Question Details

CHAPTER 9 ACCOUNTING FOR RECEIVABLES PART 3

TRUE-FALSE STATEMENTS

21. A factor purchases receivables from businesses for a fee and collects the remittances
directly from customers.
22. A major advantage of national credit cards to retailers is that there is no charge to the
retailer by the credit card companies for their services.
23. Receivables may be sold because they may be the only reasonable source of cash.
24. If a retailer accepts a national credit card such as VISA, the retailer must maintain detailed
records of customer accounts.
25. A note receivable is a written promise by the maker to the payee to pay a specified
amount of money at a definite time.
26. The maturity date of a 1-month note receivable dated June 30 is July 30.
27. The two key parties to a note are the maker and the payee.
28. When the due date of a note is stated in months, the time factor in computing interest is
the number of months divided by 360 days.
9 - 6 Test Bank for Accounting Principles, Eighth Edition
29. The accounts receivable turnover ratio is computed by dividing total sales by the average
net receivables during the year.
30. Both the gross amount of receivables and the allowance for doubtful accounts should be
reported in the financial statements.
Additional True-False Questions
31. Notes receivable represent claims for which formal instruments of credit are issued as
evidence of debt.
32. The two methods of accounting for uncollectible accounts are (a) percentage of sales and
(b) percentage of receivables.
33. The account Allowance for Doubtful Accounts is closed out at the end of the year.
34. In order to accelerate the receipt of cash from receivables, owners may sell the
receivables to another company for cash.
35. When counting the exact number of days to determine the maturity date of a note, the
date of issue is included but the due date is omitted.
36. A note is dishonored when it is not fully paid at maturity.
37. Short-term receivables are reported in the current assets section before temporary
investments.