Financial Accounting
Showing posts with label Financial Accounting. Show all posts
Showing posts with label Financial Accounting. Show all posts

One of the following statements about promissory notes is incorrect. The incorrect statement is

One of the following statements about promissory notes is incorrect. The incorrect statement is




A. The party making the promise to pay is called the maker.
B. The party to whom payment is to be made is called the payee.
C. A promissory note is not a negotiable instrument.
D. A promissory note is often required from high-risk customers.



Answer: C

Sanders Company has a debit balance of $7,000 in its Allowance for Doubtful Accounts before any adjustments are made. Based on a review of its accounts receivable at the end of the year, Sanders estimates that $70,000 of its receivables are uncollectible. The amount of bad debts expense which should be reported for the year is

Sanders Company has a debit balance of $7,000 in its Allowance for Doubtful Accounts before any adjustments are made. Based on a review of its accounts receivable at the end of the year, Sanders estimates that $70,000 of its receivables are uncollectible. The amount of bad debts expense which should be reported for the year is




A. $7,000.
B. $77,000.
C. $70,000.
D. $63,000.



Answer: B

The balance of the Allowance for Doubtful Accounts account at January1 of the current year was $6,800. During the year, accounts receivable in the amount of $9,000 were written off. Estimated uncollectible accounts expense using the percentage-of-sales basis for the year amounts to $7,200. The balance of the Allowance for Doubtful Accounts account to be reported on the balance sheet at year-end is

The balance of the Allowance for Doubtful Accounts account at January1 of the current year was $6,800. During the year, accounts receivable in the amount of $9,000 were written off. Estimated uncollectible accounts expense using the percentage-of-sales basis for the year amounts to $7,200. The balance of the Allowance for Doubtful Accounts account to be reported on the balance sheet at year-end is




A. $14,000.
B. $7,200.
C. $8,600.
D. $5,000.



Answer: D

The percentage-of-receivables basis of estimating uncollectibles

The percentage-of-receivables basis of estimating uncollectibles




A. produces a better estimate of cash realizable value.
B. results in a better matching of expenses with revenues.
C. emphasizes income statement relationships.
D. ignores the existing balance in Allowance for Doubtful Accounts.



Answer: A

Allowance for Doubtful Accounts is

Allowance for Doubtful Accounts is




A. closed at the end of the fiscal year.
B. an operating expense.
C. a contra asset account.
D. added to Accounts Receivable on the balance sheet.



Answer: C

Net sales for the month are $800,000, and bad debts are expected to be 1.5% of net sales. The company uses the percentage-of-sales basis. If the Allowance for Doubtful Accounts has a credit balance of $15,000 before adjustment, what is the balance after adjustment?

Net sales for the month are $800,000, and bad debts are expected to be 1.5% of net sales. The company uses the percentage-of-sales basis. If the Allowance for Doubtful Accounts has a credit balance of $15,000 before adjustment, what is the balance after adjustment?




A. $15,000.
B. $27,000.
C. $23,000.
D. $31,000.


Answer: B

Hughes Company has a credit balance of $5,000 in its Allowance for Doubtful Accounts before any adjustments are made at the end of the year. Based on the review and aging of its accounts receivable at the end of the year, Hughes estimates that $60,000 of its receivables are uncollectible. The amount of bad debts expense which should be reported for the year is

Hughes Company has a credit balance of $5,000 in its Allowance for Doubtful Accounts before any adjustments are made at the end of the year. Based on the review and aging of its accounts receivable at the end of the year, Hughes estimates that $60,000 of its receivables are uncollectible. The amount of bad debts expense which should be reported for the year is




A. $5,000.
B. $55,000.
C. $60,000.
D. $65,000.



Answer: B

Voight Company's account balances at December 31 for Accounts Receivable and Allowance for Doubtful Accounts were $1,400,000 and $70,000 (credit balance), respectively. An aging of accounts receivable indicated that $128,000 are expected to become uncollectible. The amount of the adjusting entry for bad debts at December 31 is

Voight Company's account balances at December 31 for Accounts Receivable and Allowance for Doubtful Accounts were $1,400,000 and $70,000 (credit balance), respectively. An aging of accounts receivable indicated that $128,000 are expected to become uncollectible. The amount of the adjusting entry for bad debts at December 31 is




A. $128,000.
B. $58,000.
C. $198,000.
D. $70,000.



Answer: B

If a company fails to record estimated bad debts expense,

If a company fails to record estimated bad debts expense,




A. cash realizable value is understated.
B. expenses are understated.
C. revenues are understated.
D. receivables are understated.




Answer: B

Which of the following practices by a credit card company results in lower interest charges to the cardholder?

Which of the following practices by a credit card company results in lower interest charges to the cardholder?




A. The card company states interest as a monthly percentage rather than an annual percentage.
B. The card company allows a grace period before interest is accrued.
C. The card company allows cardholders to skip payments on their cards.
D. The card company calculates finance charges from the date of purchase to the date the amount is paid.



Answer: B

Which of the following would require a compound journal entry?

Which of the following would require a compound journal entry?




A. To record merchandise returned that was previously purchased on account.
B. To record sales on account.
C. To record purchases of inventory when a discount is offered for prompt payment.
D. To record collection of accounts receivable when a cash discount is taken.



Answer: D

Receivables are frequently classified as

Receivables are frequently classified as




A. accounts receivable, company receivables, and other receivables.
B. accounts receivable, notes receivable, and employee receivables.
C. accounts receivable and general receivables.
D. accounts receivable, notes receivable, and other receivables.



Answer: D

Interest is usually associated with

Interest is usually associated with




A. accounts receivable.
B. notes receivable.
C. doubtful accounts.
D. bad debts.



Answer: B

The accounts receivable turnover ratio is computed by dividing

The accounts receivable turnover ratio is computed by dividing




A. total sales by average net accounts receivable.
B. net credit sales by average net accounts receivable.
C. total sales by ending net accounts receivable.
D. net credit sales by ending net accounts receivable.



Answer: B

The average collection period is computed by dividing

The average collection period is computed by dividing




A. net credit sales by average net accounts receivable.
B. net credit sales by ending net accounts receivable.
C. the accounts receivable turnover ratio by 365 days.
D. 365 days by the accounts receivable turnover ratio.



Answer: D
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