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| 1 | |
What is the supplementary record that a company creates and maintains in a separate account for each customer called? |
| | A) | The controlling account |
| | B) | The schedule of accounts receivable |
| | C) | The accounts receivable ledger |
| | D) | Either A or B above |
| | E) | None of the above |
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| 2 | |
Which of the following statements is true about debit cards? |
| | A) | Amounts are withdrawn from the customer's cash account when the debit card (issued by a bank) is used. |
| | B) | The use of a debit card creates a receivable on the retailer's books. |
| | C) | Debit cards are not commonly used in places of business. |
| | D) | Interest fees are usually imposed on those customers that use the card. |
| | E) | All of the above. |
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| 3 | |
Which is an appropriate way to report credit card expense on the income statement? |
| | A) | As an addition to net sales |
| | B) | As a selling expense |
| | C) | As an administrative expense |
| | D) | Either B or C |
| | E) | None of the above |
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| 4 | |
What is the total interest (360-day year) on a $1,500, 12%, 120-day note? |
| | A) | $6.00 |
| | B) | $60.00 |
| | C) | $180.00 |
| | D) | $1680.00 |
| | E) | None of the above |
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| 5 | |
A 60-day, 11%, promissory note that is dated June 10 will mature on: |
| | A) | August 6. |
| | B) | August 7. |
| | C) | August 8. |
| | D) | August 9. |
| | E) | August 10. |
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| 6 | |
Accounts receivable valued at $40,000 are sold for $38,000. How is the difference of $2,000 treated in the entry to record the sale? |
| | A) | As a debit to Interest Expense |
| | B) | As a debit to Factoring Fee Expense |
| | C) | As a credit to Interest Earned |
| | D) | As a credit to Bad Debts Expense |
| | E) | As a debit to Allowance for Doubtful Accounts |
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| 7 | |
Beginning accounts receivable were $100,000 and the ending accounts receivable are $130,000. Net sales for the period total $1,265,000. What is the accounts receivable turnover? |
| | A) | 11.00 |
| | B) | 12.00 |
| | C) | 9.73 |
| | D) | 12.65 |
| | E) | None of the above |
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| 8 | |
Which of the following is a method used to account for uncollectible accounts? |
| | A) | Direct write-off method |
| | B) | Allowance method |
| | C) | Bad debts expense method |
| | D) | Installment method |
| | E) | Both A and B above |
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| 9 | |
A company that uses the direct write-off method of accounting for bad debts expense has recovered a bad debt that was written off one year ago. Which of the following would be included in the two entries used to record this transaction? |
| | A) | A credit to the Allowance for Doubtful Accounts account |
| | B) | A debit to the Bad Debts Recovered |
| | C) | A credit to the Bad Debts Expense account |
| | D) | A debit to the Allowance for Doubtful Accounts account |
| | E) | None of the above |
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| 10 | |
What accounting principle or concept permits the direct write-off method of accounting for bad debts? |
| | A) | Full-disclosure principle |
| | B) | Business entity concept |
| | C) | Expense recognition principle |
| | D) | Materiality constraint |
| | E) | Discounting constraint |
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| 11 | |
A company had a debit balance of $1,700 in the Allowance for Doubtful Accounts account and a debit balance of $450,000 in the Accounts Receivable account prior to the year-end adjustment. Past experience suggests that 2% of receivables will be uncollectible. What amount should be in the adjusting entry for bad debts? |
| | A) | $7,300 |
| | B) | $9,000 |
| | C) | $10,700 |
| | D) | $12,500 |
| | E) | None of the above |
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| 12 | |
The Allowance for Doubtful Accounts account has a credit balance of $600 prior to the year-end adjustment. The bad debts are estimated at 4% of $650,000, the net credit sales. After the appropriate adjusting entry for bad debts is recorded, what will be the balance of the Allowance for Doubtful Accounts account? |
| | A) | $25,400 |
| | B) | $26,000 |
| | C) | $26,600 |
| | D) | $28,400 |
| | E) | None of the above |
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| 13 | |
What entry should be recorded to recognize the receipt of a note from a customer in granting a customer a time extension on a past-due account receivable? |
| | A) | Debit Notes Receivable; credit Sales. |
| | B) | Debit Accounts Receivable; credit Notes Receivable. |
| | C) | Debit Notes Receivable; credit Accounts Receivable. |
| | D) | Debit Notes Receivable; credit Allowance for Doubtful Accounts. |
| | E) | Debit Allowance for Doubtful Accounts; credit Accounts Receivable. |
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| 14 | |
On December 1, ABH Company accepts a $5,000, 6-month 12% note from a customer. What adjusting entry should be made at December 31 relating to this note on ABH's books? |
| | A) | Debit Interest Expense $600; credit Interest Payable $600. |
| | B) | Debit Interest Revenue $600; credit Interest Receivable. |
| | C) | Debit Interest Receivable $600; credit Interest Revenue $600. |
| | D) | Debit Interest Revenue $50; credit Interest Receivable $50. |
| | E) | Debit Interest Receivable $50; credit Interest Revenue $50. |
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| 15 | |
Which of the following is not true regarding U.S. GAAP and IFRS? |
| | A) | Both U.S. GAAP and IFRS have similar criteria that apply to recognition of receivables. |
| | B) | Both U.S. GAAP and IFRS require that receivables be reported net of estimated uncollectibles. |
| | C) | Both U.S. GAAP and IFRS apply broadly similar rules in recording dispositions of receivables. |
| | D) | Both U.S. GAAP and IFRS refer to the term Provision for Uncollectible Accounts as an expense. |
| | E) | All of the above. |
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