BAT Chapter 8 Review

On August 10, Pi Company sells merchandise on account to Murray Co. for $2000, terms 2/10, n/30. On August 15, Murray returns merchandise worth $400 to Pi. On August 20, payment is received from Murray for the balance due. What is the amount of cash received?

• $1560

• $1600

• $1568

• $1960

Kartik Company's accounts receivable are $200,000 at the end of the year. The allowance for doubtful accounts has a credit balance of $4000 before any adjustments have been made. The company estimates that 5% of accounts receivable will not be collected. What is the NRV of the accounts receivable at the end of the year?

• $196,000

• $200,000

• $186,000

• $190,000

On January 1, 2019, Allowance for Doubtful Accounts had a credit balance of $40,000. In 2019, $30,000 of uncollectible accounts receivable were written off. On December 31, 2019, the company had accounts receivable of $900,000. Experience indicates that 4% of total receivables will become uncollectible. The adjusting journal entry that would be recorded on December 31, 2019, would be:

• DR Allowance for Doubtful Accounts $26,000

  CR Accounts Receivable $26,000

• DR Bad Debt Expense $36,000

  CR Accounts Receivable $36,000

• DR Bad Debt Expense $26,000

  CR Allowance for Doubtful Accounts $26,000

• DR Bad Debt Expense $36,000

  CR Allowance for Doubtful Accounts $36,000

On June 1, Sorenson Co. accepts a $2000, four-month, 6% promissory note in settlement of an account with Parton Co. Sorenson has a July 31 fiscal year end. The adjusting entry to record interest on July 31 is:

• DR Interest Receivable $20

  CR Interest Revenue $20

• DR Interest Receivable $120

  CR Interest Revenue $120

• DR Notes Receivable $120

  CR Unearned Interest Revenue $120

• DR Interest Receivable $40

  CR Interest Revenue $40

Schlicht Co. holds Osgrove Inc.'s $10,000, four-month, 9% note. If no interest has been accrued, when the note is collected, the entry made by Schlicht Co. is:

• DR Cash $10,300

  CR Notes Receivable $10,300

• DR Cash $10,900

  CR Interest Revenue $900

  CR Notes Receivable $10,000

• DR Accounts Receivable $10,300

  CR Notes Receivable $10,000

  CR Interest Revenue $300

• DR Cash $10,300

  CR Notes Receivable $10,000

  CR Interest Revenue $300

The allowance for doubtful accounts is presented in the financial statements as:

• a current liability in the balance sheet

• a deduction from accounts receivable in the balance sheet

• a contra revenue account in the income statement

• an operating expense in the income statement

Moore company had net credit sales of $800,000 in the year and a COGS of $500,000. The balance in Accounts Receivable at the beginning of the year was $100,000 and at the end of the year it was $150,000. What were the receivables turnover and collection period ratios, respectively?

• 4.0 and 91 days

• 5.3 and 69 days

• 6.4 and 57 days

• 8.0 and 46 days

An increase in a company's average collection period is most likely related to a(n):

• increase in sales

• tightening of the company's credit policy

• increase in the credit terms

• decrease in sales

Accounts receivable are typically expected to be collected in:

• 120 days

• 90 days

• 60 days

• 30 days

Under the allowance method, writing off an uncollectible account:

• affects only balance sheet accounts

• affects both balance sheet and income statement accounts

• affects only income statement accounts

• is not acceptable practice