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Exam 9: Accounting for Receivables

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Question 41

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When using the allowance method of accounting for uncollectible accounts, the recovery of a bad debt would be recorded as a debit to Cash and a credit to Bad Debts Expense.

A) True
B) False

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Question 42

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The accounts receivable turnover is calculated by:

A) Dividing net sales by average accounts receivable.
B) Dividing net sales by average accounts receivable and multiplying by 365.
C) Dividing average accounts receivable by net sales.
D) Dividing average accounts receivable by net sales and multiplying by 365.
E) Dividing net income by average accounts receivable.

F) A) and E)
G) B) and C)

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Question 43

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The materiality constraint:

Prepare general journal entries for the following transactions of this company for the current year:

Installment accounts receivable is another name for aging of accounts receivable.

MixRecording Studios purchased $7,800 in electronic components from TechCom. MixRecording Studios signed a 60-day, 10% promissory note for $7,800. If the note is dishonored, what is the amount due on the note?

What is the accounts receivable turnover ratio? How is it calculated? How is it used to assess financial condition?

Crystal Products allows customers to use bank credit cards to charge purchases. The bank used by Crystal Products processes all bank credit cards in exchange for a 3% processing fee. All credit card receipts deposited are credited to the company account on the day of deposit. Assume that on January 18, Crystal Products sold and deposited $19,000 worth of bank credit card receipts. Prepare the general journal entry to record this transaction.

Define a note receivable and explain how to calculate the interest due on a short-term note receivable.

Loma Company estimates uncollectible accounts using the allowance method at December 31. It prepared the following aging of receivables analysis.

Tepsi's accounts receivable turnover was 9.9 for this year and 11.0 for last year. Craig's turnover was 9.3 for this year and 9.3 for last year. These results imply that:

A company uses the aging of accounts receivable method to estimate its bad debts expense. On December 31 of the current year an aging analysis of accounts receivable revealed the following:

A 90-day note issued on April 10 matures on:

A company ages its accounts receivables to determine its end of period adjustment for bad debts. At the end of the current year, management estimated that $15,750 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a debit balance of $175. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

The aging method of determining bad debts expense is based on the knowledge that the longer a receivable is past due, the lower the likelihood of collection.

The process of using accounts receivable as security for a loan is known as factoring accounts receivable.

A promissory note is a written promise to pay a specified amount of money either on demand or at a definite future date.

The ________________ method of accounting for bad debts records the loss from an uncollectible account receivable at the time it is determined to be uncollectible (and not before).

A company receives a 10%, 90-day note for $1,500. The total interest due on the maturity date is:

The use of an allowance for bad debts is required under the materiality constraint.