Question 1

When an account is written off using the allowance method, gross accounts receivable

Accepted Answer

A)   is unchanged and the allowance account increases.
B)   increases and the allowance account increases.
C)   decreases and the allowance account decreases.
D)   decreases and the allowance account increases.

Question 2

A promissory note is a written promise to pay a specific amount of money on demand or at a definite time.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements about short-term notes receivable is FALSE?

Accepted Answer

A)   They may have a related allowance account called Allowance for Doubtful Notes Receivable.
B)   They are reported at their gross realizable value.
C)   They may use the same estimations and calculations as accounts receivable to determine net realizable value.
D)   They are reported in current assets.

Question 4

The two most common types of receivables are

Accepted Answer

A)   accounts receivable and notes receivable.
B)   notes receivable and other receivables.
C)   trade receivables and other receivables.
D)   accounts receivable and trade receivables.

Question 5

A nonbank credit card transaction would be recorded as an account receivable transaction for which of the following companies?

Accepted Answer

A)   Bank of Montreal
B)   Canadian Tire
C)   Bank of Nova Scotia
D)   Royal Bank

Question 6

An increase in the bad debt expense would NOT be caused by

Accepted Answer

A)   an increase in cash sales.
B)   poor economic climate.
C)   an increase in credit sales.
D)   a decrease in the quality of customers.

Question 7

Interest revenue is usually associated with

Accepted Answer

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

Question 8

When the controller reviewed the aged customer list, he found that there was a large accounts receivable which was 60 days overdue. The name of the customer was the same last name as the company's president, who had a very uncommon name. The action that the controller should take would be

Accepted Answer

A)   ignore the situation.
B)   send the account to a collection agency and let them deal with it.
C)   give the account to a junior clerk and ask them to make a call.
D)   bring the account to the attention of the company president and ask him for his advice on collection.

Question 9

The collection period can be used to assess the length of the company's operating cycle.

Accepted Answer

A) True 
 B)False

Question 10

Three accounting issues associated with accounts receivable are

Accepted Answer

A)   amortizing, returns, and valuing.
B)   amortizing, valuing, and collecting.
C)   recognizing, valuing, and accelerating cash receipts.
D)   accrual, bad debts, and disposing.

Question 11

To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a

Accepted Answer

A)   debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts.
B)   debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts.
C)   debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable.
D)   debit to Bad Debts Expense and a credit to Accounts Receivable.

Question 12

When should the company expect to receive cash from the credit card company?

Accepted Answer

A)   less than 7 days
B)   less than 30 days
C)   less than a few days
D)   never record as a cash transaction

Question 13

Which of the following is NOT a similarity between notes receivable and account receivables?

Accepted Answer

A)   They are both credit instruments.
B)   Both can be sold to another party.
C)   Both are valued at net realizable value.
D)   Both are due within 30 days.

Question 14

Neil Construction Co. receives a note receivable from Sonny Plastics Inc. as settlement of an overdue account receivable. The note is for three months and bears an annual interest rate of 8%. The original accounts receivable balance was $800. At the end of the three-month period, Neil Construction Co. will pay Sonny Plastics Inc.

Accepted Answer

A)   $64.
B)   $864.
C)   $16.
D)   $816.

Question 15

Bad Debts Expense is considered

Accepted Answer

A)   an avoidable cost in doing business on a credit approach.
B)   an internal control weakness.
C)   a necessary risk of doing business on a credit approach.
D)   avoidable unless there is a recession.

Question 16

During 2017, Jerico's sales increased by 20%. If accounts receivable increased by 40%, this may indicate that

Accepted Answer

A)   the company's collections have improved.
B)   the company may be increasing sales by loosening its credit policies.
C)   the company's collection policies have become more aggressive.
D)   the company's management is focusing on cash sales.

Question 17

Notes or accounts receivables that result from sales transactions are often called

Accepted Answer

A)   sales receivables.
B)   non-trade receivables.
C)   trade receivables.
D)   merchandise receivables.

Question 18

Most companies that sell on account record the collection of an accounts receivable in

Accepted Answer

A)   both the subsidiary ledger and the general ledger.
B)   the general ledger only.
C)   the subsidiary ledger only.
D)   Collections on account do not have to be recorded as all collections are deposited in the bank and will therefore be recorded on the bank statement.

Question 19

Under the allowance method of accounting for uncollectible accounts,

Accepted Answer

A)   the net realizable value of accounts receivable is greater before an account is written off than after it is written off.
B)   Bad Debts Expense is debited when a specific account is written off as uncollectible.
C)   the net realizable value of accounts receivable in the balance sheet is the same before and after an account is written off.
D)   Allowance for Doubtful Accounts is closed each year to the owner's capital account.

Question 20

A note receivable is a formal instrument of credit issued as proof of a debt between a debtor and the company.

Accepted Answer

A) True 
 B)False

Exam 8: Accounting for Receivables

Under the allowance method of accounting for uncollectible accounts,

Correct Answer
verified

The collection period can be used to assess the length of the company's operating cycle.

Correct Answer
verified

Which of the following is NOT a similarity between notes receivable and account receivables?

Correct Answer
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Correct Answer
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When should the company expect to receive cash from the credit card company?

Correct Answer
verified

Interest revenue is usually associated with

Correct Answer
verified

Which of the following statements about short-term notes receivable is FALSE?

Correct Answer
verified

Three accounting issues associated with accounts receivable are

Correct Answer
verified

To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a

Correct Answer
verified

When an account is written off using the allowance method, gross accounts receivable

Correct Answer
verified

Most companies that sell on account record the collection of an accounts receivable in

Correct Answer
verified

Notes or accounts receivables that result from sales transactions are often called

Correct Answer
verified

Bad Debts Expense is considered

Correct Answer
verified

An increase in the bad debt expense would NOT be caused by

Correct Answer
verified

A promissory note is a written promise to pay a specific amount of money on demand or at a definite time.

Correct Answer
verified

A note receivable is a formal instrument of credit issued as proof of a debt between a debtor and the company.

Correct Answer
verified

When the controller reviewed the aged customer list, he found that there was a large accounts receivable which was 60 days overdue. The name of the customer was the same last name as the company's president, who had a very uncommon name. The action that the controller should take would be

Correct Answer
verified

The two most common types of receivables are

Correct Answer
verified

During 2017, Jerico's sales increased by 20%. If accounts receivable increased by 40%, this may indicate that

Correct Answer
verified

A nonbank credit card transaction would be recorded as an account receivable transaction for which of the following companies?

Correct Answer
verified

Exam 8: Accounting for Receivables

Under the allowance method of accounting for uncollectible accounts,

Correct AnswerverifiedShow Answer

The collection period can be used to assess the length of the company's operating cycle.

Correct AnswerverifiedShow Answer

Which of the following is NOT a similarity between notes receivable and account receivables?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When should the company expect to receive cash from the credit card company?

Correct AnswerverifiedShow Answer

Interest revenue is usually associated with

Correct AnswerverifiedShow Answer

Which of the following statements about short-term notes receivable is FALSE?

Correct AnswerverifiedShow Answer

Three accounting issues associated with accounts receivable are

Correct AnswerverifiedShow Answer

To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a

Correct AnswerverifiedShow Answer

When an account is written off using the allowance method, gross accounts receivable

Correct AnswerverifiedShow Answer

Most companies that sell on account record the collection of an accounts receivable in

Correct AnswerverifiedShow Answer

Notes or accounts receivables that result from sales transactions are often called

Correct AnswerverifiedShow Answer

Bad Debts Expense is considered

Correct AnswerverifiedShow Answer

An increase in the bad debt expense would NOT be caused by

Correct AnswerverifiedShow Answer

A promissory note is a written promise to pay a specific amount of money on demand or at a definite time.

Correct AnswerverifiedShow Answer

A note receivable is a formal instrument of credit issued as proof of a debt between a debtor and the company.

Correct AnswerverifiedShow Answer

When the controller reviewed the aged customer list, he found that there was a large accounts receivable which was 60 days overdue. The name of the customer was the same last name as the company's president, who had a very uncommon name. The action that the controller should take would be

Correct AnswerverifiedShow Answer

The two most common types of receivables are

Correct AnswerverifiedShow Answer

During 2017, Jerico's sales increased by 20%. If accounts receivable increased by 40%, this may indicate that

Correct AnswerverifiedShow Answer

A nonbank credit card transaction would be recorded as an account receivable transaction for which of the following companies?

Correct AnswerverifiedShow Answer

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