Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
40. The CHS Company has provided the following information:
• Accounts receivable written-off as uncollectible during the year amounted to $11,500.
• The accounts receivable balance at the beginning of the year was $150,000.
• The accounts receivable balance at the end of the year was $210,000.
• The allowance for doubtful accounts balance at the beginning of the year was $14,000.
• The allowance for doubtful accounts balance at the end of the year after the recording of bad
debt expense was $12,900.
• Credit sales during the year totaled $900,000.
How much was CHS Company’s bad debt expense?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
41. The CHS Company has provided the following information:
• Accounts receivable written-off as uncollectible during the year amounted to $11,500.
• The accounts receivable balance at the beginning of the year was $150,000.
• The accounts receivable balance at the end of the year was $210,000.
• The allowance for doubtful accounts balance at the beginning of the year was $14,000.
• The allowance for doubtful accounts balance at the end of the year after the recording of bad
debt expense was $12,900.
• Credit sales during the year totaled $900,000.
How much cash was received from collections of accounts receivable?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
42. Which of the following statements is correct?
43. Clark Company estimated the net realizable value of their accounts receivable as of
December 31, 2011, based on an aging schedule of accounts receivable, to be $165,000. Clark
has also provided the following information:
• The accounts receivable balance on December 31, 2011 was $175,000.
• Uncollectible accounts receivable written-off during 2011 totaled $12,000.
• The allowance for doubtful accounts balance on January 1, 2011 was $15,000.
How much is Clark’s 2011 bad debt expense?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
6-24
44. Which of the following statements correctly describes the effect of recording the
collection of a $10,000 account receivable for which a 2% sales discount was recorded at the
time of collection?
45. Which of the following journal entries correctly records the collection of an account
receivable for which a 1% sales discount was recorded at the time of collection?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
46. Which of the following correctly describes the effect of a journal entry involving the
recording of a sales return?
47. Which of the following doesn’t correctly describe the effect of a journal entry involving
the recording of a credit card discount?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
48. Which of the following correctly describes credit terms of 2/10, n/30?
49. A customer purchased and received $5,000 of goods on credit from Discount Paper
Supply on September 1. The customer received the bill on September 13 and mailed a $5,000
check on September 30. Discount Paper Supply received the check on October 4. On which of
the following dates should Discount Paper Supply record sales revenue?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
50. When a credit sale is made with terms of 2/10, n/30 on May 10 and the customer’s check
is received on May 19, which of the following is true about the May 19 journal entry?
51. A company had the following partial list of account balances at year-end:
How much is net sales revenue?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
52. A company purchased goods on credit with credit terms of 3/15, n/45. Although the
company does not have cash available to pay within the discount period, the manager of the
company is considering borrowing money to take advantage of the discount. In order to make
the appropriate decision, the manager computed the annual interest rate associated with the
sales discount. Which of the following is the annual interest rate (rounded)?
53. When credit terms for a sale are 2/15, n/40, the customer saves by paying early. What
percent (rounded) would this savings amount to on an annual basis?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
54. Which of the following accounts is not a contra-revenue?
55. Which of the following is the most likely cause of a decrease in a company’s gross profit
percentage?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
56. Dillon Company uses the allowance method to account for bad debts. The entry to write-
off a bad account (one that will never be collected) should be:
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
57. When using the allowance method for accounting for bad debts, accounts receivable is
reported on the balance sheet at the expected net realizable value. When a particular
receivable from a customer ultimately is determined to be uncollectible and is written off, the
recording of this event will
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
58. Oakwood Company had accounts receivable of $750,000 and an allowance for doubtful
accounts of the $21,500 just prior to writing off as worthless an account receivable for Hyland
Company of $5,000. The net realizable value of accounts receivable as shown by the
accounting records before and after the write-off was as follows:
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
59. Woodland Company uses the allowance method to account for bad debts. During 2009, a
customer became bankrupt and a receivable of $10,000 was deemed uncollectible. Which of
the following journal entries records the uncollectible account write-off?
60. At year end, Chief Company has a balance of $10,000 in accounts receivable of which
$1,000 is more than 30 days overdue. Chief has a credit balance of $100 in the allowance for
doubtful accounts before any year-end adjustments. Chief estimates that 1% of current
accounts and 10% of accounts over thirty days are uncollectible. How much is bad debt
expense?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
61. Upon completing an aging analysis of accounts receivable, the accountant for Rosco
Works aged the accounts receivable and estimated that $5,000 of the $98,000 accounts
receivable balance would be uncollectible. The allowance for doubtful accounts had a $400
debit balance at year-end prior to adjustment. How much is bad debt expense?
62. Which of the following statements does not correctly describe the allowance for doubtful
accounts balance?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
63. The Roscoe Company’s March 1, 2010 bank statement balance was $70,000. As of March
1, outstanding checks total $22,000 and deposits in transit total $15,000. How much was
Roscoe’s March 1, 2010 cash balance on their books?
64. The Tanner Company’s April 1, 2010 pre-reconciliation cash balance on their books was
$35,000. While preparing the April 1 bank reconciliation, Tanner determined that outstanding
checks total $11,000, deposits in transit total $7,000, and bank service charges are $50. How
much was Tanner’s April 1, 2010 cash balance per the bank statement?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
65. The Conner Company’s August 1, 2010 cash balance on their books was $90,000. As of
August 1, outstanding checks total $44,000 and deposits in transit total $30,000. How much
was Conner’s August 1, 2010 cash balance on their bank statement?
66. Which of the following statements pertaining to bank reconciliations is false?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
67. When a depositor receives a bank statement indicating that there was a “NSF check”, the
depositor should do which of the following?
68. A deposit in transit on a bank reconciliation should be
69. Linetech Company’s bank statement showed an ending balance of $8,000. Items appearing
in the bank reconciliation included: outstanding checks, $500; deposits in transit, $1,000;
bank service charges, $50; and Driver Company’s $250 check erroneously deducted from
Linetech’s bank account by the bank. How much is the correct cash balance at the end of the
month?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
70. Which of the following demonstrates a poor internal control procedure?
71. The cash records and the bank statement of Frankel Company showed the following at the
end of February 2010: Outstanding checks as of the beginning of February 2010, $8,000;
checks written by Frankel Company according to their books during February 2010, $50,000;
and checks cleared by the bank during February 2010, $54,000. How much were the
outstanding checks at the end of February 2010?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
72. The cash account and the December bank statement of Gomez Company showed the
following: deposits made by Gomez Company during December $90,000; deposits reflected
on the December bank statement, $88,000; and deposits in transit on December 1, $5,000.
How much were the deposits in transit at the end of December?
73. When preparing the monthly bank reconciliation, the accountant for Farris Corporation
discovered that a check correctly written to one of Farris’ suppliers for $159 had been
incorrectly recorded in the books as $195. Which of the following statements is correct with
respect to the bank reconciliation process?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
74. When preparing a bank reconciliation, which of the following would be deducted from the
company’s cash balance?
75. Merchandise was sold on credit for $10,000, terms 2/10, n/30. Which of the following
journal entry descriptions correctly describes the cash collection?