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Exam 6: The Current Asset Classification, Cash, and Accounts Receivable

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Question 31

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The following information was taken from the unadjusted trial balance and aging schedule of Diane Company on December 31, 2010. All sales are on account. Accounts and related balances at December 31, 2010 before adjustment: Aging Schedule of Accounts Receivable: If Diane uses the aging schedule of accounts receivable to determine bad debts, what is the bad debts expense for the year ending December 31, 2010? a. $4,280 b. $3,600 c. $3,680 d. $3,060

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Question 32

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Summers, Inc. uses the allowance method to account for bad debts. The entry to record the write-off of a customer's account balance decreases

A) assets and owners' equity.
B) assets and decreases liabilities.
C) owners' equity and revenues.
D) none of these answers is correct.

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Question 33

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At the beginning of 2010, Flagstaff Corp.'s allowance for doubtful accounts is $10,000. During 2010, $7,000 was written off as uncollectible. At December 31, the company used an aging schedule of accounts receivable and determined that $8,000 of the accounts receivable would probably be uncollectible. Calculate bad debts expense to be reported on Flagstaff's 2010 income statement.

Under the allowance method of accounting for bad debts, the recognition of bad debts expense

The gross method refers to

A company's allowance for doubtful accounts is $4,000 and $3,000 on 1/1/11 and 1/1/10, respectively. During 2010, bad debts expenses were estimated to be 6% on net credit sales of $100,000. During 2010, the amount of accounts written off as uncollectible amounts to

The balances of the allowance for doubtful accounts on the balance sheets dated December 31 of 2010 and 2009 were $21,000 and $14,000, respectively. During 2010, $13,000 of accounts receivable were written off as uncollectible. How much bad debts expense is recognized during 2010?

Managers must understand how transactions affect working capital

The Porsha Bank has provided its auditor with the following selected financial data for 2010: In reviewing the loans outstanding, the auditors were troubled by the fact that the collectability of some loans to Brazil was questionable. In fact, Porsha Bank has been making new loans to Brazil so that they can pay the interest on the loans already outstanding. The economic situation of Brazil has forced the auditors to insist that Porsha Bank increases its allowance for its current loans to $9,000 and for its non-current loans to $16,000. Porsha Bank decided to adhere to their auditors' suggestions. Indicate the effects of adopting the auditor's allowance requirements on Porsha Bank's current ratio and 2010 net income.

Under the allowance method of accounting for bad debts, the actual write-off of an account receivable determined to be uncollectible

Use the information that follows taken from the unadjusted trial balance and aging schedule of Behrend Company on December 31, 2010 to answer problems 15. All sales are on account. Accounts and related balances at December 31, 2010 before adjustment: Aging Schedule of Accounts Receivable: -If Behrend uses the aging schedule of accounts receivable to determine bad debts, determine the following: A. Bad debts expense for the year ending December 31, 2010 B. Allowance for Doubtful Accounts balance at December 31, 2010 C. Net realizable value of accounts receivable on the 2010 financial statements

A company's operating cycle may be described as

Which of the following are components of the quick ratio?

The current ratio fails to accurately reflect

On December 1, 2009, Mason Company delivered a shipment of goods to a Swiss customer for a price of 150,000 euros. If on that date 1.3 U.S. dollars could be exchanged for 1 euro, what entry would Mason record to convert the receivable to equivalent U.S. dollars?

The following information was taken from the unadjusted trial balance and aging schedule of Diane Company on December 31, 2010. All sales are on account. Accounts and related balances at December 31, 2010 before adjustment: Aging Schedule of Accounts Receivable: If Diane uses the aging schedule of accounts receivable to determine bad debts, what is the net realizable value of accounts receivable on the 2010 financial statements? a. $46,000 b. $42,260 c. $42,320 d. $30,400

Under the allowance method of accounting for bad debts, the write-off of an account receivable determined to be uncollectible

Briefly described hedging.

The following information concerning the current assets and current liabilities of Mason Company at December 31, 2010, is presented below. Based on this information, how would the current ratio be affected if Mason collects the accounts receivable and then uses some of the cash to pay off the accounts payable? a. The current ratio would increase from 1.30 to 1.93. b. The current ratio would increase from 0.74 to 4.02. c. The current ratio would decrease from 1.30 to 0.62. d. The current ratio would increase from 1.09 to 1.61.

Sanchez Inc. sells to customers only on credit. For the year ended December 31, 2010, the following information is provided: If Sanchez estimates bad debts at 5% of net credit sales, how much is bad debt expense? a. $34,000 b. $15,200 c. $23,400 d. $42,150