157.
On July 1, 2018, Herzog Mining lends cash and accepts a $9,000 note receivable that
offers 10% interest and is due in nine months. How would Herzog record the transaction
on April 1, 2019, when the borrower pays Herzog the correct amount owed?
A.
Cash
9,675
Notes Receivable
9,000
Interest Revenue
675
B.
Cash
9,675
Notes Receivable
9,000
Interest Revenue
225
Interest Receivable
450
C.
Cash
9,675
Notes Receivable
9,000
Interest Receivable
675
D.
Cash
9,675
Notes Receivable
9,675
158.
On January 1, 2018, Alice & Co. lends $5,000 to an employee and accepts a 24-month, 10%
note. At the end of 2018, what effect will the adjustment for accrued interest revenue have
on the Alice & Co.’s financial statements?
159.
On October 1, 2018, Stripes Inc. lends $100,000 to another company and accepts a 24–
month, 6% note. What is the amount of interest revenue Stripes will report in its 2018
income statement?
160.
On October 1, 2018, Stripes Inc. lends $100,000 to another company and accepts a 24–
month, 6% note. What is the amount of interest revenue Stripes will report in its 2019
income statement?
161.
On October 1, 2018, Stripes Inc. lends $100,000 to another company and accepts a 24–
month, 6% note. What is the amount of interest revenue Stripes will report in its
2020
income statement?
Topic: Accounting for Notes Receivable
162.
On September 1, 2018, Heartford Construction lends $50,000 to a customer with 10%
interest. The note and interest are due in twelve months. The note receivable is recorded
for $50,000 on September 1, but no other adjustments are made in 2018. At the end of
2018, which of the following is true?
163.
On September 1, 2018, Heartford Construction lends $50,000 to a customer with 9%
interest. The note and interest are due in twelve months. The note receivable is recorded
for $50,000 on September 1, and the following year-end adjusting entry is made on
December 31, 2018:
Interest Receivable
4,500
Interest Revenue
4,500
At the end of 2018, which of the following is true?
164.
The amount of a company’s receivables is influenced by several variables, including all of
the following except:
165.
The formula for the receivables turnover ratio is:
166.
The receivables turnover ratio indicates:
167.
An increase in a company’s receivables turnover ratio typically means the company is:
168.
At the beginning of the year, Vici Ventures had accounts receivable of $220,000. At the
end of the year, the company had accounts receivable of $340,000. During the year, Vici
had total sales of $1,000,000, 70% of which were credit sales. What was Vici’s receivables
turnover ratio for the year?
169.
Sandburg Veterinarian reports the following information for the year:
Net credit sales
$120,000
Average accounts receivable
20,000
Cash collections on credit sales
100,000
What is Sandburg‘s receivables turnover ratio?
170.
Beverage International reports net credit sales for the year of $240,000. The company’s
accounts receivable balance at the beginning of the year equaled $20,000 and the balance
at the end of the year equaled $30,000. What is Beverage International’s receivables
turnover ratio?
171.
Toppleson Manufacturing reports a receivables turnover ratio of 14.5. The industry
average is 10.7. What most likely is causing this difference?
172.
A company’s ratio of net sales (cash and credit sales) to average accounts receivable can
be interpreted as management’s ability to:
173.
The formula for average collection period is:
174.
What is the most likely reason for a company to have an increase in average collection
period?
175.
Red Company has the following information:
Net credit sales = $400,000
Net income = $100,000
Average total assets = $80,000
Average accounts receivable = $20,000
What is Red’s average collection period (rounded to the nearest whole day)?
176.
The percentage-of–credit-sales method for estimating uncollectible accounts is
sometimes described as:
177.
The income statement approach for estimating bad debts uses a percentage of
178.
Which of the following statements is true with respect to the percentage–of-credit-sales
method for estimating uncollectible accounts?
179.
Which of the following provides an accurate match?
180.
The following information pertains to Lindsey Corp. at the end of the year:
Credit Sales
$150,000
Accounts Payable
20,000
Accounts Receivable
30,000
Allowance for Uncollectible
Accounts
800
debit
Cash Sales
5,500
Lindsey Corp. uses the percentage-of-credit-sales method and estimates that 2% of the
credit sales are uncollectible. After the year-end adjustment, what amount of bad debt
expense would Lindsey report for the year?
181.
The following information pertains to Lightning Inc., at the end of the year:
Credit Sales
$60,000
Accounts Payable
10,000
Accounts Receivable
7,000
Allowance for Uncollectible
Accounts
400
credit
Cash Sales
20,000
Lightning uses the percentage-of-credit-sales method and estimates 1% of sales are
uncollectible. What is the ending balance of the allowance account after the year-end
adjustment?
182.
Using the income statement approach for accounting for uncollectible accounts, a
company estimates that 2.5% of credit sales will eventually become uncollectible. If credit
sales during the year are $400,000 and accounts receivable at the end of the year are
$80,000, the adjustment for estimated uncollectible accounts will require a:
Matching Questions
183.
Match each term related to net revenues with its description.
1. Net revenues
1
2. Sales returns
Reduction in revenue because the product or service is
sold below the listed price.
5
2
Reduction in revenue because the customer brings back
6
Reduction in revenue because of some deficiency in the
5. Trade discounts
4
6. Sales allowances
3
Reduction in revenue when the customer pays within a
184.
Match each term related to the allowance method for uncollectible accounts with its
description.
6
The account used to record sales on account to
3
The procedure required for financial reporting purposes
3. Allowance method
The difference between total accounts receivable and
the estimate of future bad debts.
4
4. Net realizable value
5
8
The effect on total assets when estimating future bad
7
7. Increase
1
The effect on total expenses when estimating future bad
2
8. Allowance for
The effect on total liabilities when estimating future bad
185.
Match each term related to the comparison between the allowance method and direct
write-off method for uncollectible accounts with its description.
The procedure commonly used for financial reporting
The procedure commonly used for tax reporting
The account to credit when writing off an actual bad
The account to debit when writing off an actual bad
The account to debit when writing off an actual bad
The effect on total expenses when writing off an actual
7. Allowance for
The effect on total assets when estimating future bad
The effect on total expenses when estimating future
186.
Match each account with its description.
1. Accounts receivable
1
2. Interest revenue
4
Account to debit when interest accrues at the end of the
3. Notes receivable
2
Account to credit when interest accruals at the end of the
4. Interest receivable
Formal signed credit arrangements between a creditor
and a debtor.
3
5. Cash
5
Account to debit when receivables and interest are
187.
Match each term related to receivables analysis with its description.
1. Less
3
The approximate number of days the average accounts
2. Decrease
An increase in the receivables turnover ratio generally
indicates the company manages its receivables _____
efficiently.
4
3. Average collection
period
Reducing the length of time in which customers are
required to pay will typically _____ the receivables turnover
ratio.
6
4. More
5
The number of times during a year that the average
1
5. Receivables turnover
An increase in the average collection period indicates the
6. Increase
2
Allowing riskier customers to purchase goods or services
on account will typically _____ the receivables turnover
Short Answer Questions
188.
A company offers a 20% trade discount when providing services of $5,000 or more to its
customers. Record the transaction when the company provides services of $8,000 (not
including the trade discount) on account.
$6,400.