Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
76. Merchandise was sold on credit for $30,000, terms 3/15, n/30. Which of the following
journal entry descriptions correctly describes the cash collection?
77. Which of the following does not correctly describe the following journal entry?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
78. Which of the following correctly describes the following journal entry?
79. Which of the following does not correctly describe the following journal entry?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
80. The Ward Company has provided the following information:
• Net sales totaled $750,000.
• Beginning net accounts receivable was $65,000.
• Ending net accounts receivable was $85,000.
What was Ward’s receivable turnover ratio?
81. The Ward Company has provided the following information:
• Net sales totaled $750,000.
• Beginning net accounts receivable was $65,000.
• Ending net accounts receivable was $85,000.
What was Ward’s average collection period?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
82. The Rye Corporation has provided the following information:
• Total sales were $1,200,000.
• Beginning net accounts receivable was $45,000.
• Ending net accounts receivable was $65,000.
• Sales returns and allowances totaled $100,000.
What was Rye’s receivable turnover ratio?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
83. The Rye Corporation has provided the following information:
• Total sales were $1,200,000.
• Beginning net accounts receivable was $45,000.
• Ending net accounts receivable was $65,000.
• Sales returns and allowances totaled $100,000.
What was Rye’s average collection period?
84. Which of the following transactions will result in a decrease in the receivable turnover
ratio?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
85. Which of the following transactions will result in an increase in the receivable turnover
ratio?
86. Which of the following statements is correct?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
87. Which of the following does not correctly describe the effect of recording a credit sale of
inventory for a profit?
88. The Soft Company has provided the following information:
• Allowance for doubtful accounts increased $19,000 and accounts receivable increased •
$390,000 during the year.
• Accounts written off as uncollectible totaled $20,000.
• Net sales totaled $2,700,000.
• The gross profit percentage was 40%.
• Sales discounts were $100,000.
How much was Soft’s bad debt expense?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
89. The Soft Company has provided the following information:
• Allowance for doubtful accounts increased $19,000 and accounts receivable increased
$390,000 during the year.
• Accounts written off as uncollectible totaled $20,000.
• Net sales totaled $2,700,000.
• The gross profit percentage was 40%.
• Sales discounts were $100,000.
How much was Soft’s gross profit?
90. Redwing Company sold inventory costing $500 to a customer on account for $700. Which
of the following correctly describes the collection of $686 cash when the customer takes
advantage of a discount?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
91. Redwing Company sold inventory costing $500 to a customer on account for $700. Which
of the following does not correctly describe the collection of $686 cash when the customer
takes advantage of a discount?
92. Sabre Company sold inventory costing $600 to a customer on account for $900 with terms
of 3/10, n/30. Which of the following is not correct?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
93. One of Hawk Company’s customers returned products that cost Hawk $300, which was
sold on account for $450. Which of the following does not correctly describe the affect of the
return on the financial statements?
94. One of Hawk Company’s customers returned products that cost Hawk $500, which was
sold on account for $800. Which of the following correctly describes the affect of the return
on the financial statements?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
95. Which of the following transactions does not affect gross profit?
96. Which of the following is not a component of the gross profit calculation?
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
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97. The following data were taken from the records of Lilo Corporation for the year ended
December 31, 2010
The following items have not been included in above amounts:
Estimated bad debt expense is 1% of credit sales.
The income tax rate is 35%.
10,000 of shares of common stock are outstanding.
Requirements:
A. Based on the above data, prepare a multiple-step income statement (including gross profit,
pretax income, and earnings per share).
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
98. A portion of the income statement for Oscar Company is shown below. Provide the
missing account titles and amounts.
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
99. A portion of the income statement for Lone Star Company is shown below. Provide the
missing account titles and amounts.
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
6-56
100. Indicate whether each of the accounts listed below normally will have a debit or a credit
balance. Record your answer to the left of each account by entering either Dr or Cr.
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
101. Anthony Inc. reported the following amounts on their 2011 and 2010 income statements:
Requirements:
A. Compute the gross profit percentage for both years.
B. Provide at least two potential causes for the change in Anthony’s gross profit percentage.
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
102. Hill Company has reported the following information on their income statements for the
years 2008 through 2012:
A. Compute the gross profit percentage for each year.
B. Has the gross profit ratio for Hill improved over time or worsened? Explain your answer.
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
103. Hickory Corporation recorded sales revenue during the year of $350,000 of which
$100,000 was on credit. The company has experienced an average loss rate of 2% of credit
sales. Give the adjusting journal entry at the end of the year to record bad debt expense.
Chapter 06 – Reporting and Interpreting Sales Revenue, Receivables, and Cash
104. Prior to the year-end adjustment to record bad debt expense the ledger of Stickler
Company included the following accounts and balances:
Cash collections on accounts receivable during 2010 amounted to $450,000. Sales revenue
during 2010 amounted to $800,000, of which 75% was on credit, and it was estimated that 2%
of the credit sales made in 2010 would ultimately become uncollectible.
Determine the balances of the allowance for doubtful accounts and bad debt expense after the
adjusting entry to record bad debt expense was made. The allowance for doubtful accounts
has a credit balance prior to the adjusting entry.