance method, the

Bad Debt Expense is reported on the income statement as

The bookkeeper recorded the following journal entry Which one of the following statements is false?