ACC 291 Week 1 Practice Quiz

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ACC 291 Week 1 Practice Quiz
ACC 291 Week 1 Practice Quiz
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ACC 291 Week 1 Practice Quiz

Fill in the Blank Question 244

Notes and accounts receivable that result from sales transactions are often called

receivables.

 

 

 

 

Fill in the Blank Question 247

When credit sales are made,

Expense is considered a normal and necessary risk of doing business on a credit basis.

 

 

 

True False Question 06

Your answer is correct.

Accounts receivable are one of a company’s least liquid assets.

 

True

 

False

 

 

 

True False Question 08

Your answer is correct.

The two accounting problems with accounts receivable are: (1) recognizing and (2) disposing.

 

True

 

False

 

  

Practice Question 06

Correct! While the balance of accounts receivable represents the amount owed by customers, the amount reported on the balance sheet is shown at their cash (net) realizable value. This is the amount the company expects to collect.

Receivables are reported on the balance sheet at the cash amount owed by customers.

True

 

False

 

  

 

True False Question 21

Your answer is correct.

The Allowance for Doubtful Accounts is a liability account.

 

True

 

False

 

  

 

Insight Box Concept Check 7

Your answer is correct.

In order to prevent excessive home loan defaults, banks can

 

require proof of income, employment, and verification of assets as well as an independent appraisal of the property’s value.

 

subcontract loan originations to a third party whose loan officers are rewarded on the basis of loans generated.

 

require borrowers to have at least a high school education.

 

require borrowers to show proof that they have lived at the same address for at least ten years.

 

 

Practice Question 04

Correct! The amount received on June 24 is $686. Because payment is made within the discount period of 10 days, the amount received is $700 ($1,000 – return of $300) minus the discount of $14 ($700 × 2%), for a cash amount of $686.

On June 15, Kersee Company sold merchandise on account to Eng Co. for $1,000, terms 2/10, n/30. On June 20, Eng Co. returns merchandise worth $300 to Kersee Company. On June 24, payment is received from Eng Co. for the balance due. What is the amount of cash received on June 24?

$700.

 

$680.

 

$686.

 

None of the answer choices are correct.

 

  

Practice Question 05

Correct! A receivable is recorded when the service is performed, not at some other specific date.

When is a receivable recorded by a service organization?

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When service is provided on account

 

When the related expenses are incurred

 

When the bill is sent to the customer

 

When the customer pays

 

  

Practice Question 11

Correct! Allowance for Doubtful Accounts needs an ending credit balance of 4% of $100,000 or $4,000. To increase the current credit balance of $800 to the required amount of $4,000, the account requires a credit of $3,200. The entry to estimate bad debts is a debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts for $3,200.

RyTronics uses the percentage of receivables method for estimating bad debts expense. The Accounts Receivable balance is $100,000 at year-end and the total credit sales were $800,000. Management estimates that 4% of receivables will be uncollectible. What adjusting entry will be recorded if the Allowance for Doubtful Accounts has a credit balance of $800 before adjustment?

Bad Debts Expense3,200
Allowance for Doubtful Accounts3,200

 

Bad Debts Expense4,000
Allowance for Doubtful Accounts4,000

 

Allowance for Doubtful Accounts4,000
Bad Debt Expense4,000

 

Bad Debts Expense3,200
Accounts Receivable3,200

 

 

  

Practice Question 14

Correct! The proper journal entry debits Allowance for Doubtful Accounts and credits Accounts Receivable.

Obama Company has identified that Bill Clinton’s receivable account of $100 is uncollectible. What is the journal entry needed to write off the account under the allowance method?

Accounts Receivable100
Bad Debts Expense100

 

Allowance for Doubtful Accounts100
Bad Debts Expense100

 

Bad Debts Expense100
Accounts Receivable100

 

Allowance for Doubtful Accounts100
Accounts Receivable100

 

 

  

 

Practice Question 17

Correct! The journal entry to record the estimate of uncollectible accounts is a debit to Bad Debts Expense and a credit to the Allowance for Doubtful Accounts.

If a company uses the allowance method for uncollectible accounts, then the entry to record $800 of estimated uncollectibles is

Allowance for Doubtful Accounts800
Accounts Receivable800

 

Accounts Receivable800
Allowance for Doubtful Accounts800

 

Bad Debts Expense800
Allowance for Doubtful Accounts800

 

Bad Debts Expense800
Accounts Receivable800

 

  

 

Practice Question 41

Correct! Longer payment period will increase the chances the company will not pay. Companies might require risky customers to provide letters of credit or bank guarantees, require them to pay cash in advance, or ask for references from banks and suppliers to determine their payment history.

If a company is concerned about lending money to a risky customer, which one of the following would it not want to do?

Contact references provided by the customer, such as banks and other suppliers.

 

Provide the customer a lengthy payment period to increase the chance of paying.

 

Require the customer to pay cash in advance.

 

Require the customer to provide a letter of credit or a bank guarantee.

 

 

 

Practice Question 47

Correct! The average collection period is computed by dividing the number of days in the year by the accounts receivable turnover, or 365/7 = 52 days.

Prall Corporation sells its goods on terms of 2/10, n/30. It has a receivables turnover ratio of 7.00. What is its average collection period (days)?

2 days

 

2,555 days

 

30 days

 

52 days

 

  

Practice Question 55

Correct! The fee is 4% times $6,000, or $240. Kerrison will receive the difference between the face amount of the receivables and the fee, or $5,760. The journal entry includes a debit to cash for $5,760, a debit to Service Charge Expense for $240, and credit to sales for $6,000.

Kerrison Company sold $6,000 of merchandise to customers who charged their purchases with a bank credit card. Kerrison’s bank charges it a 4% fee. Which one of the following is part of the journal entry to record the credit card sales?

Debit to Cash for $5,760

 

Debit to Cash for $6,000

 

Credit to Sales Revenue for $5,760

 

Credit to Service Charge Expense for $240

 

 

 

 

 

 

 

 

 

Practice Question 01

What type of receivable is evidenced by a formal instrument and normally requires the payment of interest?

A trade receivable

 

An account receivable

 

A note receivable

 

Past-due accounts receivables

 

 

Practice Question 05

When is a receivable recorded by a service organization?

When service is provided on account

 

When the related expenses are incurred

 

When the bill is sent to the customer

 

When the customer pays

 

 

Practice Question 10

At what value are accounts receivable reported on the balance sheet?

Cash (net) realizable value

 

Present value

 

Maturity value

 

Fair market value

 

 

Practice Question 21

Short-term notes receivable are reported at their cash (net) realizable value.

True

 

False

 

 

Practice Question 25

Which one of these statements about promissory notes is incorrect?

The party to whom payment is to be made is called the payee.

 

The party making the promise to pay is called the maker.

 

A promissory note is not a negotiable instrument.

 

A promissory note is more liquid than an account receivable.

 

 

Practice Question 02

Which of the following should be classified as an “other” receivable?

Accounts receivable

 

Notes receivable

 

Interest receivable

 

Trade receivables

 

 

Practice Question 03

What type of receivables result from sales transactions?

Other receivables

 

Non-trade receivables

 

Trade receivables

 

Long-term receivables

 

 

Practice Question 52

Which one of the following is not a method used by companies to accelerate cash receipts?

Offering discounts for early payment

 

Writing off receivables

 

Selling receivables to a factor

 

Accepting national credit cards for customer purchases

 

 

Practice Question 53

Which of the following accounts is debited when a company factors its accounts receivable?

Interest Expense

 

Accounts Receivable

 

Service Charge Expense

 

Loss on Sale of Accounts Receivable

 

 

Practice Question 57

Which of the following is the value at which loans and receivables should be reported under IFRS?

Maturity value

 

Cash realizable value

 

Amortized cost

 

Net of bad debt expense