L9: Account receivables

Jones Company uses the percentage-of-sales method of estimating its allowance for doubtful accounts. This method emphasizes which of the following?​

• A. The estimated collectability of an account receivable. ​

• B. The relationship between sales and the cost of goods sold during an accounting period.​

• C. The matching of expenses against sales.​

• D. The lack of understanding of GAAP, since this is not an accepted method of estimating the allowance for doubtful accounts.

Suppose that Oakville Groceries uses the direct write-off method to record uncollectable. At the time an account is deemed uncollectible, the entry to record this event should include a credit to:​

• A. Accounts Receivable ​

• B. Allowance for Doubtful Accounts​

• C. Bad-Debt Expense​

• D. Cash

The December 31, 2019, balance sheet of ABC Ltd. reported the following information:​

• - Accounts Receivable $365,500​, Allowance for Doubtful Accounts $31,600​

On January 24, 2020, an $800 account receivable from Pacific Store is written off. As a result,​

• A. net accounts receivable will decrease.​

• B. ABC will record $800 of Bad-debt Expense.​

• C. ABC will record a credit to Allowance for Doubtful Accounts of $800.​

• D. the net accounts receivable will not change.

The credit balance in Allowance for Doubtful Accounts is $12,600 prior to the adjusting entries at the end of the period. The aging of the accounts indicates that an allowance of $81,200 is needed. The amount of expense to record is:

• A. $12,600

• B. $68,600

• C. $81,200

• D. $93,800

On May 4, 2019, a 12%, 120-day, $1,000 note receivable is accepted from a customer in settlement of his past-due account receivable. Which of the following statements is true?​

• A. The maturity date is September 2, 2019.​

• B. The maturity date is September 1, 2019.​

• C. The maturity value is $1,000.​

• D. The maturity value is $1,120.​

Given the following information, compute days’ sales in receivables.​

• Accounts Receivable (Jan 1, 2019) $22,000 ​

• Accounts Receivable (Dec 31, 2019)              28,000 ​

• Net credit sales              200,000​

• Cash   8,000​

• A. 25 days​

• B. 35 days​

• C. 40 days

• D. 46 days

At year end, Schultz Company has cash of $11,600, current accounts receivable of $48,900, merchandise inventory of $37,900, and prepaid expenses totalling $5,100. Liabilities of $55,900 must be paid next year. What is Schultz’s acid-test ratio?

• A. 1.08

• B. 0.21

• C. 1.76

• D. Cannot be determined from the data given