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Exam 5: Receivables and Sales

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Question 51

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Toppleson Manufacturing reports a receivables turnover ratio of 14.5.The industry average is 10.7.What most likely is causing this difference?

A) Toppleson is selling to high-risk customers.
B) Toppleson has effective procedures related to selling goods on account.
C) Toppleson provides superior products and services.
D) Toppleson allows customers too long to pay.

E) B) and C)
F) C) and D)

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Question 52

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Bad debt expense is the amount of the adjustment to the allowance for uncollectible accounts that represents the cost of the estimated future bad debts.

A) True
B) False

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Question 53

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A company has the following balances on December 31,2015,after year-end adjustments: Accounts Receivable = $62,000;Allowance for Uncollectible Accounts = $6,000.Calculate the net realizable value of accounts receivable.

Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms.Match each phrase with the best term placing the letter designating the term in the space provided. -_____ Accounts receivable less allowance for uncollectible accounts.

On December 31,2015,Coolwear Inc.had balances in Accounts Receivable and Allowance for Uncollectible Accounts of $48,400 and $940,respectively.During 2016,Coolwear wrote off $820 in accounts receivable and determined that there should be an allowance for uncollectible accounts of $1,140 at December 31,2016.Bad debt expense for 2016 would be:

Listed below are five terms followed by a list of phrases that describe or characterize the terms.Match each phrase with the best term by placing the letter designating the term in the space provided. -_____ Offered to induce prompt payment.

The adjustment to account for future bad debts has the effect of (1)reducing assets and (2)increasing liabilities.

The receivables turnover ratio equals average accounts receivable divided by net credit sales.

One disadvantage of the allowance method (over the direct write-off method)for recording uncollectible accounts is that it generally matches bad debt expense with the revenue it helped to generate.

On April 14,a company lends $10,000 cash to one of its employees and accepts a six-month,12% note in return.Record the acceptance of the note receivable.

Customers' accounts that we no longer consider collectible are referred to as uncollectible accounts (or bad debts).

Listed below are five terms followed by a list of phrases that describe or characterize the terms.Match each phrase with the best term by placing the letter designating the term in the space provided. -_____ When a customer returns a product.

At the beginning of the year,Vici Ventures had accounts receivable of $220,000.At the end of the year,the company had accounts receivable of $340,000.During the year,Vici had total sales of $1,000,000,70% of which were credit sales.What was Vici's receivables turnover ratio for the year?

Eric Company has the following information: What is the amount of net revenues for Eric Company?

On December 31,2015,Mark Inc.estimates future bad debts to be $6,500.The Allowance for Uncollectible Accounts has a credit balance of $2,500 before any year-end adjustment.What adjustment should Mark Inc.record for the estimated bad debts on December 31,2015?

Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms.Match each phrase with the best term placing the letter designating the term in the space provided. -_____ The amount of the adjustment to the allowance for uncollectible accounts during the period.

The receivables turnover ratio shows the number of times during a year that the average accounts receivable balance is collected (or "turns over").

Credits sales are recorded as:

Trade discounts represent a discount offered to the purchasers for quick payment.

Crimson Inc.recorded credit sales of $750,000,of which $600,000 is not yet due,$100,000 is past due for up to 180 days,and $50,000 is past due for more than 180 days.Under the aging of receivables approach,Crimson Inc.expects it will not collect 1% of the amount not yet due,10% of the amount past due for up to 180 days,and 20% of the amount past due for more than 180 days.The allowance account had a debit balance of $1,000 before adjustment.After adjusting for bad debt expense,what is the ending balance of the allowance account?