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Exam 6: Reporting and Interpreting Sales Revenue, Receivables, and Cash

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Question 41

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One of Hawk Company's customers returned products that cost Hawk $300, which was sold on account for $450. Which of the following does not correctly describe the effect of the return on the financial statements?

A) Gross profit decreases $150.
B) Total current assets decrease $150.
C) Sales returns and allowances increase $150.
D) Operating expenses increase $150.

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

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Question 42

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Which of the following journal entries correctly records bad debt expense?

A) Option A
B) Option B
C) Option C
D) Option D

E) B) and D)
F) A) and D)

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Question 43

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Dally Company has just finished preparing its bank reconciliation. If everything was done correctly, which of the following items would be reported as a deduction from the company's ending balance per the bank?

Cash equivalents on the balance sheet include certificates of deposit with maturities of 90 days or more.

Which of the following statements is correct?

Which of the following transactions will result in a decrease in the receivable turnover ratio?

Prior to the year-end adjustment to record bad debt expense for 2014 the general ledger of Stickler Company included the following accounts and balances: Cash collections on accounts receivable during 2014 amounted to $450,000. Sales revenue during 2014 amounted to $800,000, of which 75% was on credit, and it was estimated that 2% of these credit sales made in 2014 would ultimately become uncollectible. Required: A. Calculate the bad debt expense for 2014. B. Determine the adjusted 2014 year-end balance of the allowance for doubtful accounts. C. Determine the net realizable value of accounts receivable for the December 31, 2014 balance sheet.

When using the percentage of credit sales method, net sales multiplied by a historical percentage for credit losses equal bad debt expense.

When a credit sale is made with terms of 2/10, n/30 on May 10 and the customer's check is received on May 19, which of the following is true about the May 19 journal entry?

A portion of the income statement for Oscar Company is shown below. Provide the missing account titles and amounts.

Clark Company estimated the net realizable value of its accounts receivable as of December 31, 2014, to be $165,000, based on an aging schedule of accounts receivable. Clark has also provided the following information: • The accounts receivable balance on December 31, 2014 was $175,000. • Uncollectible accounts receivable written-off during 2014 totaled $12,000. • The allowance for doubtful accounts balance on January 1, 2014 was $15,000. How much is Clark's 2014 bad debt expense?

Superior Company has provided you with the following information before any year-end adjustments: Net credit sales are $120,000. Historical percentage of credit losses is 2%. Allowance for doubtful accounts has a credit balance of $300. Accounts receivables ending balance is $47,000. What is the estimated bad debt expense using the percentage of credit sales method?

The Tanner Company's April 30, 2014 pre-reconciliation cash balance on its books was $35,000. While preparing the April 30 bank reconciliation, Tanner determined that outstanding checks total $11,000, deposits in transit total $7,000, and bank service charges are $50. How much was Tanner's April 30, 2014 cash balance per the bank statement?

Merchandise was sold on credit for $30,000, terms 3/15, n/30. Which of the following journal entry descriptions correctly describes the cash collection?

Matrix Corp. reported the following figures from its financial statements for the years 2013 through 2015. Required: A. Calculate for 2015: 1. Accounts receivable turnover 2. Average collection period B. Calculate for 2014: 1. Accounts receivable turnover 2. Average collection period C. Interpret the receivables turnover and the average collection period, in general. Comment on the change in the ratio results from 2014 to 2015. Then discuss how the trend in sales from 2013 to 2014 and 2015 may have affected the change in the ratios from 2014 to 2015.

Which of the following does not correctly describe the effect of a credit card discount?

Hickory Corporation recorded sales revenue during the year of $350,000 of which $100,000 was on credit. The company has experienced an average bad debt loss rate of 2% of credit sales. Required: Prepare the adjusting journal entry at the end of the year to record bad debt expense.

A deposit in transit on a bank reconciliation should be:

A comparison of the balance in Cottonwood Company's cash account per its books as of April 30, 2014 and the bank statement dated April 30, 2014 revealed the following information: Required: Prepare a complete bank reconciliation using the format below. In each section of the bank reconciliation indicate the proper handling of each of the items shown above by listing the appropriate item code letter and the respective amount

The CHS Company has provided the following information: • Accounts receivable written-off as uncollectible during the year amounted to $11,500. • The accounts receivable balance at the beginning of the year was $150,000. • The accounts receivable balance at the end of the year was $210,000. • The allowance for doubtful accounts balance at the beginning of the year was $14,000. • The allowance for doubtful accounts balance at the end of the year after the recording of bad debt expense was $12,900. • Credit sales during the year totaled $900,000. How much was CHS Company's bad debt expense?