COB 241: Ch 7 Exam Questions With 100% Verified Solutions

COB 241: Ch 7 Exam Questions With 100% Verified Solutions When a company accepts a credit card with a fee for services rendered, the - ANSWER- Accounts Receivable INCREASES Credit Card Expense INCREASES Service Revenue INCREASES Under the allowance method, the journal entry to recognize the write-off of an uncollectible account receivable includes a - ANSWER- DEBIT allowance for doubtful accounts CREDIT accounts receivable When a company recognizes uncollectible accounts expense, the amount of - ANSWER- total assets decrease total equity decreases net income decreases In Yr 1, Simpson company earned $10k of revenue on account. Cash collections of a/r amounted to $8K. the company estimated uncollectible accounts to be 10% of revenue. Simpson wrote-off $900 of uncollectible accounts during Y1. Assuming the company uses the allowance method to account for uncollectible accounts, the amount of uncollectible accounts expense shown on the Y1 income statement - ANSWER- $1,000 10,000 Rev x 10% = $1,000 In Yr 1, Simpson company earned $10k of revenue on account. Cash collections of a/r amounted to $8K. the company estimated uncollectible accounts to be 10% of revenue. Simpson wrote-off $900 of uncollectible accounts during Y1. Assuming the company uses the allowance method to account for uncollectible accounts, the amount of net realizable value shown on the Yr 1 balance sheet is - ANSWER- $1,000 Balance in a/r = $10,000 - $8,000 - $900 = $1,100. Balance in Allowance for Doubtful Accounts account = (10,000 x 10%) - 900 = 100 Net Realizable value = 1,100 - 100 = 1,000 In Yr 1, Simpson company earned $10k of revenue on account. Cash collections of a/r amounted to $8K. the company estimated uncollectible accounts to be 10% of revenue. Simpson wrote-off $900 of uncollectible accounts during Y1. Assuming the company uses the allowance method to account for uncollectible accounts, the amount of cash flow from operating activities is - ANSWER- $8,000 The percent of ... method of estimating uncollectible accounts focuses on producing the best balance sheet, while the percent of ... focuses on producing the best income statement - ANSWER- receivables revenue which method of estimating uncollectible accounts provides the best measure of net income - ANSWER- Percent of revenue focuses on determining the amt of exp that should be matched with the amt of rev earned during an acc period. this focus on the matching rev with exp produces a more accurate measure of net inc. which of the following statements is TRUE regarding the recognition of uncollectible accounts expense under the direct write-off method - ANSWER- the expense recognition will cause assets (a/r) to decrease, thereby affecting the balance sheet the statement of cash flows is not affected by the write-off of an uncollectible account under the direct write-off method which of the following statements is true - ANSWER- notes receivable normally have higher principal amounts than accounts receivable notes receivable normally have a longer term to maturity than accounts receivable Interest is normally shown as a - ANSWER- nonoperating item on the income statement operating item on the statement of cash flows ... refers to how quickly assets are expected to be converted to cash during normal operations - ANSWER- liquidity Collateral protects the holder of the note. If the borrower cannot repay the loan, the holder receives compensation - ANSWER- true Western company loaned Eastern Company money. How would this event affect Western company financial statements - ANSWER- total assets is not affected cash flow from operating activities is not affected the net realizable value of receivables appears on which of the following financial statements - ANSWER- balance sheet stair company accepted a credit card with a fee for services rendered. How would this event affect Stair Company's financial statements - ANSWER- Stockholder's equity increases total assets increases under the allowance method, the journal entry to recognize the reinstatement of an account receivable includes a ... to allowance for doubtful accounts and a ... to accounts receivable - ANSWER- credit debit Alpha company loaned $5,000 to Beta company on Oct 1, Yr 1. Interest was set at 6% per year. On Dec 31, Y1, Alpha would recognize accrued interest revenue amounting to - ANSWER- $75 $5,000 x 6% = $300 per year 300 / 12 months = $25 per month 25 per month x 3 months = $75 accrued interest which of the following statements about calculating the accounts receivable turnover ratio are CORRECT - ANSWER- average net accounts receivable should be used in the denominator net credit sales should be used in the numerator Assume 3 companies in the same industry have the following accounts receivable turnover ratios: