FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 5: Accounting for Receivables and Inventory Cost Flow

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 31

Multiple Choice

Review LaterAdd Note

Review Later

The net effect of the entries to recognize the collection of a previously written-off account under the allowance method will

A) decrease total assets.
B) have no effect on total assets or total equity.
C) increase total equity.
D) decrease total equity.

E) B) and D)
F) C) and D)

Correct Answer

verified

Show Answer

Question 32

Multiple Choice

Review LaterAdd Note

Review Later

Bay Company began using the allowance method in 2014. On January 1, 2014, Bay had a $3,000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During 2014, Bay provided $25,000 of service on account. The company collected $21,000 cash from account receivable. Uncollectible accounts are estimated to be 2% of sales on account. The amount of uncollectible accounts expense to recognize on the 2014 income statement is:

A) $80.
B) $250.
C) $480.
D) $500.

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

Correct Answer

verified

Show Answer

Question 33

True/False

Review LaterAdd Note

Using the allowance method of accounting for uncollectible receivables requires an estimate of the amount of receivables that will not be collected.

At the end of 2014, Duffau Company had outstanding accounts receivable of $109,760. Before recording the adjusting entry for uncollectible accounts, the balance in the Allowance for Doubtful Accounts was $350. If Duffau estimates that it will not collect 4 percent of its accounts receivable, what amount of uncollectible accounts expense should Duffau record? Round to the nearest dollar.

On December 31, 2014, the Landon Corporation estimated that 3% of its credit sales of $215,000 would be uncollectible. Landon used the allowance method of accounting for uncollectible accounts. On February 15, 2015, Landon wrote off the account of one of its customers, in the amount of $2,500. On April 7, 2015, the customer paid the account in full. Which of the following answers correctly shows the effect of the December 31, 2014 adjusting entry for uncollectible accounts on the financial statements of the Landon Corporation?

The Ruiz Corporation, which owns a chain of specialty shops, has recently begun to accept credit cards. On March 1, 2014, Ruiz made a credit card sale of $5,200 to a customer. The credit card company charges a fee of 3%. Which of the following answers correctly describes the effect on Ruiz's financial statements of the collection of cash from the credit card company?

The Ruiz Corporation, which owns a chain of specialty shops, has recently begun to accept credit cards. On March 1, 2014, Ruiz made a credit card sale of $5,200 to a customer. The credit card company charges a fee of 3%. Which of the following is not an advantage of accepting credit cards from retail customers?

Warden Company has the following account balances at the end of 2014: $\begin{array}{lr}\text { Cash } & \$ 25,000 \\\text { Accounts Receivable } & \$ 76,000 \\\text { Allowance for Doubtful Accounts } & \$ 3,200 \\\text { Credit Sales } & \$ 115,000\end{array}$ Required: Compute the net realizable value of the above accounts receivable.

The Stevens Company provided $45,000 of services on account during 2014, its first year in operation. During 2014, Stevens collected $34,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 2% of its revenues on account. The amount of net realizable value of receivables on the company's 2014 balance sheet was

Indicate whether each of the following statements about accepting credit cards from customers is true or false. 1. A benefit of accepting credit cards is that there is no associated cost to the merchant 2. A benefit of accepting credit cards is that increased sales may be generated 3. The entry to record a credit card sale increases total assets and increases total equity 4. The income statement is not affected when the receipt of cash from the credit card company is recorded 5. When recording the collection of cash from the credit card company, the entry acts to increase cash and increase revenue

When a credit card sale is recorded, what is the effect on the accounting equation?

The percent of revenue method of determining uncollectible accounts expense is called the balance sheet approach.

A promissory note involves a maker, payee, and principal. Explain what each is.

Hines Enterprises loaned $4,000 to Baldwin Company on October 1, 2010, for one year at 8% interest. Required: Show the effects on the financial statements model (below) of a) the loan to Baldwin b) the adjusting entry at December 31, 2010 c) accrual of interest and collection of the note and related interest on October 1, 2011 Indicate dollar amounts of increases and decreases. For cash flows, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). If an element is not affected by an event, indicate with NA.

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. $\text { Increase } = \mathrm { I } \quad\text { Decrease } = \mathrm { D } \quad\text { No Effect } = \mathrm { N }$ On March 31, 2014, Stuart Co. wrote off a $600 account receivable of one of its customers. The $600 sale had been made in 2011. Stuart uses the allowance method to account for uncollectible accounts expense. Show how the write-off of the account would affect Stuart's financial statements.

Falon Company accepted a credit card account receivable in exchange for $50,000 of services provided to a customer. The credit card company charges a 3% service charge. Recording the service revenue and the service charge would

Kentucky Supply Co., which had no beginning balance in its Accounts Receivable and Allowance for Doubtful Accounts, earned $80,000 of revenue on account during 2014. During 2014, the company collected $64,000 of cash from its receivables accounts. Kentucky estimates that it will be unable to collect 2% of revenue on account. The amount of net realizable value of receivables on the December 31, 2014 balance sheet would be:

During November 2014, Cooper Company sold 120 units of a product for $375 each. Selling and administrative expenses for the year were $14,000. All transactions were cash transactions. The following information is also available about Cooper's inventory and purchases: The company's income tax rate is 30%. Required: a) Prepare an income statement for Cooper Company for 2014 assuming: 1) FIFO inventory cost flow 2) LIFO inventory cost flow b) Prepare the operating activities section of the Statement of Cash Flows for 2014 assuming: 1) FIFO inventory cost flow 2) LIFO inventory cost flow

In October 2014, Simpson Company loaned $20,000 to Warren Corporation, receiving Warren's 6-month, 6% promissory note. Indicate whether each of the following statements about the note is true or false. 1. Accruing interest receivable at the end of 2014 does not affect the 2014 statement of cash flows 2. Accruing the amount of interest receivable at the end of 2014 is consistent with the matching concept 3. Loaning the money to Warren was an asset use transaction for Simpson 4. Accruing the amount of interest due at the end of 2014 was an asset source transaction for Simpson 5. Simpson's 2014 statement of cash flows would report the loan to Warren as a financing activity

Bay Company began using the allowance method in 2014. On January 1, 2014, Bay had a $3,000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During 2014, Bay provided $25,000 of service on account. The company collected $21,000 cash from account receivable. Uncollectible accounts are estimated to be 2% of sales on account. The amount of cash flow from operating activities that would appear on the 2014 statement of cash flows is: