Chapter 9

Separate accounts receivable information for each customer is important because it reveals all of the following except: How much each customer has purchased on credit. How much each customer has paid. How much each customer still owes. The basis for sending bills to customers. When the customer intends to pay outstanding balances.

Sellers allow customers to use credit cards for all of the following reasons except: To be able to charge more due to fees and interest. To lessen the risk of extending credit to customers who cannot pay. To speed up receipt of cash from the credit sale. To increase total sales volume. To avoid having to evaluate a customer's credit standing for each sale.

Which of the following is not true regarding a credit card expense? Credit card expense may be classified as a "discount" deducted from sales to get net sales. Credit card expense may be classified as a selling expense. Credit card expense may be classified as an administrative expense. Credit card expense is not recorded by the seller. Credit card expense is a fee the seller pays for services provided by the card company.

A promissory note received from a customer in exchange for an account receivable is recorded by the payee as: A cash equivalent. An account receivable. A note receivable. A short-term investment. A note payable.

Reporting the details of notes is consistent with which accounting principle that requires financial statements (including footnotes) to report all relevant information? Relevance. Full disclosure. Evaluation. Materiality. Expense recognition (matching).

A promissory note: Is a short-term investment for the maker. Is a written promise to pay a specified amount of money at a certain date. Is a liability to the payee. Is another name for an installment receivable. Cannot be used in payment of an account receivable.

The maturity date of a note receivable: Is the day of the credit sale. Is the day the note was signed. Is the day the note is due to be repaid. Is the date of the first payment. Is the last day of the month.

The interest accrued on $7,500 at 6% for 90 days is: (Use 360 days a year.) $450.00. $37.50. $112.50. $11.25. $1,800.00.

A company borrowed $10,000 by signing a 180-day promissory note at 9%. The total interest due on the maturity date is: (Use 360 days a year.) $900 $75 $450 $300 $1,800

A company borrowed $10,000 by signing a 180-day promissory note at 9%. The maturity value of the note is: (Use 360 days a year.) $10,450 $10,900 $10,075 $11,800 $10,300

The quality of receivables refers to: The creditworthiness of sellers. The speed of collection. The likelihood of collection without loss. Sales turnover. The interest rate.

The account receivable turnover measures: How long it takes to sell accounts receivable to a factor. How often, on average, receivables are received and collected during the period. The relation of cash sales to credit sales. How long it takes to sell merchandise inventory. All of the options are correct.

The accounts receivable turnover is calculated by: Dividing net sales by average accounts receivable. Dividing net sales by average accounts receivable and multiplying by 365. Dividing average accounts receivable by net sales. Dividing average accounts receivable by net sales and multiplying by 365. Dividing net income by average accounts receivable.

Axle Co.'s accounts receivable turnover was 9.9 for this year and 11.0 for last year. Betterman's turnover was 9.3 for this year and 9.3 for last year. These results imply that: Betterman has the better turnover for both years. Axle has the better turnover for both years. Betterman's turnover is improving. Axle's credit policies are too loose. Betterman is collecting its receivables more quickly than Axle in both years.

All sales are made on credit. Based on past experience, the company estimates that 0.6% of net credit sales are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared? $1,275 $1,775 $4,500 $4,800 $5,500

All sales are made on credit. Based on past experience, the company estimates 0.6% of net credit sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense? Debit Bad Debts Expense $2,130; credit Allowance for Doubtful Accounts $2,130. Debit Bad Debts Expense $2,630; credit Allowance for Doubtful Accounts $2,630. Debit Bad Debts Expense $4,300; credit Allowance for Doubtful Accounts $4,300. Debit Bad Debts Expense $4,800; credit Allowance for Doubtful Accounts $4,800. Debit Bad Debts Expense $5,300; credit Allowance for Doubtful Accounts $5,300.

The allowance method based on the idea that a given percent of a company's credit sales for the period is uncollectible is: The percent of sales method. The percent of accounts receivable method. The aging of accounts receivable method. Direct write-off method. Factoring method.

A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and the length of time past due is the: Direct write-off method. Aging of accounts receivable method. Percentage of sales method. Aging of investments method. Percent of accounts receivable method.

The materiality constraint, as applied to bad debts: Permits the use of the direct write-off method when bad debts expenses are relatively small. Requires use of the allowance method for bad debts. Requires use of the direct write-off method. Requires that bad debts not be written off. Requires that expenses be reported in the same period as the sales they helped produce.

The expense recognition (matching) principle, as applied to bad debts, requires: That expenses be ignored if their effect on the financial statements is unimportant to users' business decisions. The use of the direct write-off method for bad debts. The use of the allowance method of accounting for bad debts. That bad debts be disclosed in the financial statements. That bad debts not be written off.

Which of the following is not true about the Allowance for Doubtful Accounts? Selected Answer: Incorrect [None Given] Answers: It is a contra asset account. It is used instead of reducing accounts receivable directly. It is debited when uncollectible accounts are written off. It is a liability account. It is credited when bad debts expense is estimated and recorded.

Honoring a note receivable indicates that the maker has: Signed. Paid in full. Guaranteed. Notarized. Cosigned.

Failure by a promissory notes' maker to pay the amount due at maturity is known as: Protesting a note. Closing a note. Dishonoring a note. Discounting a note. Depreciating a note.

Valley Spa purchased $7,800 in plumbing components from Tubman Co. Valley Spa signed a 60-day, 10% promissory note for $7,800. If the note is dishonored, but Tubman intends to continue collection efforts, what is the journal entry to record the dishonored note? (Use 360 days a year.) Debit Accounts Receivable $7,930; debit Bad Debt Expense $130; credit Notes Receivable $8,060. Debit Bad Debt Expense $7,930; credit Accounts Receivable $7,930. Debit Bad Debt Expense $7,800; credit Notes Receivable $7,800. Debit Accounts Receivable—Valley Spa $7,800; credit Notes Receivable $7,800. Debit Accounts Receivable—Valley Spa $7,930, credit Interest Revenue $130; credit Notes Receivable $7,800.

All sales are made on credit. Based on past experience, the company estimates 3.5% of ending account receivable to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense? Debit Bad Debts Expense $13,975; credit Allowance for Doubtful Accounts $13,975. Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225. Debit Bad Debts Expense $16,475; credit Allowance for Doubtful Accounts $16,475. Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350. Debit Bad Debts Expense $17,350; credit Allowance for Doubtful Accounts $17,350.

On July 9, Mifflin Company receives an $8,500, 90-day, 8% note from customer Payton Summers as payment on account. Compute the amount due at maturity for the note. (Use 360 days a year.) : $8,628 $8,192 $8,613 $8,500 $8,670

On July 9, Mifflin Company receives a $8,500, 90-day, 8% note from customer Payton Summers as payment on account. Compute the maturity date for the note. October 8 October 7 November 8 November 7 November 6

All sales are made on credit. Based on past experience, the company estimates 3.5% of ending account receivable to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense? Selected Answer: Debit Bad Debts Expense $13,975; credit Allowance for Doubtful Accounts $13,975. Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225. Debit Bad Debts Expense $16,475; credit Allowance for Doubtful Accounts $16,475. Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350. Debit Bad Debts Expense $17,350; credit Allowance for Doubtful Accounts $17,350.