Chapter 9 Self Test

Question 1

Receivables are frequently classified as:
accounts receivable, company receivables, and other receivables.
accounts receivable, notes receivable, and employee receivables.
accounts receivable and general receivables.
accounts receivable, notes receivable, and other receivables.

Answer 1

accounts receivable, notes receivable, and other receivables.

Question 2

Buehler Company on June 15 sells merchandise on account to Chaz Co. for $1,000, terms 2/10, n/30. On June 20, Chaz Co. returns merchandise worth $300 to Buehler Company. On June 24, payment is received from Chaz Co. for the balance due. What is the amount of cash received?
$700.
$680.
$686.
None of the above.

Answer 2

$686.

Question 3

Which of the following approaches for bad debts is best described as a balance sheet method?
Percentage-of-receivables basis.
Direct write-off method.
Percentage-of-sales basis.
Both a and b.

Answer 3

Percentage-of-receivables basis.

Question 4

Hughes Company has a credit balance of $5,000 in its Allowance for Doubtful Accounts before any adjustments are made at the end of the year. Based on review and aging of its accounts receivable at the end of the year, Hughes estimates that $60,000 of its receivables are uncollectible. The amount of bad debts expense which should be reported for the year is:
$5,000.
$55,000.
$60,000.
$65,000.

Answer 4

$55,000.

Question 5

Net sales for the month are $800,000, and bad debts are expected to be 1.5% of net sales. The company uses the percentage-of-sales basis. If Allowance for Doubtful Accounts has a credit balance of $15,000 before adjustment, what is the balance after adjustment?
$15,000.
$27,000.
$23,000.
$31,000.

Answer 5

$27,000.

Question 6

In 2012, Roso Carlson Company had net credit sales of $750,000. On January 1, 2012, Allowance for Doubtful Accounts had a credit balance of $18,000. During 2012, $30,000 of uncollectible accounts receivable were written off. Past experience indicates that 3% of net credit sales become uncollectible. What should be the adjusted balance of Allowance for Doubtful Accounts at December 31, 2012?
$10,050.
$10,500.
$22,500.
$40,500.

Answer 6

$10,500

Question 7

One of the following statements about promissory notes is incorrect. The incorrect statement is:
The party making the promise to pay is called the maker.
The party to whom payment is to be made is called the payee.
A promissory note is not a negotiable instrument.
A promissory note is often required from high-risk customers.

Answer 7

A promissory note is not a negotiable instrument.

Question 8

Which of the following statements about Visa credit card sales is incorrect?
The credit card issuer makes the credit investigation of the customer.
The retailer is not involved in the collection process.
Two parties are involved.
The retailer receives cash more quickly than it would from individual customers on account.

Answer 8

Two parties are involved

Question 9

Accounts and notes receivable are reported in the current assets section of the balance sheet at:
cash (net) realizable value
net book value.
lower-of-cost-or-market value.
invoice cost.

Answer 9

cash (net) realizable value

Question 10

Oliveras Company had net credit sales during the year of $800,000 and cost of goods sold of $500,000. The balance in accounts receivable at the beginning of the year was $100,000, and the end of the year it was $150,000. What were the accounts receivable turnover ratio and the average collection period in days?

4. 0 and 91.3 days.
5. 3 and 68.9 days.
6. 4 and 57 days.
7. 0 and 45.6 days.

Answer 10

6.4 and 57 days.