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Exam 5: Receivables and Sales

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Question 31

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The Sales Discounts account is an example of a contra revenue account.

A) True
B) False

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Question 32

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Notes receivable are assets and are reported in the balance sheet.

A) True
B) False

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Question 33

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Tom's Textiles shipped the wrong material to a customer,who refused to accept the order.Upon receipt of the material,Tom's would credit Accounts Receivable and debit:

The direct write-off method violates the matching principle.

The adjustment for uncollectible accounts involves a debit to Bad Debt Expense and a credit to the Allowance for Uncollectible Accounts.

Under the direct write-off method,what adjustment is made at the end of the year to account for possible future bad debts?

Garber Plumbers offers a 20% trade discount when providing $2,000 or more of plumbing services to its customers.In March 2018,Garber provided $4,000 of plumbing services to Red Oak Inc. ,and $1,500 of services to Cyril Inc. ,Each of these customers was granted credit terms of 2/10,net 30.If both customers paid for the plumbing services within the discount period,what was the net revenues amount for these two transactions?

A company's ratio of net sales (cash and credit sales) to average accounts receivable can be interpreted as management's ability to:

Collections of accounts receivable that previously have been written off are credited to:

If the estimate of uncollectible accounts at the end of the current year is too high,which of the following is true in the following year?

Ryerson Co.provides goods and services to customers during the year totaling $100,000.Also during the year,customers are granted discounts,returns,and allowance of $20,000.At the end of the year,Ryerson estimates that an additional $5,000 in discounts,returns,and allowances will occur next year as a result of sales transactions this year.What is the amount of net revenues Ryerson will report in its current-year income statement?

Which of the following statements is true with respect to the percentage-of-credit-sales method for estimating uncollectible accounts?

The direct write-off method is not normally an acceptable method for GAAP because it fails to report:

When a company sells a $100 service with a 20% trade discount,$80 of revenue is recognized.

Toppleson Manufacturing reports a receivables turnover ratio of 14.5.The industry average is 10.7.What most likely is causing this difference?

A company expects 5% of its newer accounts receivable to be uncollectible and 20% of its older accounts to be uncollectible.If the company has $40,000 of newer accounts and $5,000 of older accounts,the total estimate of uncollectible accounts is $2,000.Estimated uncollectible accounts = ($40,000 × 5%)+ ($5,000 × 20%)= $3,000.

A sales allowance is recorded as a debit to Accounts Receivable and a credit to Sales Allowances.A sales allowance is recorded as a debit to Sales Allowances and a credit to Accounts Receivable.

The formula for the receivables turnover ratio is:

On September 1,2018,Middleton Corp.lends cash and accepts a $1,000 note receivable that offers 12% interest and is due in six months.How much interest revenue will Middleton Corp.report during 2018?

The first step in using a balance sheet approach to estimate bad debts is to calculate the desired ending balance in which account?