QUIZ 7

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•             Question 1
5 out of 5 points
               
                The allowance method of accounting for bad debts matches the estimated loss from uncollectible accounts receivable against the sales they helped produce.                                            
                Selected Answer:             True
                                               
•             Question 2
0 out of 5 points
               
                A company has $80,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 6% of outstanding receivables are uncollectible. The current debit balance (before adjustments) in the allowance for doubtful accounts is $1,200. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for $6,000.                                  
                Selected Answer:             False
                                               
•             Question 3
0 out of 5 points
               
                The notes receivable account of a business should include both the notes that have not yet matured and the dishonored notes.                                          
                Selected Answer:             True
                                               
•             Question 4
0 out of 5 points
               
                Gideon Company uses the direct write-off method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $2,000 uncollectible account of its customer, A. Hopkins. On July 10, Gideon received a check for the full amount of $2,000 from Hopkins. On July 10, the entry or entries Gideon makes to record the recovery of the bad debt is:                                        
                Selected Answer:             Allowance for Doubtful Accounts              2,000    
Accounts Receivable—A. Hopkinse                         2,000
Accounts Receivable—A. Hopkins             2,000    
Cash                     2,000

                                               
•             Question 5
5 out of 5 points
               
                Installment accounts receivable is another name for aging of accounts receivable.                                            
                Selected Answer:             False
                                               
•             Question 6
5 out of 5 points
               
                Winkler Company borrows $85,000 and pledges its receivables as security. The journal entry to record this transaction would be:                                   
                Selected Answer:             Debit Cash $85,000 and credit Notes Payable $85,000.
                                               
•             Question 7
5 out of 5 points
               
                On October 12 of the current year, a company determined that a customer's account receivable was uncollectible and that the account should be written off. Assuming the allowance method is used to account for bad debts, what effect will this write-off have on the company's net income and total assets?                                              
                Selected Answer:             No effect on net income; no effect on total assets.
                                               
•             Question 8
5 out of 5 points
               
                A company borrowed $10,000 by signing a 180-day promissory note at 9%. The total interest due on the maturity date is: (Use 360 days a year.)                                 
                Selected Answer:             $450
                                               
•             Question 9
5 out of 5 points
               
                Uniform Supply accepted a $4,800, 90-day, 10% note from Tracy Janitorial on October 17. What entry should Uniform Supply make on January 15 of the next year when the note is paid? (Assume reversing entries are not made.) (Use 360 days a year.)                                   
                Selected Answer:             Debit Cash $4,920; credit Interest Revenue $20; credit Interest Receivable $100; credit Notes Receivable $4,800.
                                               
•             Question 10
5 out of 5 points
               
                On November 19, Nicholson Company receives a $15,000, 60-day, 8% note from a customer as payment on account. What adjusting entry should be made on the December 31 year-end? (Use 360 days a year.)                                     
                Selected Answer:             Debit Interest Receivable $140; credit Interest Revenue $140.
                                               
•             Question 11
0 out of 5 points
               
                A Company had net sales of $23,000, and its average account receivables were $5,700. Its accounts receivable turnover is 0.24.                                               
                Selected Answer:             True
                                               
•             Question 12
5 out of 5 points
               
                A note that the maker is unable or refuses to pay at maturity is called a dishonored note.                                              
                Selected Answer:             True
                                               
•             Question 13
5 out of 5 points
               
                The materiality constraint, as applied to bad debts:                                         
                Selected Answer:             Permits the use of the direct write-off method when bad debts expenses are relatively small.
                                               
•             Question 14
5 out of 5 points
               
                A company had net sales of $550,000 and an average accounts receivable of $110,000. Its accounts receivable turnover equals 5.0.                                       
                Selected Answer:             True
                                               
•             Question 15
5 out of 5 points
               
                Federal laws prohibit the selling of accounts receivables to factors.                                          
                Selected Answer:             False
                                               
•             Question 16
5 out of 5 points
               
                Mullis Company sold merchandise on account to a customer for $625, terms n/30. The journal entry to record this sale transaction would be:                                  
                Selected Answer:             Debit Accounts Receivable $625 and credit Sales $625.
                                               
•             Question 17
5 out of 5 points
               
                Honoring a note receivable indicates that the maker has:                                              
                Selected Answer:             Paid in full.
                                               
•             Question 18
0 out of 5 points
               
                Giorgio Italian Market bought $4,000 worth of merchandise from Food Suppliers and signed a 90-day, 6% promissory note for the $4,000. Food Supplier's journal entry to record the collection on the maturity date is: (Use 360 days a year.)                                             
                Selected Answer:             Debit Notes Receivable $4,000; credit Cash $4,000
                                               
•             Question 19
5 out of 5 points
               
                A company has $80,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 6% of outstanding receivables are uncollectible. The current credit balance (before adjustments) in the allowance for doubtful accounts is $1,200. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for $4,800.                                  
                Selected Answer:             False
                                               
•             Question 20
5 out of 5 points
               
                The interest accrued on $7,500 at 6% for 90 days is: (Use 360 days a year.)                                           

                Selected Answer:             $112.50.

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