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Exam 7: Accounting for Receivables

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Question 21

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What does the accounts receivable turnover ratio measure?

A) How quickly accounts receivable turn into cash
B) How quickly the accounts receivable balance increases
C) Average balance of accounts receivables
D) How quickly inventory turns into accounts receivable

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Question 22

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The balance in Accounts Receivable at the beginning of the year amounted to $16,000. During the year, $64,000 of credit sales were made to customers. If the ending balance in Accounts Receivable amounted to $10,000, and uncollectible accounts expense amounted to $4,000, what is the amount of cash inflow from customers that would appear in the operating activities section of the cash flow statement?

A) $66,000
B) $64,000
C) $80,000
D) $70,000

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Question 23

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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.)

Which of the following statements is true?

Which of the following best describes the percent of receivables method?

How does accepting a credit card payment for services rendered affect the financial statements?(Assume the credit card company charges a fee for handling a credit card transaction.)

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

Which of the following statements is true regarding aging accounts receivable?

How is the average number of days to collect accounts receivable computed?

On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $66,800 and $2,000, respectively. During Year 2, Kincaid reported $169,000 of credit sales, wrote off $1,450 of receivables as uncollectible, and collected cash from receivables amounting to $191,100. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales.What is the amount of uncollectible accounts expense that will be reported on the Year 2 income statement?

Buttercup Florist uses the allowance method to account for uncollectible accounts. Unable to collect a $150 account from a customer, Buttercup determined it was uncollectible. Which of the following statements is correct regarding the effect of writing-off a receivable?

On January 1, Year 2, Burton Company had a balance in Accounts Receivable of $90,000 and a balance in the Allowance for Doubtful Accounts account of $2,400. Burton had credit sales of $244,000 during Year 2 and ended the year with a balance in Accounts Receivable of $48,000. Burton also wrote off $1,100 of receivables during Year 2. Burton uses the allowance method and assumes that 2% of the sales on account will not be collected. Required: a)After adjustments at the end of Year 2, what will be the balance in the Allowance for Doubtful Accounts? b)What was the decrease in the net realizable value of accounts receivable in Year 2 as a result of the write-off of the receivable? c)What amount of cash was collected from customers during Year 2?

On September 1, Year 1, Vincent Company loaned $24,000. The note had a 7% interest rate and a one-year term.Required:Calculate the amount of interest revenue recognized by Vincent Company during Year 1.Calculate the amount of interest revenue recognized by Vincent Company during Year 2.Calculate the amount of cash collected by Vincent Company on August 31, Year 2.

Indicate whether each of the following statements is true or false. a)Most companies expect to receive the full amount of their receivables.b)The estimated amount of uncollectible accounts is called the net realizable value.c)The direct write-off method does not require the computation of the net realizable value of accounts receivable.d)The practice of reporting the net realizable value of receivables is the result of using the allowance method.e)The materiality principle requires the computation of net realizable value for a company's liabilities.

Geary, Incorporated had the following sales during Year 1: Geary also had the following beginning and ending balances in the following accounts: Geary, who uses the allowance method, estimated that 3% of the credit sales will go uncollected. The credit card company charges Geary a 4% fee for handling credit card transactions.Required:Compute the uncollectible accounts expense for Year 1.Compute the credit card expense during Year 1.Determine the amount of net cash flows from operating activities during Year 1.

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 amount of uncollectible accounts expense that will be recognized on the Year 1 income statement?

Indicate how each event affects the financial statements. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter dollar amounts. Increase = I Decrease = D Not Affected = NA Gable Company collected a receivable due from a credit card company; the credit card fee had previously been recognized when the sale was recorded. Show the effect of the collection of the receivable on Gable's financial statements.

The best estimate of the amount of cash a company expects to collect from its accounts receivable is the face value of the receivables.

Other things being equal, the longer a company's operating cycle, the higher the company's operating costs are likely to be.

When is it acceptable to use the direct write-off method?