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Exam 8: Reporting and Interpreting Receivables,bad Debt Expense,and Interest Revenue

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Question 81

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Countryside Corporation is owed $11,890 from a customer for landscaping.The account is overdue and the customer is having difficulty paying.Countryside might ask the customer to sign a note for the unpaid amount to:

A) decrease its net income for tax reporting purposes.
B) strengthen Countryside Corporation's legal right to be repaid with interest.
C) reduce its tax liability.
D) eliminate any doubts of collection of the amount due.

E) A) and B)
F) A) and C)

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Question 82

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Which of the following statements about the interpretation of the receivables turnover ratio is not correct?

A) Analysts often interpret a sudden increase in the receivables turnover ratio as a signal of a developing problem.
B) The smaller the receivables turnover ratio the larger the days to collect will be.
C) A change in the receivables turnover ratio may indicate a change in the company's credit granting policies.
D) A change in the receivables turnover ratio may indicate a change in economic conditions.

E) A) and B)
F) B) and D)

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Question 83

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If the adjusting entry to accrue interest of $1,000 on a note receivable is omitted,then:

Your company has previously averaged about 26% of its accounts receivable in the "over 90 days past due" category.This year,the company hired a new collections manager and,as a result,management forecasts that only 18% of its accounts receivable will be in this category at the end of the current year.The company uses the aging of accounts receivable method of estimating Bad Debt Expense.If the total of credit sales and year-end balance in accounts receivable remain unchanged from the previous year and no write offs were made during the current year,this year's bad expense will:

On March 1,Cents,Inc.lent $1,000 to an employee at a rate of 6% for 3 months.The entry to record the loan of $1,000 to its employee includes a:

The financial statements of Orion Frozen Foods contained the following information: -Use the information above to answer the following question.What is the receivables turnover ratio?

Recording the estimate of bad debt expense:

Total doubtful accounts at the end of the year are estimated to be $25,000 based on an aging of accounts receivable.If the balance in the Allowance for Doubtful Accounts is a $7,000 debit before adjustment,what is current year's Bad Debt Expense?

Which of the following are similarities between a six-month note receivable and an account receivable? They both are:

On the balance sheet,the Allowance for Doubtful Accounts:

On August 1,Jackson Radiology signed a one-year note receivable of $60,000 with interest at of 15% payable every six months.Jackson properly accrued interest on the note on December 31.What journal entry would Jackson make on the following February 1 to record the interest payment received on that date?

If the Allowance for Doubtful Accounts has a $1,000 debit balance prior to making the end-of-period adjusting entry for bad debts using the aging of accounts receivable method,then it must mean that the:

The direct write-off method for uncollectible accounts is not allowed by GAAP because it overstates the net realizable value of accounts receivable and violates the expense recognition principle.

Toque Inc.uses the allowance method for bad debts.If management is overly optimistic about its ability to collect customer accounts,the company will understate Bad Debt Expense and:

The adjusting entry to record the allowance for doubtful accounts includes a:

The days to collect receivables increased from 32 last year to 48 this year.Which of the following statements is correct?

Indicate whether each of the following items is a characteristic of the allowance method and/or the direct write-off method by placing an "X" in the appropriate column.If an item is a characteristic of both methods,place an "X" in both columns.

Credit card companies charge a fee to the seller that accepts the credit cards.This fee is recorded by the seller as a non-operating expense on its income statement.

A high receivables turnover ratio is a sign of a company's:

A company used the aging of accounts receivable method.At December 31,management determined that the net realizable value of accounts receivable was $304,000.The balance in Accounts Receivable was $384,000 and the unadjusted credit balance in Allowance for Doubtful Accounts was $16,000.What was the amount of Bad Debt Expense for the year?