In: Accounting
Answer the following 1-10 questions for intermediate accounting:
1. Companies value and report short-term receivables at net realizable value, the net amount they expect to receive in cash
True
False
2. When should the loss on an uncollectible account receivable be recorded as an expense for accrual accounting purposes?
A. At any day there is an indication that certain
customer will not pay
B. At the beginning of accounting period
C. The day the credit sale is recorded
D. At the end of accounting period
E. Never
3. Which of the following is NOT an accurate description of the Allowance for Doubtful Accounts?
A. an income statement account
B. a balance sheet account
C. an estimate of the amount of accounts receivable that will not be collected
D. a contra asset account
4. The following accounts were taken from Starr
Co.'s unadjusted trial balance at December 31, 2017:
Accounts receivable, DR $880,000
Allowance for uncollectible accounts, DR 27,000
Net credit sales, CR $2,000,000
Starr estimates that 8% of the gross accounts receivable will
become uncollectible. After adjustment at December 31, 2017, the
allowance for uncollectible accounts should have a
credit balance of
A. 160,000
B. 70,400
C. 27,000
D. 43,400
E. 97,400
5. The following accounts were abstracted from
Starr Co.'s unadjusted trial balance at December 31, 2017:
Accounts receivable DR $880,000
Allowance for uncollectible accounts DR 27,000
Net credit sales CR $2,000,000
Starr estimates that 8% of the gross accounts receivable will
become uncollectible. What is a bad debt expense
for the year?
A. 97,400
B. 70,400
C. 43,400
D. 27,000
E. 160,000
6. Why would a company sell receivables to another company?
A. To limit its legal liability
B. To improve the quality of its credit granting process
C. To comply with customer agreements
D. To accelerate access to amounts collected
7. BobCat Co. uses the GROSS method to record sales made on credit. On Mar 1, 2017, it made sales of $80,000 with terms 3/10 n/30. On Mar 9, 2017, BobCat received full payment for the March 1 sale. The required journal entries for BobCat Inc. on Mar 9 is
A. DR Accounts Receivable 80,000
CR Sales Revenue 80,000
B. DR Accounts
Receivable 77,600
CR Sales Revenue 77,600
C. DR Cash…..
77,600
DR Sales Discount 2,400
CR Accounts Receivable 80,000
D. DR Cash…..
77,600
CR Accounts Receivable 77,600
E. DR Cash
80,000
CR Accounts Receivable 80,000
8. The following information relates to Jay
Co.’s accounts receivable for the year just ended:
Accounts receivable, 1/1 $ 650,000
Credit sales for the year 2,700,000
Sales returns for the year 75,000
Accounts written off during the year 40,000
Collections from customers during the year 2,150,000
Estimated uncollectible accounts at 12/31 СR 110,000
What amount should Jay report on the Balance Sheet for net realizable value of accounts receivable at December 31?
A. 1,085,000
B. 540,000
C. 2,700,000
D. 975,000
E. 650,000
9. The following are held by BobCat Inc.:
Cash in checking account $6,000
Cash in savings account $12,000
Postdated check from customer dated one month from balance sheet
date 2,500
Petty cash 300
Commercial paper (matures in a month, original maturity 3 months)
9,000
Certificate of deposit (matures in six months) 5,000
What amount should be reported as cash and cash equivalents on
Smite’s balance sheet?
A. 27,300
B. 18,000
C. 18,300
D. 27,000
10. Hilltop Co.’s
monthly bank statement shows a balance of $52,200.
Reconciliation of the statement with company books reveals the
following information:
Bank service charge $ 10
Insufficient funds check 650
Checks outstanding 1,500
Deposits in transit 1300
Check deposited by Hilltop and cleared by the bank for $125, but
improperly recorded by Hilltop as $152.
What is the TRUE cash balance after the reconciliation?_______________
A. 54,200
B. 52,000
C. 52,027
D. 51,973
1)The statement is True.
company reports short term receivables at net realizable value by subtracting estimated allowance for un-collectible account from gross receivables.
2)The loss from un-collectible accounts receivable should be recorded in the period sale is made .(as per matching concept principle)
correct option is "C "- The day the credit sale is recorded
3)Correct option is "A'
Allowance for un-collectible account is not reported in income statement (since it is a permanent account to be reported in balance sheet as contra asset)
4)correct option is ""B"--70400
After adjustment at December 31, 2017, the allowance for uncollectible accounts should have a credit balance of = gross receivable at end * % of uncollectible account
= 880000*.08
= $ 70400
5)Correct option is "A" -97400
bad debt expense= Estimated balance at end (calculated in part 4) - unadjusted balance in allowance account
= 70400- (-27000)
= 70400+27000
= 97400
6)correct option is "D"-To accelerate access to amounts collected
in order to ensure collectibility of outstanding receivables ,company sells its receivables .