Orion Ch 8- Reporting and Analyzing Receivables

Q 8.1: What are notes or accounts receivables that result from sales transactions often called?

A :
sales receivables

B :
merchandise receivables

C :
non-trade receivables

D :
trade receivables

D : trade receivables

Q 8.2: ________ are also called trade receivables.

A :
Accounts receivable

B :
Other receivables

C :
Income taxes refundable

D :
Advances to employees

A : Accounts receivable

Q 8.3: ________ are three accounting issues associated with accounts receivable.

A :
Recognizing, valuing, and disposing

B :
Depreciating, returns, and valuing

C :
Depreciating, valuing, and collecting

D :
Accrual, bad debts, and disposing

A : Recognizing, valuing, and disposing

Q 8.4: The net amount expected to be received in cash from receivables is termed the _____ _____
value.

A) Cash realizable
B) Cash Equivalent

A) Cash realizable

Q 8.5: When would a credit card holder receive lower interest charges?

A :
when the card company states interest as a monthly percentage rather than an annual percentage

B :
when the card company allows a grace period before interest is accrued

C :
when the card company calculates finance charges from the date of purchase to the date the amount is paid

D :
when the card company allows cardholders to skip payments on their cards

B : when the card company allows a grace period before interest is accrued

Q 8.6: Writing off an uncollectible account affects ________ under the allowance method.

A :
all financial statements

B :
only income statement accounts

C :
only balance sheet accounts

D :
both balance sheet and income statement accounts

C : only balance sheet accounts

Q 8.7: What is the Bad Debts Expense considered?

A :
an internal control weakness

B :
an avoidable cost in doing business on a credit basis

C :
avoidable unless there is a recession

D :
a necessary risk of doing business on a credit basis

D : a necessary risk of doing business on a credit basis

Q 8.8: The balance of Allowance for Doubtful Accounts prior to making the adjusting entry to record estimated uncollectible accounts _____
relevant when using the percentage of receivables basis.

a) is
b) is not

a) is

Q 8.9: The entry to recognize the bad debt expense ________ when the allowance method is used.

A :
has no effect on current assets

B :
has no effect on net income

C :
decreases current assets

D :
increases net income

C : decreases current assets

Q 8.10: What are the two key parties to a promissory note?

A :
maker and the payee

B :
debtor and the payee

C :
sender and the receiver

D :
maker and a bank

A : maker and the payee

Q 8.11: Maynard Mills received a 60-day, 5% note for $10,000 on April 5th. Which of the following statements is true?

A :
The principal of the note plus interest is due on June 4th.

B :
Maynard Mills should record a total receivable due of $10,500 on April 5th.

C :
The maturity value of this note is $10,000.

D :
Maynard Mills will receive $10,000 plus interest of $500 at maturity.

A : The principal of the note plus interest is due on June 4th.

Q 8.12: Which of the following statements about a note receivable is true?

A :
It can be transferred to another party by endorsement.

B :
It eliminates the need for a bad debts allowance.

C :
It takes the place of checks in a business firm.

D :
It can only be collected by a bank.

A : It can be transferred to another party by endorsement.

Q 8.13: 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 :
interest revenue is never recorded

D :
the maturity value of the note is written off

A : accounts Receivable is debited if eventual collection is expected

Q 8.14: When a note receivable is honored, Cash is debited for the note's

A :
maturity value.

B :
fair value.

C :
market value.

D :
face value.

A : maturity value.

Q 8.15: A debit to ________ is entered to record the dishonor of a note receivable assuming the payee expects eventual collection.

A :
Allowance for Doubtful Accounts

B :
Accounts Receivable

C :
Note Receivable

D :
Cash

B : Accounts Receivable

Q 8.16: Which of the following statements concerning receivables are true? Select all that apply.
A : Notes receivable are often listed last under receivables.
B : The contingent liability from selling notes receivable should be disclosed.
C : Both the gross amount of receivables and the allowance for doubtful accounts should be reported.
D : Interest revenue and gain on sale of notes receivable are shown under other revenues and gains.

B : The contingent liability from selling notes receivable should be disclosed. C : Both the gross amount of receivables and the allowance for doubtful accounts should be reported. D : Interest revenue and gain on sale of notes receivable are shown under other revenues and gains.

Q 8.17: How is the average collection period computed?

A :
by dividing 365 days by the accounts receivable turnover ratio

B :
by dividing net credit sales by ending gross accounts receivable

C :
by dividing the accounts receivable turnover ratio by 365 days

D :
by dividing net credit sales by average gross accounts receivable

A : by dividing 365 days by the accounts receivable turnover ratio

Q 8.18: 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 retailer receives more cash from the credit card issuer

B :
the issuer does the credit investigation of customers

C :
the issuer undertakes the collection process

D :
all of the choices are correct

A : the retailer receives more cash from the credit card issuer

Q 8.19: The retailer ________ when customers use national credit cards to make purchases.

A :
is not involved in the collection process

B :
is responsible for maintaining customer accounts

C :
absorbs any losses from uncollectible accounts

D :
receives cash equal to the full price of the merchandise sold from the credit card company

A : is not involved in the collection process

Q 8.20: When a factor buys accounts receivable, the charge for the factor's commission is recorded as

A :
Commission Expense.

B :
Service Charge Expense.

C :
Bad Debts Expense.

D :
Loss on Sale of Receivables.

B : Service Charge Expense.

Q 8.21: All of the following are principles of managing accounts receivable EXCEPT

A :
monitoring collections.

B :
determining from which vendor credit should be requested.

C :
establishing a payment period.

D :
accelerating cash receipts from receivables when necessary.

B : determining from which vendor credit should be requested.

Q 8.22: The average collection period for receivables is computed by dividing 365 days by which of the following?

A :
accounts receivable turnover

B :
average accounts receivable

C :
net credit sales

D :
ending accounts receivable

A accounts receivable turnover

Q 8.23: Another name for trade receivables, which result from sales transactions, is

A :
advances to employees.

B :
refundable income taxes.

C :
accounts receivable.

D :
other receivables.

C : accounts receivable.

Q 8.24: Two methods of accounting for uncollectible accounts are the direct write-off method and the accrual method.

A :
True

B :
False

B : False

Q 8.25: When the allowance method is used, current assets increase when an entry recognizes bad debts.

A :
True

B :
False

B : False

Q 8.26: Writing off an uncollectible account affects the balance sheet account and ______
affect the income statement accounts under the allowance method.

a) does
b) does not

b) does not

The _____
amount expected to be collected from receivables is the cash realizable value.

a) gross
b) net

b) net

Q 8.28: A written promise of amounts to be received as the result of a sales transaction, a note or account receivable is often called a

A :
non-trade receivable.

B :
merchandise receivable.

C :
trade receivable.

D :
sales receivable.

C : trade receivable.

Q 8.29: When a company receives an interest-bearing note receivable, it will ______
Notes Receivable for the face value of the note.

a) debit
b) credit

a) debit

Q 8.30: What is represented by the following formula?
Face Value of Note × Annual Interest Rate × Time in Terms of One Year = Interest

A :
the basic formula for a year's worth of interest on a note.

B :
the basic formula for computing interest on an interest-bearing note.

C :
a way of finding the lowest interest on a note.

D :
a way of determining if an interest-bearing note will prove worthwhile for the payee.

B the basic formula for computing interest on an interest-bearing note.

Q 8.31: If a company receives a 60-day, 5% note for $5,000 on September 5, which of the following statement is true?

A :
The maturity value of the note is $5,000.

B :
The company should receive $5,000 plus interest of $250 at maturity.

C :
The company should receive the principal of the note plus interest in early November.

D :
The company should record a total receivable due of $5,000 on September 5.

C : The company should receive the principal of the note plus interest in early November.

Q 8.32: Short-term
_____ _____
use the same estimations and computations as accounts receivable to determine cash realizable value.

notes receivable

Q 8.33: A(n) ________ may be used to settle accounts receivable.

A :
NSF stamp

B :
promissory note

C :
bill of attainder

D :
collection notice

B : promissory note

Q 8.34: A promissory note may be used to settle accounts receivable.

A :
True

B :
False

A : True

Q 8.35: A note receivable can be transferred ________ by endorsement.

A :
to another party

B :
into Bad Debts Expense

C :
within the bookkeeping department

D :
to Accounts Payable

A : to another party

Q 8.36: When calculating interest on a promissory note with the maturity date stated in terms of days, the payer receives _____
interest if 360 days are used instead of 365.

a) more
b) less

a) more

Q 8.37: Being transferrable to another party by endorsement _____
one of the characteristics of a note receivable.

a) is
b) is not

a) is

Q 8.38: When the due date of a note is stated in months, what is the time factor in computing interest?

A :
the number of months divided by 30 days

B :
the number of months divided by 360 days

C :
the number of months divided by 12

D :
the number of months divided by 0.12

C : the number of months divided by 12

Q 8.39: In a promissory note, the party who will be paid is called the ______
.

I got this question wrong, and I didn't get the answer. Sorry! =(

An annual rate of interest would be _____
way in which to state the interest rate for a three-month loan.

a) the normal

b) an unusual

a) the normal

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Orion Ch 8- Reporting and Analyzing Receivables

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Q 8.1: What are notes or accounts receivables that result from sales transactions often called?

A :
sales receivables

B :
merchandise receivables

C :
non-trade receivables

D :
trade receivables

D : trade receivables

Q 8.2: ________ are also called trade receivables.

A :
Accounts receivable

B :
Other receivables

C :
Income taxes refundable

D :
Advances to employees

A : Accounts receivable

Q 8.3: ________ are three accounting issues associated with accounts receivable.

A :
Recognizing, valuing, and disposing

B :
Depreciating, returns, and valuing

C :
Depreciating, valuing, and collecting

D :
Accrual, bad debts, and disposing

A : Recognizing, valuing, and disposing

Q 8.4: The net amount expected to be received in cash from receivables is termed the _____ _____
value.

A) Cash realizable
B) Cash Equivalent

A) Cash realizable

Q 8.5: When would a credit card holder receive lower interest charges?

A :
when the card company states interest as a monthly percentage rather than an annual percentage

B :
when the card company allows a grace period before interest is accrued

C :
when the card company calculates finance charges from the date of purchase to the date the amount is paid

D :
when the card company allows cardholders to skip payments on their cards

B : when the card company allows a grace period before interest is accrued

Q 8.6: Writing off an uncollectible account affects ________ under the allowance method.

A :
all financial statements

B :
only income statement accounts

C :
only balance sheet accounts

D :
both balance sheet and income statement accounts

C : only balance sheet accounts

Q 8.7: What is the Bad Debts Expense considered?

A :
an internal control weakness

B :
an avoidable cost in doing business on a credit basis

C :
avoidable unless there is a recession

D :
a necessary risk of doing business on a credit basis

D : a necessary risk of doing business on a credit basis

Q 8.8: The balance of Allowance for Doubtful Accounts prior to making the adjusting entry to record estimated uncollectible accounts _____
relevant when using the percentage of receivables basis.

a) is
b) is not

a) is

Q 8.9: The entry to recognize the bad debt expense ________ when the allowance method is used.

A :
has no effect on current assets

B :
has no effect on net income

C :
decreases current assets

D :
increases net income

C : decreases current assets

Q 8.10: What are the two key parties to a promissory note?

A :
maker and the payee

B :
debtor and the payee

C :
sender and the receiver

D :
maker and a bank

A : maker and the payee

Q 8.11: Maynard Mills received a 60-day, 5% note for $10,000 on April 5th. Which of the following statements is true?

A :
The principal of the note plus interest is due on June 4th.

B :
Maynard Mills should record a total receivable due of $10,500 on April 5th.

C :
The maturity value of this note is $10,000.

D :
Maynard Mills will receive $10,000 plus interest of $500 at maturity.

A : The principal of the note plus interest is due on June 4th.

Q 8.12: Which of the following statements about a note receivable is true?

A :
It can be transferred to another party by endorsement.

B :
It eliminates the need for a bad debts allowance.

C :
It takes the place of checks in a business firm.

D :
It can only be collected by a bank.

A : It can be transferred to another party by endorsement.

Q 8.13: 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 :
interest revenue is never recorded

D :
the maturity value of the note is written off

A : accounts Receivable is debited if eventual collection is expected

Q 8.14: When a note receivable is honored, Cash is debited for the note’s

A :
maturity value.

B :
fair value.

C :
market value.

D :
face value.

A : maturity value.

Q 8.15: A debit to ________ is entered to record the dishonor of a note receivable assuming the payee expects eventual collection.

A :
Allowance for Doubtful Accounts

B :
Accounts Receivable

C :
Note Receivable

D :
Cash

B : Accounts Receivable

Q 8.16: Which of the following statements concerning receivables are true? Select all that apply.
A : Notes receivable are often listed last under receivables.
B : The contingent liability from selling notes receivable should be disclosed.
C : Both the gross amount of receivables and the allowance for doubtful accounts should be reported.
D : Interest revenue and gain on sale of notes receivable are shown under other revenues and gains.

B : The contingent liability from selling notes receivable should be disclosed. C : Both the gross amount of receivables and the allowance for doubtful accounts should be reported. D : Interest revenue and gain on sale of notes receivable are shown under other revenues and gains.

Q 8.17: How is the average collection period computed?

A :
by dividing 365 days by the accounts receivable turnover ratio

B :
by dividing net credit sales by ending gross accounts receivable

C :
by dividing the accounts receivable turnover ratio by 365 days

D :
by dividing net credit sales by average gross accounts receivable

A : by dividing 365 days by the accounts receivable turnover ratio

Q 8.18: 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 retailer receives more cash from the credit card issuer

B :
the issuer does the credit investigation of customers

C :
the issuer undertakes the collection process

D :
all of the choices are correct

A : the retailer receives more cash from the credit card issuer

Q 8.19: The retailer ________ when customers use national credit cards to make purchases.

A :
is not involved in the collection process

B :
is responsible for maintaining customer accounts

C :
absorbs any losses from uncollectible accounts

D :
receives cash equal to the full price of the merchandise sold from the credit card company

A : is not involved in the collection process

Q 8.20: When a factor buys accounts receivable, the charge for the factor’s commission is recorded as

A :
Commission Expense.

B :
Service Charge Expense.

C :
Bad Debts Expense.

D :
Loss on Sale of Receivables.

B : Service Charge Expense.

Q 8.21: All of the following are principles of managing accounts receivable EXCEPT

A :
monitoring collections.

B :
determining from which vendor credit should be requested.

C :
establishing a payment period.

D :
accelerating cash receipts from receivables when necessary.

B : determining from which vendor credit should be requested.

Q 8.22: The average collection period for receivables is computed by dividing 365 days by which of the following?

A :
accounts receivable turnover

B :
average accounts receivable

C :
net credit sales

D :
ending accounts receivable

A accounts receivable turnover

Q 8.23: Another name for trade receivables, which result from sales transactions, is

A :
advances to employees.

B :
refundable income taxes.

C :
accounts receivable.

D :
other receivables.

C : accounts receivable.

Q 8.24: Two methods of accounting for uncollectible accounts are the direct write-off method and the accrual method.

A :
True

B :
False

B : False

Q 8.25: When the allowance method is used, current assets increase when an entry recognizes bad debts.

A :
True

B :
False

B : False

Q 8.26: Writing off an uncollectible account affects the balance sheet account and ______
affect the income statement accounts under the allowance method.

a) does
b) does not

b) does not

The _____
amount expected to be collected from receivables is the cash realizable value.

a) gross
b) net

b) net

Q 8.28: A written promise of amounts to be received as the result of a sales transaction, a note or account receivable is often called a

A :
non-trade receivable.

B :
merchandise receivable.

C :
trade receivable.

D :
sales receivable.

C : trade receivable.

Q 8.29: When a company receives an interest-bearing note receivable, it will ______
Notes Receivable for the face value of the note.

a) debit
b) credit

a) debit

Q 8.30: What is represented by the following formula?
Face Value of Note × Annual Interest Rate × Time in Terms of One Year = Interest

A :
the basic formula for a year’s worth of interest on a note.

B :
the basic formula for computing interest on an interest-bearing note.

C :
a way of finding the lowest interest on a note.

D :
a way of determining if an interest-bearing note will prove worthwhile for the payee.

B the basic formula for computing interest on an interest-bearing note.

Q 8.31: If a company receives a 60-day, 5% note for $5,000 on September 5, which of the following statement is true?

A :
The maturity value of the note is $5,000.

B :
The company should receive $5,000 plus interest of $250 at maturity.

C :
The company should receive the principal of the note plus interest in early November.

D :
The company should record a total receivable due of $5,000 on September 5.

C : The company should receive the principal of the note plus interest in early November.

Q 8.32: Short-term
_____ _____
use the same estimations and computations as accounts receivable to determine cash realizable value.

notes receivable

Q 8.33: A(n) ________ may be used to settle accounts receivable.

A :
NSF stamp

B :
promissory note

C :
bill of attainder

D :
collection notice

B : promissory note

Q 8.34: A promissory note may be used to settle accounts receivable.

A :
True

B :
False

A : True

Q 8.35: A note receivable can be transferred ________ by endorsement.

A :
to another party

B :
into Bad Debts Expense

C :
within the bookkeeping department

D :
to Accounts Payable

A : to another party

Q 8.36: When calculating interest on a promissory note with the maturity date stated in terms of days, the payer receives _____
interest if 360 days are used instead of 365.

a) more
b) less

a) more

Q 8.37: Being transferrable to another party by endorsement _____
one of the characteristics of a note receivable.

a) is
b) is not

a) is

Q 8.38: When the due date of a note is stated in months, what is the time factor in computing interest?

A :
the number of months divided by 30 days

B :
the number of months divided by 360 days

C :
the number of months divided by 12

D :
the number of months divided by 0.12

C : the number of months divided by 12

Q 8.39: In a promissory note, the party who will be paid is called the ______
.

I got this question wrong, and I didn’t get the answer. Sorry! =(

An annual rate of interest would be _____
way in which to state the interest rate for a three-month loan.

a) the normal

b) an unusual

a) the normal

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