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The accounts receivable turnover ratio indicates how rapidly customers pay their bills.

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Thompson Manufacturing sold inventory to a customer for $400.The customer used a VISA bank card,which charges Thompson a 3% fee.The company uses the periodic inventory system.What asset results from this sale?


A) Accounts Receivable of $388
B) Cash of $400
C) Cash of $388
D) Sales of $388
E) Accounts Receivable of $400

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In its first year of operations,20X2,Flow Crafts,Inc.,had credit sales of $420,000 to many different customers.Of this amount,P.Walker purchased $400 and J.Jocke purchased $180 on account.During the year,cash collections of $389,000 were made,of which P.Walker paid $360 and J.Jocke paid $60.At the end of 20X2,bad debts expense was estimated to be 5% of ending accounts receivable.At December 31,20X2,the Allowance for Uncollectible Accounts is $0.On February 23,20X3,the balance in J.Jocke's account was written off as uncollectible. Prepare the appropriate journal entry on the books of Flow Crafts,Inc.for a.the $420,000 in credit sales. b.the collection of $389,000 from credit customers. c.the estimation of bad debts expense. d.the write-off of J.Jocke's account.

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If the criteria to use the percentage of completion method are not met,a company must


A) use the completed contract method to recognize revenue.
B) use the completion revenue principle to recognize revenue.
C) confer with their client about cash collection expectations.
D) refer to IFRS and choose between one of the five available revenue recognition principles.
E) determine whether they are permitted to conduct business with a client.

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The accounts receivable subsidiary ledger


A) is not effected by the write-off of individual accounts.
B) provides the supporting detail (i.e.,individual customer names and amounts owed) for the general ledger account "Accounts Receivable."
C) is kept for both the "Accounts Receivable" and the "Allowance for Uncollectible Accounts" accounts.
D) is only kept by companies that use the allowance method of estimating bad debts.
E) All of the above are true statements.

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The following represent common reconciling items within a bank reconciliation: 1.Bank service charges 2) Deposits in transit 3) Outstanding checks Which of the above items will be an adjustment to the balance per books?


A) 1 only
B) 2 only
C) 3 only
D) 1 and 2
E) 2 and 3

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A company offers a 2% discount on payments received within 10 days of the invoice date.Otherwise full payment must be received within 30 days of the invoice date.If the invoice date is January 5,the payment date is January 13,and the company received the invoice on January 7,what is the amount that should be remitted assuming a gross sale of $1,000?


A) $200
B) $1,000
C) $1,020
D) $980
E) $196

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The estimation of bad debts expense,using the allowance method,has what effect on the balance sheet?


A) It has no effect on assets and decreases stockholders' equity.
B) It decreases assets and decreases stockholders' equity.
C) It increases assets and increases stockholders' equity.
D) It decreases assets and increases stockholders' equity.
E) It increases assets and decreases stockholders' equity.

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A long term contract to provide services for New York City was awarded to Mason Technology on December 30,20X1.The 4-year contract is set for $160 million and payment is certain.Services are to be provided evenly over 20X2 through 20X5.Progress measures are dependable,the contract obligations are explicit and the buyer and seller are expected to meet their obligations.


A) In 20X2,Mason should recognize no revenue.
B) In 20X2,Mason should recognize $160 million in revenue.
C) In 20X3,Mason should recognize no revenue.
D) In 20X3,Mason should recognize $40 million in revenue.
E) In 20X3,Mason should recognize $160 million in revenue.

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Selia Sewage Systems has sales of $900,000,of which 25% are cash sales and the remainder is on credit.As of year-end,but before the bad debts adjustment,the Allowance for Uncollectible Accounts has a credit balance of $300,and Accounts Receivable has a debit balance of $60,000.If it is determined that the company will not collect from Colltor and from Mortana for the amounts of $330 and $680,respectively,what journal entry would Selia prepare?


A)  Allowance for Uncollectible Accounts 1,010 Accounts Receivable, Colltor 330 Accounts Receivable, Mortana 680\begin{array}{lcc}\text { Allowance for Uncollectible Accounts } & 1,010 & \\\text { Accounts Receivable, Colltor }&& 330 \\\text { Accounts Receivable, Mortana }&&680\\\end{array}

B)  Bad Debts Expense 1,010 Accounts Receivable, Colltor 330 Accounts Receivable, Mortana 680\begin{array}{lccc}\text { Bad Debts Expense } & 1,010 \\\text { Accounts Receivable, Colltor }&& 330 \\\text { Accounts Receivable, Mortana }&&680\\\end{array}

C)  Bad Debts Expense 1,010 Allowance for Uncollectible Accounts 1,010\begin{array}{lccc}\text { Bad Debts Expense } & 1,010 \\\quad \text { Allowance for Uncollectible Accounts } & & 1,010 \\\end{array}

D)  Accounts Receivable, Colltor 330 Accounts Receivable, Mortana 680 Allowance for Uncollectible Accounts 1,010\begin{array}{lccc}\text { Accounts Receivable, Colltor } & 330 & \\\text { Accounts Receivable, Mortana } & 680 & \\\quad \text { Allowance for Uncollectible Accounts } & & 1,010 \\\end{array}

E)  Accounts Receivable, Colltor 330 Accounts Receivable, Mortana 680 Bad Debts Expense 1,010\begin{array}{lccc}\text { Accounts Receivable, Colltor } & 330 & \\\text { Accounts Receivable, Mortana } & 680 & \\\quad \text { Bad Debts Expense }& & 1,010\end{array}

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Trade discounts


A) apply one or more reductions to the gross selling price for a particular class of customers in accordance with a company's policies.
B) are offered in order to be competitive.
C) are offered to encourage certain customer behavior (to encourage early orders) .
D) are not reported on the income statement
E) All of the above statements are true regarding trade discounts.

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A retailer accepting a bank card such as VISA or Master Card does not have the responsibility of collecting cash on account.

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Assume the periodic inventory system is used.Madison Manufacturing gave a 4% trade discount to Tristan Company when it sold inventory for cash that normally sells for $12,000.Which of the following is the journal entry to be made by Madison Manufacturing?


A)  Cash 11,520 Sales 11,520\begin{array}{lll}\text { Cash } & 11,520 & \\\quad \text { Sales } && 11,520 \\\end{array}

B)  Cash 11,520 Trade Discount 480 Sales 12,000\begin{array}{lccc}\text { Cash } & 11,520& \\\text { Trade Discount } &480 & \\\quad \text { Sales } & &12,000 \\\end{array}

C)  Cash 11,520 Trade Discount Payable 480 Sales 12,000\begin{array}{lccc}\text { Cash } & 11,520 & \\\text { Trade Discount Payable } &480 & \\\quad \text { Sales } & & 12,000\\\end{array}

D)  Cash 12,000 Trade Discount 480 Sales 11,520\begin{array}{lccc}\text { Cash } & 12,000& \\\quad \text { Trade Discount } & & 480 \\\quad \text { Sales } & & 11,520\\\end{array}

E)  Cash 12,000 Trade Discount Receivable 480 Sales 11,520\begin{array}{lccc}\text { Cash } & 12,000& \\\quad \text { Trade Discount Receivable } & & 480 \\\quad \text { Sales } & & 11,520 \\\end{array}

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The allowance method has two basic elements: (1)an estimate of the amount of accounts receivable that will ultimately be uncollectible and (2)a contra account that contains the estimate and is deducted from the accounts receivable.

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Payne Industries can borrow money from the local bank at 14%.The company just acquired inventory costing $2,900,which has terms of 2/10,n/30.Assuming a 365-day year,which of the following statements is true?


A) Do not pay within the discount period since the effective annual rate of the discount is 37.2%,while the cost to borrow money is 14%.
B) Pay within the discount period since the effective annual rate of the discount is 37.2%,while the cost to borrow money is 14%.
C) Do not pay within the discount period since the effective annual rate of the discount is 24%,while the cost to borrow money is 14%.
D) Pay within the discount period since the effective annual rate of the discount is 24%,while the cost to borrow money is 14%.
E) Do not pay within the discount period since the 2% discount is less than the 14% cost to borrow money.

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On February 27,20X9,Best Appliances Ever agreed to sell 60 refrigerators to a local home construction company.The sales contract stated that the normal selling price of the refrigerators was $500 each,but a 4% trade discount was given due to the size of the order.The terms of the sales are 2/10,n/30.The refrigerators are to be delivered on March 20,20X9.The invoice was dated March 20,20X9.The customer paid the appropriate amount on March 28. A.What is the gross revenue that Best Appliances Ever should recognize for the month ending March 31,20X9? B.What is the net revenue that Best Appliances Ever should recognize for the month ending March 31,20X9?

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A.Trade discount is ...

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Neslund Ornamentals offered a 2% trade discount to Parsons Retail Outlet for all purchases over $200,000.Parsons Retail Outlet purchased $300,000 from Neslund Ornamentals on account.Neslund uses the periodic inventory system.Which of the following is the journal entry made by Neslund Ornamentals to recognize the sale and the 2% trade discount?


A)  Accounts Receivable $294,000 Sales $294,000\begin{array}{lcc}\text { Accounts Receivable } & \$ 294,000 & \\\quad \text { Sales } & & \$ 294,000 \\\end{array}

B)  Accounts Receivable $300,000 Sales Returns and Allowances $6,000 Sales $294,000\begin{array}{lccc}\text { Accounts Receivable } & \$ 300,000 & \\\quad \text { Sales Returns and Allowances } & & \$ 6,000 \\\quad \text { Sales } & &\$ 294,000 \\\end{array}

C)  Sales Returns and Allowances $294,000 Sales $294,000\begin{array}{lccc}\text { Sales Returns and Allowances } & \$ 294,000 & \\\quad \text { Sales } & & \$ 294,000 \\\end{array}

D)  Sales $294,000 Accounts Receivable $300,000 Trade Discounts $6,000\begin{array}{lccc}\text { Sales } & \$ 294,000 & \\\quad \text { Accounts Receivable } & & \$ 300,000 \\\quad \text { Trade Discounts } && \$ 6,000 \\\end{array}

E)  Sales $294,000 Accounts Receivable $294,000\begin{array}{lccc}\text { Sales } &\$ 294,000 & \\\quad \text { Accounts Receivable } & & \$ 294,000\end{array}

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Wells,Inc.,manufactures lawn mowers.Materials are purchased by the purchasing agent from information sent to him by the line manager.The line manager details how much to purchase as well as whom to purchase the materials from.When materials arrive at the factory,they are sent immediately to the stockroom without warehouse personnel checking on quantity or quality of the goods.Invoices are received by the accounts payable department,which compares the invoice to the purchase order.If the documents agree,payment is generated in the accounts payable department and sent to the vendor. Propose improvements in the internal control procedures for Wells,Inc.

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1.All materials should be counted and qu...

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A compensating balance is the required minimum cash balance on deposit when money is borrowed from the bank.

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Direct Rentals has many accounts receivable.Direct Rentals' balance sheet as of December 31,20X2,showed Accounts Receivable of $36,000 and an Allowance for Uncollectible Accounts of $3,400 credit.In early 20X3,write-offs of customer accounts of $2,800 were made.In late 20X3,a customer named Jeremy,whose $1,000 debt had been written off earlier,won a $1 million promotion cash prize.He immediately remitted $1,000 to Direct Rentals. Prepare the journal entries for the a.$2,800 write-off in early 20X3. b.receipt from Jeremy in late 20X3.

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None...

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