Chapter 5 Flashcards
A company has 12,247 customers they extend credit to, they will have 1 ______________ A/R account.
Master
A company has 12,247 customers they extend credit to, they will have 12,247 __________________ accounts.
Subsidiary
Net credit sales
$120,000
Average accounts receivable
20,000
Cash collections on credit sales
100,000
What is the receivables turnover ratio?
6
In the Allowance Method when a receivable is resurrected
Assets stay the same, Net Income stays the same.
Accounts Receivable are like
Dead Fish that deteriorate with age.
ABC reports a receivables turnover ratio of 14.5. The industry average is 10.7. What most likely is causing this difference?
ABC has effective procedures related to selling goods on account.
Allowance for Bad Debts is what kind of account?
Contra-Asset
ABC estimates uncollectible accounts based on the percentage of accounts receivable. What effect will recording the estimate of uncollectible accounts have on the accounting equation?
Decrease assets and decrease stockholders’ equity.
What is the most likely reason for a company to have an increase in average collection period?
The company has become more lenient in its credit policies and is extending credit terms to maintain customers.
In the Allowance Method when we collect on a previously written off receivable
Assets stay the same, Net Income stays the same.
Which of the following is/are a sign that a company cannot quickly turn its receivables into cash (may have more than one answer)?
Check All That Apply A low receivables turnover ratio A low average collection period A high receivables turnover ratio A high average collection period.
2,3
Which of the following is/are a sign that a company can quickly turn its receivables into cash (may have more than one answer)?
1,3
ABC accounts for bad debts using the allowance method. On 6/1, ABC wrote off DE’s $2,500 account. What effect will this write-off have on ABC’s balance sheet at the time of the write-off?
No effect.
ABC reports the following information for the year:
Net credit sales
$120,000
Average accounts receivable
20,000
Cash collections on credit sales
100,000
What is ABC’s receivables turnover ratio?
6.0
Calculating the Allowance for Bad Debts at the end of the year
is an APPROXIMATE procedure.
