Question 1

In the normal formula for interest calculation,the interest rate is on a(n) _____ basis and therefore the time variable must reflect how many _____ out of _____ in the interest period.

Accepted Answer

A)  biannual,months,6
B)  annual,years,1
C)  biannual,half-years,2
D)  annual,months,12E) B) and C)
F) A) and C)

Question 2

Receivables might be sold ("factored") to:

Accepted Answer

A)  lengthen the time to collect from customers.
B)  reduce the receivables turnover ratio.
C)  generate cash quickly.
D)  generate a gain on sale.E) B) and C)
F) A) and B)

Question 3

The receivables turnover ratio indicates:

Accepted Answer

A)  the average number of days from the time a sale is made on account to the time cash is collected.
B)  the average number of days from the time a sale is made on account to the time payment is due.
C)  how many times a year receivables go uncollected.
D)  how fast receivables are collected.E) B) and C)
F) A) and D)

Question 4

Analysts often interpret a sudden decline in the receivables turnover ratio as a signal of a developing problem.
BT: Comprehension

Accepted Answer

A) True 
 B)False

Question 5

A company lends its CEO $150,000 for 3 years at a 6% annual interest rate.Interest payments are to be made twice a year.Each interest payment will be for:

Accepted Answer

A)  $9,000.
B)  $750.
C)  $4,500.
D)  $1,500.E) A) and B)
F) B) and C)

Question 6

Extending credit to customers will result in which of the following additional costs?

Accepted Answer

A)  Increased employer costs will be incurred to evaluate customer credit worthiness,track what each customer owes,and follow up to ensure correction.
B)  Bad debt expense will result when amounts cannot be collected from customers.
C)  Delayed receipt of cash may result requiring the company to take out short-term loans and incur interest costs.
D)  All of the above.E) None of the above
F) All of the above

Question 7

At the end of the first year,the Treadwell Tire Company had accounts receivable of $67,900 and at the end of the second year the company had accounts receivable of $72,400.If the company's net sales revenue during the second year was $876,875,the receivables turnover ratio for the second year was:

Accepted Answer

A)  12.5.
B)  29.2.
C)  0.08.
D)  0.034.E) A) and B)
F) None of the above

Question 8

The allowance for doubtful accounts is a contra-asset account.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 9

Your company uses the percentage of credit sales method for calculating bad debt expense.If your company has $216,000 in total sales,of which $178,000 are on credit,and its historical bad debt loss is 6% of credit sales,bad debt expense:

Accepted Answer

A)  is $12,960.
B)  is $10,680.
C)  is $38,000.
D)  cannot be determined from the information given.E) C) and D)
F) A) and C)

Question 10

The receivables turnover ratio is calculated using the average net accounts receivable.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 11

Which of the following method is not acceptable under both IFRS and ASPE?

Accepted Answer

A)  Percentage of sales method
B)  Direct write-off method
C)  Aging of accounts receivableBT: KnowledgeD) A) and C)
E) B) and C)

Question 12

.The company's expenses (including bad debt expense) were $7,300 in Q1 and $6,900 in Q2.If the company raised its bad debt expense estimate by $800 in Q1 and lowered it by $800 in Q2,which of the following would be true assuming all else equal?

Accepted Answer

A)  Q1 net income would fall $800 and Q2 net income would rise $1,600.
B)  Q1 net income would fall $1,600 and Q2 net income would rise $1,600.
C)  Q1 net income would fall $800 and Q2 net income would rise $800.
D)  Q1 net income would fall $1,600 and Q2 net income would rise $800.E) A) and B)
F) B) and C)

Question 13

Trade accounts receivable are created by selling goods or services on credit.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 14

The Grass is Greener Corporation provides $6,000 worth of lawn care on account during the month.Experience suggests that about 2% of net credit sales will not be paid.According to the revenue recognition principle and the matching principle,the company should:

Accepted Answer

A)  record an estimate of bad debt expense in the same period as the lawn care is provided.
B)  not report the sales revenue until it collects payment.
C)  increase the value of its liabilities with an adjustment.
D)  all of the above.E) B) and C)
F) A) and B)

Question 15

The amount of uncollectible accounts at the end of the year is estimated,using the aging of receivables method,to be $25,000.The balance in the Allowance for Doubtful Accounts account is an $8,000 credit before adjustment.Assuming no accounts are written off during the period,what will be the amount of bad debts expense for the period?

Accepted Answer

A)  $8,000.
B)  $17,000.
C)  $25,000.
D)  $33,000.E) None of the above
F) B) and D)

Question 16

Purrfect Pets sells a $1,500 aquarium to a customer on account.This would be recorded under:

Accepted Answer

A)  non-trade receivables.
B)  cash.
C)  trade accounts receivable.
D)  notes receivable.E) A) and C)
F) None of the above

Question 17

If the receivables turnover ratio rises significantly,the increase may be a signal that the company is extending credit to high-risk borrowers or allowing an overly generous repayment schedule.
BT: Comprehension

Accepted Answer

A) True 
 B)False

Question 18

A company lends its CEO $150,000 for 3 years at a 6% annual interest rate.Interest payments are to be made twice a year.The company initially records the transaction by:

Accepted Answer

A)  debiting Notes Receivable for $150,000 and crediting Cash for $150,000.
B)  debiting assets for $150,000 and crediting liabilities for $150,000.
C)  debiting Cash for $9,000 and crediting Interest Revenue for $9,000.
D)  debiting Interest Receivable for $4,500 and crediting Interest Revenue for $4,500.E) All of the above
F) B) and C)

Question 19

The smaller the receivables turnover ratio the larger the days to collect measure will be.
BT: Comprehension

Accepted Answer

A) True 
 B)False

Question 20

Over the past five years,a company had average annual credit sales of $320,000 and an average annual net write-offs of $2,000.Credit sales in the current year are $300,000.Using the percentage of credit sales method,what should the company record as an estimate of bad debt expense?

Accepted Answer

A)  $2,000
B)  $1,875
C)  $20,000
D)  $6,000E) C) and D)
F) B) and D)

Exam 8: Receivables, bad Debt Expense, and Interest Revenue

Analysts often interpret a sudden decline in the receivables turnover ratio as a signal of a developing problem. BT: Comprehension

Correct Answer
verified

The allowance for doubtful accounts is a contra-asset account. BT: Knowledge

Correct Answer
verified

The Grass is Greener Corporation provides $6,000 worth of lawn care on account during the month.Experience suggests that about 2% of net credit sales will not be paid.According to the revenue recognition principle and the matching principle,the company should:

Correct Answer
verified

If the receivables turnover ratio rises significantly,the increase may be a signal that the company is extending credit to high-risk borrowers or allowing an overly generous repayment schedule. BT: Comprehension

Correct Answer
verified

Trade accounts receivable are created by selling goods or services on credit. BT: Knowledge

Correct Answer
verified

Your company uses the percentage of credit sales method for calculating bad debt expense.If your company has $216,000 in total sales,of which $178,000 are on credit,and its historical bad debt loss is 6% of credit sales,bad debt expense:

Correct Answer
verified

The receivables turnover ratio is calculated using the average net accounts receivable. BT: Knowledge

Correct Answer
verified

Which of the following method is not acceptable under both IFRS and ASPE?

Correct Answer
verified

.The company's expenses (including bad debt expense) were $7,300 in Q1 and $6,900 in Q2.If the company raised its bad debt expense estimate by $800 in Q1 and lowered it by $800 in Q2,which of the following would be true assuming all else equal?

Correct Answer
verified

Extending credit to customers will result in which of the following additional costs?

Correct Answer
verified

Purrfect Pets sells a $1,500 aquarium to a customer on account.This would be recorded under:

Correct Answer
verified

The smaller the receivables turnover ratio the larger the days to collect measure will be. BT: Comprehension

Correct Answer
verified

In the normal formula for interest calculation,the interest rate is on a(n) ___ basis and therefore the time variable must reflect how many _ out of ___ in the interest period.

Correct Answer
verified

A company lends its CEO $150,000 for 3 years at a 6% annual interest rate.Interest payments are to be made twice a year.The company initially records the transaction by:

Correct Answer
verified

At the end of the first year,the Treadwell Tire Company had accounts receivable of $67,900 and at the end of the second year the company had accounts receivable of $72,400.If the company's net sales revenue during the second year was $876,875,the receivables turnover ratio for the second year was:

Correct Answer
verified

The receivables turnover ratio indicates:

Correct Answer
verified

Receivables might be sold ("factored") to:

Correct Answer
verified

Correct Answer
verified

Over the past five years,a company had average annual credit sales of $320,000 and an average annual net write-offs of $2,000.Credit sales in the current year are $300,000.Using the percentage of credit sales method,what should the company record as an estimate of bad debt expense?

Correct Answer
verified

A company lends its CEO $150,000 for 3 years at a 6% annual interest rate.Interest payments are to be made twice a year.Each interest payment will be for:

Correct Answer
verified

Exam 8: Receivables, bad Debt Expense, and Interest Revenue

Analysts often interpret a sudden decline in the receivables turnover ratio as a signal of a developing problem. BT: Comprehension

Correct AnswerverifiedShow Answer

The allowance for doubtful accounts is a contra-asset account. BT: Knowledge

Correct AnswerverifiedShow Answer

The Grass is Greener Corporation provides $6,000 worth of lawn care on account during the month.Experience suggests that about 2% of net credit sales will not be paid.According to the revenue recognition principle and the matching principle,the company should:

Correct AnswerverifiedShow Answer

If the receivables turnover ratio rises significantly,the increase may be a signal that the company is extending credit to high-risk borrowers or allowing an overly generous repayment schedule. BT: Comprehension

Correct AnswerverifiedShow Answer

Trade accounts receivable are created by selling goods or services on credit. BT: Knowledge

Correct AnswerverifiedShow Answer

Your company uses the percentage of credit sales method for calculating bad debt expense.If your company has $216,000 in total sales,of which $178,000 are on credit,and its historical bad debt loss is 6% of credit sales,bad debt expense:

Correct AnswerverifiedShow Answer

The receivables turnover ratio is calculated using the average net accounts receivable. BT: Knowledge

Correct AnswerverifiedShow Answer

Which of the following method is not acceptable under both IFRS and ASPE?

Correct AnswerverifiedShow Answer

.The company's expenses (including bad debt expense) were $7,300 in Q1 and $6,900 in Q2.If the company raised its bad debt expense estimate by $800 in Q1 and lowered it by $800 in Q2,which of the following would be true assuming all else equal?

Correct AnswerverifiedShow Answer

Extending credit to customers will result in which of the following additional costs?

Correct AnswerverifiedShow Answer

Purrfect Pets sells a $1,500 aquarium to a customer on account.This would be recorded under:

Correct AnswerverifiedShow Answer

The smaller the receivables turnover ratio the larger the days to collect measure will be. BT: Comprehension

Correct AnswerverifiedShow Answer

In the normal formula for interest calculation,the interest rate is on a(n) _____ basis and therefore the time variable must reflect how many _____ out of _____ in the interest period.

Correct AnswerverifiedShow Answer

A company lends its CEO $150,000 for 3 years at a 6% annual interest rate.Interest payments are to be made twice a year.The company initially records the transaction by:

Correct AnswerverifiedShow Answer

At the end of the first year,the Treadwell Tire Company had accounts receivable of $67,900 and at the end of the second year the company had accounts receivable of $72,400.If the company's net sales revenue during the second year was $876,875,the receivables turnover ratio for the second year was:

Correct AnswerverifiedShow Answer

The receivables turnover ratio indicates:

Correct AnswerverifiedShow Answer

Receivables might be sold ("factored") to:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Over the past five years,a company had average annual credit sales of $320,000 and an average annual net write-offs of $2,000.Credit sales in the current year are $300,000.Using the percentage of credit sales method,what should the company record as an estimate of bad debt expense?

Correct AnswerverifiedShow Answer

A company lends its CEO $150,000 for 3 years at a 6% annual interest rate.Interest payments are to be made twice a year.Each interest payment will be for:

Correct AnswerverifiedShow Answer

Correct Answer
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In the normal formula for interest calculation,the interest rate is on a(n) ___ basis and therefore the time variable must reflect how many _ out of ___ in the interest period.

Correct Answer
verified

Correct Answer
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Correct Answer
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