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Exam 5: Receivables and Sales

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Question 51

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The net realizable value of accounts receivable is the full amount owed by customers.Net realizable value is the net amount of cash we expect to collect.

A) True
B) False

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Question 52

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Under the allowance method,the write-off of an actual bad debt is recorded with a debit to the Allowance for Uncollectible Accounts and a credit to Accounts Receivable.

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B) False

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Question 53

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The amount of a company's receivables is influenced by several variables,including all of the following except:

At the end of 2018,Murray State Lenders had a balance in its Allowance for Uncollectible Accounts of $4,500 (credit) before any adjustment.The company estimated its future uncollectible accounts to be $12,000 using the percentage-of-receivables method.Murray State's adjustment on December 31,2018,to record its estimated uncollectible accounts included a:

Which of the following is recorded by a credit to Accounts Receivable?

From a balance sheet perspective,the percentage-of-receivables method is typically preferable because assets (net accounts receivable)are reported closer to their net realizable value.

At December 31,Gill Co.reported accounts receivable of $238,000 and an allowance for uncollectible accounts of $600 (debit) before any adjustments.An analysis of accounts receivable suggests that the allowance for uncollectible accounts should be 3% of accounts receivable.The amount of the adjustment for uncollectible accounts would be:

The receivables turnover ratio equals average accounts receivable divided by net credit sales.The receivables turnover ratio equals net credit sales divided by average accounts receivable.

If a company has total revenues of $100,000,sales discounts of $3,000,sales returns of $4,000,and sales allowances of $2,000,the income statement will report net revenues of $91,000.

On December 31,2018,Larry's Used Cars had balances in Accounts Receivable and Allowance for Uncollectible Accounts of $53,600 and $1,325,respectively.During 2019,Larry's wrote off $1,465 in accounts receivable and determined that there should be an allowance for uncollectible accounts of $1,280 at December 31,2019.Bad debt expense for 2019 would be:

On December 31,2018,Coolwear Inc.had balances in Accounts Receivable and Allowance for Uncollectible Accounts of $48,400 and $940,respectively.During 2019,Coolwear wrote off $820 in accounts receivable and determined that there should be an allowance for uncollectible accounts of $1,140 at December 31,2019.Bad debt expense for 2019 would be:

At the beginning of the year,Vici Ventures had accounts receivable of $220,000.At the end of the year,the company had accounts receivable of $340,000.During the year,Vici had total sales of $1,000,000,70% of which were credit sales.What was Vici's receivables turnover ratio for the year?

From an income statement perspective,the percentage-of-credit-sales method is typically preferable because it better matches the revenues (credit sales)with their related expenses (bad debts).

Suppose that the balance of a company's Allowance for Uncollectible Accounts was $6,200 (credit) at the end of the year,prior to any adjustments.The company estimated that the total of uncollectible accounts in its accounts receivable was $44,300 at the end of the year.What amount of bad debt expense would appear in the company's year-end income statement?

Sales returns and allowances occur when the buyer returns the goods or the seller reduces the customer's balance owed.

The amount of cash owed to a company by its customers from the sale of products or services on account is commonly referred to as:

The primary difference between a note receivable and an account receivable is:

Under the allowance method,when a company writes off an account receivable as an actual bad debt,it records an expense.Writing off an account receivable has no effect on expenses.

Crimson Inc.recorded credit sales of $750,000,of which $600,000 is not yet due,$100,000 is past due for up to 180 days,and $50,000 is past due for more than 180 days.Under the aging of receivables approach,Crimson Inc.expects it will not collect 1% of the amount not yet due,10% of the amount past due for up to 180 days,and 20% of the amount past due for more than 180 days.The allowance account had a debit balance of $1,000 before adjustment.After adjusting for bad debt expense,what is the ending balance of the allowance account?

The receivables turnover ratio indicates: