Question 1

With an interest-bearing note, a borrower must pay the ________________ of the note plus _________________ at maturity.

Accepted Answer

face value...

Question 2

A retailer that collects sales taxes is acting as an agent for the

Accepted Answer

A)  wholesaler.
B)  customer.
C)  taxing authority.
D)  chamber of commerce.E) A) and B)
F) None of the above

Question 3

When customers make purchases with a national credit card, the retailer

Accepted Answer

A)  is responsible for maintaining customer accounts.
B)  is not involved in the collection process.
C)  absorbs any losses from uncollectible accounts.
D)  receives cash equal to the full price of the merchandise sold from the credit card company.E) C) and D)
F) B) and C)

Question 4

Two bases for estimating uncollectible accounts are percentage of:

Accepted Answer

A)  assets and percentage of sales.
B)  receivables and percentage of total revenue.
C)  current assets and percentage of sales.
D)  receivables and percentage of sales.E) None of the above
F) All of the above

Question 5

When the allowance method of accounting for uncollectible accounts is used, Bad Debt Expense is recorded

Accepted Answer

A)  in the year after the credit sale is made.
B)  in the same year as the credit sale.
C)  as each credit sale is made.
D)  when an account is written off as uncollectible.E) A) and C)
F) A) and D)

Question 6

A company regularly sells its receivables to a factor who assesses a 2% service charge on the amount of receivables purchased.Which of the following statements is true for the seller of the receivables?

Accepted Answer

A)  The loss section of the income statement will increase each time receivables are sold.
B)  The credit to Accounts Receivable is less than the debit to Cash when the accounts are sold.
C)  Selling expenses will increase each time accounts are sold.
D)  The other expense section of the income statement will increase each time accounts are sold.E) A) and B)
F) A) and C)

Question 7

Hart Hotels lends Nancy's Nuts $60,000 on July 1, accepting a four-month, 9% interest note.Hart Hotels prepares financial statements on July 30.What adjusting entry should be made before the financial statements can be prepared?

Accepted Answer

A)   Note Receivable......................60,000  \quad  Cash..........................................   \quad \quad  60,000
B)   Interest Receivable....................450Interest Revenue.............................  \quad    \quad  450
C)   Cash.........................................450Interest Revenue......................  \quad    \quad    \quad  450
D)   Interest Receivable.................1,800Interest Revenue............................  \quad    \quad  1,800 E) A) and D)
F) B) and C)

Question 8

Interest expense on an interest-bearing note is

Accepted Answer

A)  always equal to zero.
B)  accrued over the life of the note.
C)  only recorded at the time the note is issued.
D)  only recorded at maturity when the note is paid.E) A) and B)
F) A) and C)

Question 9

A restaurant credited the Sales account for the sales price and the amount of sales tax on sales.If the sales tax rate is 5% and the balance in the Sales account amounted to $168,000, what is the amount of the sales taxes owed to the taxing agency?

Accepted Answer

A)  $160,000
B)  $168,000
C)  $8,400
D)  $8,000E) All of the above
F) A) and B)

Question 10

A factor purchases receivables from businesses for a fee and collects the remittances directly from customers.

Accepted Answer

A) True 
 B)False  False

Question 11

The two methods of accounting for uncollectible accounts are the ____________ method and the ______________ method.

Accepted Answer

allowance,...

Question 12

The percentage of receivables basis of estimating expected uncollectible accounts emphasizes income statement relationships.

Accepted Answer

A) True 
 B)False

Question 13

Accounts receivable are the result of cash and credit sales.

Accepted Answer

A) True 
 B)False

Question 14

Which type of business is more susceptible to losses in accounts receivables?

Accepted Answer

A)  Restaurant
B)  Theme park
C)  Hotel
D)  ClubE) A) and C)
F) None of the above

Question 15

Most companies pay current liabilities

Accepted Answer

A)  out of current assets.
B)  by issuing interest-bearing notes payable.
C)  by issuing stock.
D)  by creating long-term liabilities.E) B) and C)
F) None of the above

Question 16

Other receivables include nontrade receivables such as loans to company officers.

Accepted Answer

A) True 
 B)False

Question 17

The relationship of current assets to current liabilities is used in evaluating a company's

Accepted Answer

A)  operating cycle.
B)  revenue-producing ability.
C)  short-term debt paying ability.
D)  long-range solvency.E) C) and D)
F) None of the above A

Question 18

If a retailer regularly sells its receivables to a factor, the service charge of the factor should be classified as a(n)

Accepted Answer

A)  selling expense.
B)  interest expense.
C)  other expense.
D)  contra asset.E) None of the above
F) All of the above

Question 19

Two methods of accounting for uncollectible accounts are the

Accepted Answer

A)  allowance method and the accrual method.
B)  allowance method and the net realizable method.
C)  direct write-off method and the accrual method.
D)  direct write-off method and the allowance method.E) A) and B)
F) C) and D)

Question 20

Current liabilities are expected to be paid within one year or the operating cycle, whichever is longer.

Accepted Answer

A) True 
 B)False  False

Exam 12: Accounting for Receivablesand Payables

With an interest-bearing note, a borrower must pay the ________________ of the note plus _________________ at maturity.

Correct Answerverifiedface value...View AnswerShow Answer

A retailer that collects sales taxes is acting as an agent for the

Correct AnswerverifiedShow Answer

When customers make purchases with a national credit card, the retailer

Correct AnswerverifiedShow Answer

Two bases for estimating uncollectible accounts are percentage of:

Correct AnswerverifiedShow Answer

When the allowance method of accounting for uncollectible accounts is used, Bad Debt Expense is recorded

Correct AnswerverifiedShow Answer

A company regularly sells its receivables to a factor who assesses a 2% service charge on the amount of receivables purchased.Which of the following statements is true for the seller of the receivables?

Correct AnswerverifiedShow Answer

Hart Hotels lends Nancy's Nuts $60,000 on July 1, accepting a four-month, 9% interest note.Hart Hotels prepares financial statements on July 30.What adjusting entry should be made before the financial statements can be prepared?

Correct AnswerverifiedShow Answer

Interest expense on an interest-bearing note is

Correct AnswerverifiedShow Answer

A restaurant credited the Sales account for the sales price and the amount of sales tax on sales.If the sales tax rate is 5% and the balance in the Sales account amounted to $168,000, what is the amount of the sales taxes owed to the taxing agency?

Correct AnswerverifiedShow Answer

A factor purchases receivables from businesses for a fee and collects the remittances directly from customers.

Correct AnswerverifiedFalse

The two methods of accounting for uncollectible accounts are the ____________ method and the ______________ method.

Correct Answerverifiedallowance,...View AnswerShow Answer

The percentage of receivables basis of estimating expected uncollectible accounts emphasizes income statement relationships.

Correct AnswerverifiedShow Answer

Accounts receivable are the result of cash and credit sales.

Correct AnswerverifiedShow Answer

Which type of business is more susceptible to losses in accounts receivables?

Correct AnswerverifiedShow Answer

Most companies pay current liabilities

Correct AnswerverifiedShow Answer

Other receivables include nontrade receivables such as loans to company officers.

Correct AnswerverifiedShow Answer

The relationship of current assets to current liabilities is used in evaluating a company's

Correct AnswerverifiedA

If a retailer regularly sells its receivables to a factor, the service charge of the factor should be classified as a(n)

Correct AnswerverifiedShow Answer

Two methods of accounting for uncollectible accounts are the

Correct AnswerverifiedShow Answer

Current liabilities are expected to be paid within one year or the operating cycle, whichever is longer.

Correct AnswerverifiedFalse

With an interest-bearing note, a borrower must pay the of the note plus _ at maturity.

Correct Answer
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The two methods of accounting for uncollectible accounts are the method and the __ method.

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allowance,...
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