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Exam 7: Accounting for Receivables

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Question 31

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When a company receives payment from a customer whose account was previously written off,the customer's account should be reinstated.

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Question 32

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Which accounting concept can be used by some companies to justify the use of the direct write-off method?

A) The entity concept
B) The materiality concept
C) The going concern concept
D) The monetary principle

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Question 33

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On January 1,Year 1,the Accounts Receivable balance was $37,000 and the balance in the Allowance for Doubtful Accounts was $2,800.On January 15,Year 1,an $800 uncollectible account was written-off.What is the net realizable value of accounts receivable immediately after the write-off?

[The following information applies to the questions displayed below.] On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Loudoun uses the allowance method. On February 15, Year 2, one of Loudoun's customers failed to pay his $1,050 account and the account was written off. On April 4, Year 2, this customer paid Loudoun the $1,050. -Which of the following correctly states the effect of recording the collection of the reestablished receivable on April 4,Year 2?

The direct write-off method overstates assets on the balance sheet.

[The following information applies to the questions displayed below.] The Miller Company earned $190,000 of revenue on account during Year 1. There was no beginning balance in the accounts receivable and allowance accounts. During Year 1, Miller collected $136,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 3% of its sales on account. -What is the net realizable value of Miller's receivables at the end of Year 1?

Collecting a credit card receivable is an asset source transaction.

Which of the following general journal entries would be used to recognize $7,500 of uncollectible accounts expense under the direct write-off method?

Most companies report receivables on their balance sheets at the net realizable value.

The following information is available for Blankenship Company for the most recent year. What was Blankenship's operating cycle for the most recent year? (Round to the nearest whole day. )

What is the term used to describe the amount of accounts receivable that is actually expected to be collected?

Rhodes Company reports the following information for the Year 1 fiscal year: Determine the average number of days it takes Rhodes to collect its accounts receivable.(Round intermediate calculations to 2 decimal places. )

Many businesses find it more efficient to offer credit directly to customers rather than to accept third-party credit cards.

How is the accounts receivable turnover ratio computed?

Hoff Company uses the allowance method.An account that had been previously written-off as uncollectible was recovered.How do the two parts of the recovery (reinstate receivable and collect the receivable) affect the elements of the financial statements when the two parts are considered together?

Which one of the following is not an accurate description of the Allowance for Doubtful Accounts?

[The following information applies to the questions displayed below.] On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Loudoun uses the allowance method. On February 15, Year 2, one of Loudoun's customers failed to pay his $1,050 account and the account was written off. On April 4, Year 2, this customer paid Loudoun the $1,050. -Assume that the Loudoun Corporation uses the direct write-off method.Which of the following correctly describes the effect of the write-off of the customer's account on Loudoun's financial statements?

For a company that uses the allowance method,the write-off of an uncollectible account receivable is an asset use transaction.

Which of the following businesses would most likely have the longest operating cycle?

A company that uses the direct write-off method must still prepare a year-end adjusting entry to estimate its uncollectible accounts.