MODULE 7 REVIEW1.Wallah Company agreed to accept $5,000 in cash along with an $8,000, 90-day, 13.5% note from customer Judith Klemper to settle her $13,000 past-due account. How should Wallah record this transaction?A)
B)
C)
D)
2.A company borrowed $1,000 by signing a six month promissory note at 5% interest. The total amount of interest on this promissory note is $25.A) True
B) False3.The aging method of determining bad debts expense is based on the knowledge that the longer a receivable is past due, the lower the likelihood of collection.A) True
B) False4.A company had an accounts receivable turnover ratio of 12 and net sales of $744,000 for a given period. What was the average amount of accounts receivables for this period?A) $8,928,000
B) $4,380
C) Average accounts receivable cannot be determined from this information
D) $62,000
E) $169.865.When using the allowance method of accounting for uncollectible accounts, the entry to write off Harold's uncollectible account is a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable - Harold.A) True
B) False6.The advantage of the allowance method of accounting for uncollectible accounts is that it identifies the specific customers who do not pay their bills.A) True
B) False7.Chiller Company has credit sales of $5.60 million for year 2010. Chiller estimates that 1.32% of the credit sales will not be collected. Historically, 4% of outstanding accounts receivable is uncollectible. On December 31, 2010, the company's Allowance for Doubtful Accounts has an unadjusted credit balance of $3561. Chiller prepares a schedule of its December 31, 2010, accounts receivable by age. Based on past experience, it estimates the percent of receivables in each age category that will become uncollectible. This information is summarized here:
Assuming the company uses the percent of sales method, what is the amount that Chiller will enter as the Bad Debt Expense in the December 31 adjusting journal entry?A) $66,167.80
B) $73,920.00
C) $48,317.41
D) $70,359.00
E) $55,439.418.It is never good practice to accept a note receivable in exchange for an overdue account receivable.A) True
B) False9.The matching principle requires that accrued interest on outstanding notes receivable be recorded at the end of each accounting period.A) True
B) False10.The following information is from the annual financial statements of Nancy Company.
What is the accounts receivable turnover ratio for 2009?A) 5.40
B) 5.20
C) 6.72
D) 4.97
E) 6.4111.When using the allowance method of accounting for uncollectible accounts, the recovery of a bad debt would be recorded as a debit to Cash and a credit to Bad Debts Expense.A) True
B) False12.Companies use two methods to account for uncollectible accounts: the direct write-off method and the allowance method.A) True
B) False13.The materiality principle permits the use of the direct write-off method of accounting for uncollectible accounts when bad debts are very large in comparison to the company's other financial statement items such as sales and net income.A) True
B) False14.Temper Company has credit sales of $3.10 million for year 2010. Temper estimates that 2% of accounts receivable will remain uncollectible. Historically, .9% of sales have been uncollectible. On December 31, 2010, the company's Allowance for Doubtful Accounts has an unadjusted debit balance of $2,575. Temper prepares a schedule of its December 31, 2010, accounts receivable by age. Based on past experience, it estimates the percent of receivables in each age category that will become uncollectible. This information is summarized here:
Assuming the company uses the percent of accounts receivable method, what is the amount that Temper will enter as the Bad Debt Expense in the December 31 adjusting journal entry?A) $23,024.40
B) $18,947.20
C) $16,372.20
D) $21,522.20
E) $27,900.0015.The amount of bad debt expense can be estimated by:A) Bad debt expense can be estimated by any of the three methods listed below
B) The percent of sales method
C) The aging of accounts receivable method
D) Only b and c
E) The percent of accounts receivable method16.Under the allowance method of accounting for uncollectible accounts receivable, no estimate is made to predict bad debts expense.A) True
B) False17.The interest accrued on $3,600 at 7% for 60 days is:A) $42
B) $252
C) $36
D) $180
E) $42018.Vine Company began operations on January 1, 2010. During its first year, the company completed a number of transactions involving sales on credit, accounts receivable collections, and bad debts. These transactions are summarized as follows:
What is the amount required for the adjusting journal entry to record bad debt expense?A) $19,221.20
B) $19,400.20
C) $39,100.70
D) $19,783.80
E) $18,644.9019.Failure by a promissory note's maker to pay the amount due at maturity is known as:A) Depreciating a note
B) Dishonoring a note
C) Closing a note
D) Protesting a note
E) Discounting a note20.The matching principle requires use of the direct write-off method of accounting for bad debts.A) True
B) False
