Question Details

CHAPTER 9 ACCOUNTING FOR RECEIVABLES MULTIPLE CHOICE QUESTIONS PART 9


MULTIPLE CHOICE QUESTIONS


141. The average collection period is computed by dividing
a. net credit sales by average gross accounts receivable.
b. net credit sales by ending gross accounts receivable.
c. the accounts receivable turnover ratio by 365 days.
d. 365 days by the accounts receivable turnover ratio.
Use the following information for questions 142-143.
The financial statements of Bolton Manufacturing Company report net sales of $500,000 and
accounts receivable of $50,000 and $30,000 at the beginning and end of the year, respectively.
9 - 22 Test Bank for Accounting Principles, Eighth Edition
142. What is the receivables turnover ratio for Bolton?
a. 7 times
b. 10 times
c. 16.7 times
d. 12.5 times
143. What is the average collection period for accounts receivable in days?
a. 52.1
b. 29.2
c. 21.9
d. 36.5
Use the following information for questions 144-145.
The financial statements of Colter Manufacturing Company report net sales of $400,000 and
accounts receivable of $80,000 and $40,000 at the beginning and end of the year, respectively.
144. What is the receivables turnover ratio for Colter?
a. 6.7 times
b. 10 times
c. 5 times
d. 8 times
145. What is the average collection period for accounts receivable in days?
a. 40 times
b. 80 times
c. 54.7 times
d. 50 times
Additional Multiple Choice Questions
146. Which of the following are also called trade receivables?
a. Accounts receivable
b. Other receivables
c. Advances to employees
d. Income taxes refundable
147. On February 1, 2008, Cogwell Company sells merchandise on account to Livingston
Company for $5,000. The entry to record this transaction by Cogwell Company is
a. Sales.................................................................................... 5,000
Accounts Payable......................................................... 5,000
b. Cash .................................................................................... 5,000
Sales ............................................................................ 5,000
c. Accounts Receivable ........................................................... 5,000
Sales ............................................................................ 5,000
d. Notes Receivable................................................................. 5,000
Accounts Receivable.................................................... 5,000
Accounting for Receivables
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148. Writing off an uncollectible account under the allowance method requires a debit to
a. Accounts Receivable.
b. Allowance for Doubtful Accounts.
c. Bad Debts Expense.
d. Uncollectible Accounts Expense.
149. When the allowance method of recognizing bad debts expense is used, the entry to
recognize that expense
a. increases net income.
b. decreases current assets.
c. has no effect on current assets.
d. has no effect on net income.
150. The direct write-off method
a. is acceptable for financial reporting purposes.
b. debits Allowance for Doubtful Accounts to record write-offs of accounts.
c. shows only actual losses from uncollectible accounts receivable.
d. estimates bad debt losses.
151. Voight Company's account balances at December 31 for Accounts Receivable and
Allowance for Doubtful Accounts were $2,100,000 and $105,000 (Cr.), respectively. An
aging of accounts receivable indicated that $192,000 are expected to become
uncollectible. The amount of the adjusting entry for bad debts at December 31 is
a. $192,000.
b. $87,000.
c. $297,000.
d. $105,000.
152. In recording the sale of accounts receivable, the commission charged by a factor is
recorded as
a. Bad Debts Expense.
b. Commission Expense.
c. Loss on Sale of Receivables.
d. Service Charge Expense.
153. Gudenas Co., makes a credit card sale to a customer for $600. The credit card sale has a
grace period of 30 days and then an interest charge of 18% per year or 1.5% per month is
added to the balance. If the unpaid balance on the above sale is $360 at the end of the
grace period, the interest charge is
a. $9.00.
b. $6.00.
c. $3.60.
d. $5.40.
154. The interest rate specified on any note is for a
a. day.
b. month.
c. week.
d. year.
9 - 24 Test Bank for Accounting Principles, Eighth Edition
155. On February 1, Maris Company received a $9,000, 10%, four-month note receivable. The
cash to be received by Maris Company when the note becomes due is
a. $300.
b. $9,000.
c. $9,300.
d. $9,900.
156. The entry to record the dishonor of a note receivable assuming the payee expects
eventual collection includes a debit to
a. Notes Receivable.
b. Cash.
c. Allowance for Doubtful Accounts.
d. Accounts Receivable.
157. Which of the following statements concerning receivables is incorrect?
a. Notes receivable are often listed last under receivables.
b. The contingent liability from selling notes receivable should be disclosed.
c. Both the gross amount of receivables and the allowance for doubtful accounts should
be reported.
d. Interest revenue and gain on sale of notes receivable are shown under other revenues
and gains.
158. The accounts receivable turnover ratio is computed by dividing
a. total sales by average net accounts receivable.
b. net credit sales by average net accounts receivable.
c. total sales by ending net accounts receivable.
d. net credit sales by ending net accounts receivable.