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Exam 7: Cash and Receivables

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Question 31

Multiple Choice

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Days' sales uncollected equals 365 days divided by

A) net sales.
B) average net accounts receivable.
C) net income.
D) the receivable turnover.

E) A) and D)
F) None of the above

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Question 32

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Uncollectible accounts must be estimated because it is not possible to know which accounts will not be collected.

A) True
B) False

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Question 33

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Why do businesses need to keep some currency on hand?

The Allowance for Uncollectible Accounts is a contra-asset account.

During the month,a company learns that a check it issued has been accidentally destroyed.On the bank reconciliation,the company would

On a bank reconciliation,a deposit in transit would be added to the balance per bank.

The existence of uncollectible accounts is evidence of poor credit policies.

The matching rule relates to credit losses by stating that Uncollectible Accounts Expense should be recorded

A compensating balance refers to a minimum amount that must remain in a bank account as part of a credit-granting arrangement.

When an individual uses a debit card to make a purchase,the amount of the purchase is deducted directly from that individual's bank account.

Accounts receivable and inventory are considered short-term financial assets.

You have just received notice that Agnes Fisher,a customer of yours with an Accounts Receivable balance of $200,has gone bankrupt and will not be making any future payments.Assuming you use the allowance method,the journal entry you make is to

Determine the interest on the following notes payable: Round answers to two decimal places. a. $3,000 at 10 percent for 60 days b. $600 at 16 percent for 4 months c. $5,000 at 12 percent for 45 days d. $900 at 14 percent for 30 days

Both the allowance method and the direct charge-off method are acceptable for tax purposes.

Assume that on December 1,a note which has a face value of $9,000,bears interest at 9 percent for 120 days,received from a customer as an extension of his of past - due account is dishonored.The entry that would be made to record the dishonor (ignoring interest) is:

Securitization delays the receipt of cash from sales made on credit.

For each of the items below,use the following letters to identify the correct treatment in a bank reconciliation. $A=$ Add to balance per bank $\quad$$\quad$$\quad$$\mathrm{C}=$ Add to balance per books $B=$ Deduct from balance per bank $\quad$$\mathrm{D}=$ Deduct from balance per books ____ 1.Interest income ____ 2.Outstanding checks ____ 3.Check written for $89,but $98 recorded in books ____ 4.Customer's NSF check ____ 5.Note receivable collected by bank ____ 6.Deposit made for $70,but $700 recorded in books ____ 7.Bank check-printing charge ____ 8.Check written for $52,but $25 recorded in books ____ 9.Deposits in transit ____ 10.Bank fee for collection on note receivable

Using the percentage of net sales method,uncollectible accounts expense for the year is estimated to be $54,000.If the balance of the Allowance for Uncollectible Accounts is an $18,000 credit before adjustment,what is the balance after adjustment?

A company that factors its receivables will have a less favorable receivable turnover than a company that does not factor.

Use this information to answer the following question. The general ledger account for Accounts Receivable shows a debit balance of $50,000.Allowance for Uncollectible Accounts has a credit balance of $1,000.Net sales for the year were $500,000.In the past,2 percent of sales have proved uncollectible,and an aging of accounts receivable accounts results in an estimate of $13,500 of uncollectible accounts. Using the accounts receivable aging method,the Allowance for Uncollectible Accounts balance (after adjustment) would be