RECEIVABLES Flashcards
The interest of a non-interest bearing note is equal to?
a. Zero
b. The excess of the market value over the present value of the note
c. The excess of the face value over the present value
d. The excess of the present value over the face value
c. The excess of the face value over the present value
How should unearned interest included in the face amount of notes receivable be presented on the balance sheet?
a. As a deduction from the related receivables
b. As a deferred credit
c. In the footnotes
d. As a current liability
a. As a deduction from the related receivables
Why is the allowance method preferred over the direct write-off method of accounting for bad debts?
a. Determining worthless accounts under direct write-off is difficult to do
b. Allowance method is used for tax purposes
c. Estimates are used
d. Improved matching of bad debt expense with revenue
a. Determining worthless accounts under direct write-off is difficult to do
Receivables denominated in foreign currency should be translated to foreign currency at
a. Closing rate
b. Average rate
c. Historical rate
d. Mortality rate
a. Closing rate
When a note receivable is dishonored, it is debited to
a. Accounts receivable at face value
b. Accounts receivable at face value plus interest and other charges
c. Dishonored note receivable at face value
d. Dishonored note receivable at face value plus interest and other charges
b. Accounts receivable at face value plus interest and other charges
When a specific customer’s accounts receivable was written off as uncollectible but was subsequently recovered, what will be the effect on Accounts Receivable and Allowance for Doubtful accounts, respectively?
a. No effect, increase
b. Increase, increase
c. increase, no effect
d. some other answer
a. No effect, increase
Accounts receivable should be stated at
a. Net realizable Value
b. Face value
c. Maturity Value
d. Discounted Value
a. Net realizable Value
Which if the following is the proper balance sheet presentation of receivables?
a. Trade receivables and non-trade receivables which are currently collectible should be presented as on line item called “trade and other receivables”
b. Trade accounts receivables and trade notes receivable should be presented separately
c. Non-trade receivables should be presented as current assets
d. Trade receivables and non-trade receivables should be presented separately
a. Trade receivables and non-trade receivables which are currently collectible should be presented as on line item called “trade and other receivables”
Nontrade receivables are classified as current assets only if they are reasonably expected to be realized in cash
a. Within one year or within the operating cycle whichever is shorter
b. Within one year or within the operating cycle whichever is longer
c. Within one year, the length of the operating cycle, notwithstanding
d. Within the normal operating cycle
c. Within one year, the length of the operating cycle, notwithstanding
The category “trade receivables” includes
a. Advances to officers and employees
b. Income tax refunds receivable
c. Claims against insurance companies for casualties sustained
d. None of these
d. None of these
Assuming that the ideal measure of short-term receivables in the balance sheet is the discounted value of the cash to be received in the future, failure to follow this practice usually does not make the balance sheet misleading because
a. Most short-term receivables are not interest-bearing
b. The allowance for uncollectible accounts includes a discount element
c. Most receivables can be sold to a bank of factor
d. The amount of the discount is not material
d. The amount of the discount is not material
On October 1, 2011, a company received a one year note-receivable bearing interest at the market rate. The face amount of the note receivable and the entire amount of the interest are due on September 30, 2012. The interest receivable account at December 31, 2011 would consist of the amount representing
a. Nine months of accrued interest income
b. The excess on October 2, 2011 of the present value of the note receivable over its face value
c. Three months of accrued interest
d Twelve months of accrued interest income
c. Three months of accrued interest
Accounting for the interest in a noninterest bearing note receivable is an example of what aspect of accounting theory?
a. Matching
b. Substance over form
c. Verifiability
d. Accrual basis
b. Substance over form
In an entity’s April 30 statement of financial position, a note receivable was reported as a noncurrent asset and the accrued interest for eight months was reported as a current asset. Which of the following terms would fit the entity’s note receivable
a. Principal and interest are due December 31, 2012
b. Both principal and interest are payable on December 31, 2012 and December 31, 2013
c. Both principal and interest are payable on August 31, 2012 and August 31, 2013.
d. Principal is due August 31, 2013, and the interest is due on August 31, 2012 and August 31, 2013
d. Principal is due August 31, 2013, and the interest is due on August 31, 2012 and August 31, 2013
On July 1, 2013, an entity obtained a two-year 8% note receivable for services rendered. At that time, the market rate of interest was 10%. The face amount of the note and the entire amount of interest are due on June 30, 2015. Interest receivable on December 31, 2013 is
a. 5% of the July 1, 2012 present value of the amount due on June 30 2014
b. 4% of the July 1, 2012 present value of the amount due on June 30, 2014
c. 5% of the face amount of the note
d. 4% of the fare amount of the note
c. 5% of the face amount of the note
