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Exam 5: Receivables and Sales

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Question 31

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A company provides services on account. Indicate how this transaction would affect the following five financial statement items:

A) Option a
B) Option b
C) Option c
D) Option d

E) A) and B)
F) All of the above

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Question 32

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The amount of a company's receivables is influenced by several variables, including all of the following except:

A) The level of sales.
B) The nature of the product or service sold.
C) The credit and collection policies.
D) Dividend payments to stockholders.

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

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Question 33

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Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the best term placing the letter designating the term in the space provided. Terms: -_____ The total amount owed to a company from credit sales to customers.

Credit sales transfer products and services to a customer today while bearing the risk of collecting payment from that customer in the future.

A company collects a customer's account within the discount period. Indicate how this transaction would affect the following five financial statement items:

At the end of the year, a company has a balance in Allowance for Uncollectible Accounts of $2,000 (credit) before any year-end adjustment. The balance of Accounts Receivable is $180,000. The company estimates that 5% of accounts receivable will not be collected over the next year. Record the adjustment for uncollectible accounts.

At the beginning of the year, Vici Ventures had accounts receivable of $220,000. At the end of the year, the company had accounts receivable of $340,000. During the year, Vici had total sales of $1,000,000, 70% of which were credit sales What was Vici's receivables turnover ratio for the year?

The Sales Returns account is an expense account.

At December 31, Amy Jo's Appliances had account balances in Accounts Receivable of $311,000 and $970 (debit) in Allowance for Uncollectible Accounts. An analysis of Amy Jo's December 31 accounts receivable suggests that the allowance for uncollectible accounts should be 2% of accounts receivable. Bad debt expense for the year should be:

From a balance sheet perspective, the percentage-of-receivables method is typically preferable because assets (net accounts receivable) are reported closer to their net realizable value.

On November 10 of the current year, Flores Mills provides services to a customer for $8,000 with credit terms 2/10, n/30. The customer made the correct payment on November 17. How would Flores record the collection of cash on November 17?

Listed below are five terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the best term by placing the letter designating the term in the space provided. Terms: -_____ Deducted from list price.

On February 1, 2012, Sanger Corp. lends cash and accepts a $2,000 note receivable that offers 10% interest and is due in six months. What would Sanger record on August 1, 2012, when the borrower pays Sanger the correct amount owed?

A sale on account for $1,000 offered with terms 2/10, n/30 means that the customers will get a $2 discount if payment is made within 10 days; otherwise, full payment is due within 30 days.

The percentage-of-credit-sales method (income statement method) is allowed only if amounts do not differ significantly from estimates using the percentage-of-receivables method.

At the end of the year, a company has a balance in Allowance for Uncollectible Accounts of $200 (credit) before any year-end adjustment. The balance of Accounts Receivable is $15,000. The company estimates that 10% of accounts receivable will not be collected over the next year. Record the adjustment for uncollectible accounts.

Toppleson Manufacturing reports a receivables turnover ratio of 14.5. The industry average is 10.7. What most likely is causing this difference?

The following information pertains to Lightning, Inc. at the end of December: $\begin{array} { l r } \text { Credit Sales } & \$ 60,000 \\\text { Accounts Payable } & 10,000 \\\text { Accounts Receivable } & 7,000 \\\text { Allowance for Uncollectible Accounts } & \$ 400 \text { credit } \\\text { Cash Sales } & 20,000\end{array}$ Lightning uses the aging method and estimates it will not collect 2% of accounts receivable not yet due, 10% of receivables less than 30 days past due, and 40% of receivables greater than 30 days past due. The accounts receivable balance of $7,000 consists of $3,500 not yet due, $2,000 less than 30 days past due, and $1,500 greater than 30 days past due. What is the appropriate amount of Bad Debt Expense?

When $2,500 of accounts receivable are determined to be uncollectible, which of the following should the company record to write off the accounts using the allowance method?

Under the allowance method, which of the following does not change the balance in the Accounts Receivable account?