The entry to recognize the bad debt expense ________ when the allowance method is used |
decreases current assets |
What are the two key parties to a promissory note? |
The maker and the payee |
Maynard Mills received a 60-day, 5% note for $10,000 on April 5. Which of the following statements is true? |
The principal of the note plus interest is due on June 4. |
Which of the following statements about a note receivable is true? A: It can be transferred to another party by endorsement. B : It takes the place of checks in a business firm. C : It can only be collected by a bank. D : It eliminates the need for a bad debts allowance. |
It can be transferred to another party by endorsement. |
What happens when a note receivable is dishonored? A: Accounts Receivable is debited if eventual collection is expected B : bad debts expense is recorded C : the maturity value of the note is written off D : interest revenue is never recorded |
Accounts Receivable is debited if eventual collection is expected |
When a note receivable is honored, Cash is debited for the note’s A : market value B : face value C : maturity value D : fair value |
maturity value |
A debit to ________ is entered to record the dishonor of a note receivable assuming the payee expects eventual collection. A : Cash B : Note Receivable C : Allowance for Doubtful Accounts D : Accounts Receivable |
Accounts Receivable |
Which of the following statements concerning receivables are true? Select all that apply. A : Notes receivable are often listed last under receivables. B : Interest revenue and gain on sale of notes receivable are shown under other revenues and gains. C : The contingent liability from selling notes receivable should be disclosed. D : Both the gross amount of receivables and the allowance for doubtful accounts should be reported. |
B: Interest revenue and gain on sale of notes receivable are shown under other revenues and gains C: The contingent liability from selling notes receivable should be disclosed. D:Both the gross amount of receivables and the allowance for doubtful accounts should be reported |
How is the average collection period computed? |
by dividing 365 days by the accounts receivable turnover ratio |
The use of credit cards offers advantages to the retailer. Which of the following is NOT an advantage of credit cards to the retailer? A : the issuer undertakes the collection process B : all of these choices are disadvantages C : the retailer receives more cash from the credit card issuer D : the issuer does the credit investigation of customers |
C : the retailer receives more cash from the credit card issuer |
The retailer ________ when customers use national credit cards to make purchases. |
is not involved in the collection process |
In addition to gross amount of receivables, which of the following is included in the balance sheet? |
allowance for doubtful accounts |
________ is a threat of nonpayment from a single large customer that could adversely affect the financial health of a company. |
A concentration of credit risk |
________ is often the most critical part of managing receivables. |
Determining who gets credit and who doesn’t |
Short-term receivables are reported above the short-term investments in the balance sheet. |
False |
Which of the following statements regarding reporting receivables on the balance sheet is true? |
Allowance for Doubtful Accounts is shown as a deduction from Accounts Receivable on the balance sheet. |
Which of the following statements is true? A : Notes receivable are often listed last under receivables. B : Interest revenue and gain on sale of notes receivable are shown under accounts receivable. C :Both the gross amount of receivables and the allowance for doubtful accounts should be reported. D : The contingent liability from selling notes receivable should never be disclosed. |
Both the gross amount of receivables and the allowance for doubtful accounts should be reported. |
Which of the following would be recorded in an income statement under "other revenues and gains"? A : notes receivable B : operating expenses C : interest revenue D : bad debt expense |
interest revenue |
Short-term receivables are reported in the current assets section of the balance sheet, |
below |
Which of the following statements regarding the financial statement presentation of receivables is NOT true? A : The allowance for doubtful receivables is reported under notes in the financial statement. B : Short-term receivables are reported in the current assets section of the balance sheet. C : Companies report bad debt expense under "selling expense" in the operating expenses section of the income statement. D : Short-term investments appear after short-term receivables on the balance sheet because these investments are nearer to cash. |
A: The allowance for doubtful receivables is reported under notes in the financial statement. D: Short-term investments appear after short-term receivables on the balance sheet because these investments are nearer to cash. |
The financial statements of R & P Imports report net sales of $600,000 and accounts receivable of $60,000 and $100,000 at the beginning of the year and end of year, respectively. What is the accounts receivable turnover for R & P Imports? A 12 times B 10.5 times C 8.3 times D 7.5 times |
D 7.5 times |
The financial statements of the Darlington Company reports net sales of $500,000 and accounts receivable of $40,000 and $20,000 at the beginning of the year and end of year, respectively. What is the accounts receivable turnover for Darlington? A : 16.6 B : 23 C : 10 D : 21.1 |
A 16.6 |
In order to measure the average amount of time that a receivable is outstanding, a company first needs to measure |
the number of times, on average, it collects receivables during the period |
The financial statements of the Larson Company report net sales of $1,000,000 and accounts receivable of $80,000 and $60,000 at the beginning of the year and end of year, respectively. What is the average collection period for accounts receivable in days? |
25.5 |
What does a high accounts receivable turnover ratio indicate? |
customers are making payments very quickly |
How is the accounts receivable turnover computed? |
by dividing net credit sales by average receivables |
The average collection period for receivables is computed by dividing 365 days by |
accounts receivables turnover |
ACC291_Ch.8
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