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Assuming a company uses the allowance method, the entry to recognize the write-off of the specific uncollectible accounts will act to:


A) Increase total assets and total equity
B) Increase total assets and decrease total equity
C) Decrease total assets and total equity
D) Not affect total assets or total equity

E) A) and B)
F) A) and C)

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On July 1, 2016, Falcon Company received a $20,000 promissory note for services from Jordyn Company.The annual interest rate is 5%.Principal and interest are paid in cash at the maturity date of June 30, 2017. ​ The effect on Falcon's financial statements on July 1, 2016 is as follows


A) Assets increase; owners' equity increases
B) Assets decrease and owners' equity decreases
C) Assets decrease
D) No net change in assets

E) C) and D)
F) A) and C)

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A company is referred to as a parent if it owns


A) 33% of the debt securities of a second company
B) 100% of the debt securities of a second company
C) 15% of the equity securities of a second company
D) None of these choices

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

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Genuine Parts received a promissory note from a customer on March 1, 2016.The face amount of the note is $8,000; the terms are 90 days and 9% interest.At the maturity date, the customer pays the amount due for the note and interest.What entry is required on the books of Genuine Parts on the maturity date assuming none of the interest had already been recognized?


A) Increase Cash, $8,000, and decrease Notes Receivable $8,000
B) Increase Cash, $8,180, increase Interest Revenue, $180, and decrease Notes Receivable, $8,000
C) Increase Cash $8,720, decrease Notes Receivable $8,000, and increase Interest Revenue, $720
D) No entry is required; the customer pays the amount due to the bank

E) All of the above
F) C) and D)

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If Rope Inc.receives $23,825 from credit card collections and has an average rate of 4.7% charged by the credit card company, its credit card sales during the period were:


A) $111,978
B) $50,691
C) $25,000
D) $22,705

E) A) and D)
F) All of the above

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Match the following definitions with their appropriate terms . -Promissory note


A) A liability resulting from the signing of a
B) A measure of how long it takes to collect receivables. promissory note.
C) A written promise to repay a definite sum of
D) The length of time a note is outstanding, that is, the money on demand or at a fixed or determinable period of time between the date it is issued and the date date in the future. it matures.
E) The party that will receive the money from a
F) The process of selling a promissory note. promissory note at some future date.
G) The date the promissory note is due.
H) The amount of cash the maker is to pay the payee on the maturity date of the note.
I) The difference between the principal amount of
J) An asset resulting from the acceptance of a promissory the note and its maturity value. note from another company.
K) Securities issued by corporations and
L) Securities issued by corporations as a form of ownership governmental bodies as a form of borrowing. in the business.
M) The party that agrees to repay the money for a
N) The amount of cash received, or the fair value of the promissory note at some future date. products or services received, by the maker when a promissory note is issued.

O) E) and J)
P) I) and L)

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Which one of the following is an accurate description of Allowance for Doubtful Accounts?


A) Contra account
B) Liability account
C) Revenue account
D) Expense account

E) B) and D)
F) A) and B)

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The maker of a note recognizes a note payable on the balance sheet and interest expense on its income statement.

A) True
B) False

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Which of the following statements is true regarding the two allowance methods used to account for bad debts?


A) The percentage of net credit sales approach takes into account the existing balance in the Allowance for Doubtful Accounts account.
B) The direct write-off method takes into account the existing balance in the Allowance for Doubtful Accounts account.
C) The percentage of accounts receivable approach takes into account the existing balance in the Allowance for Doubtful Accounts account.
D) The direct write-off method does a better job of matching revenues and expenses.

E) None of the above
F) B) and C)

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Match the following definitions with their appropriate terms . -Note receivable


A) A liability resulting from the signing of a
B) A measure of how long it takes to collect receivables. promissory note.
C) A written promise to repay a definite sum of
D) The length of time a note is outstanding, that is, the money on demand or at a fixed or determinable period of time between the date it is issued and the date date in the future. it matures.
E) The party that will receive the money from a
F) The process of selling a promissory note. promissory note at some future date.
G) The date the promissory note is due.
H) The amount of cash the maker is to pay the payee on the maturity date of the note.
I) The difference between the principal amount of
J) An asset resulting from the acceptance of a promissory the note and its maturity value. note from another company.
K) Securities issued by corporations and
L) Securities issued by corporations as a form of ownership governmental bodies as a form of borrowing. in the business.
M) The party that agrees to repay the money for a
N) The amount of cash received, or the fair value of the promissory note at some future date. products or services received, by the maker when a promissory note is issued.

O) D) and E)
P) C) and J)

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What should a company do to improve its accounts receivable turnover rate?


A) Lower its selling prices.
B) Increase its sales force.
C) Give customers credit terms of 2/10, n/30 rather than 1/10, n/30.
D) Reduce the number of employees working in the credit department.

E) A) and D)
F) B) and D)

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Changes in accounts and notes receivable are reported in the __________ Activities section of a statement of cash flows prepared using the indirect method.

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Which one of the following statements is true if a company's collection period for accounts receivable is unacceptably long?


A) The company may need to borrow to acquire operating cash.
B) The company may offer trade discounts to lengthen the collection period.
C) Cash flows from operations may be higher than expected for the company's sales.
D) The company should expand operations with its excess cash.

E) C) and D)
F) A) and C)

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Comfort Shoes received a promissory note from a customer on April 1, 2016.The face amount of the note is $2,000; the terms are 12 months and 8% annual interest.How much total interest revenue will Comfort Shoes recognize for the year ended December 31, 2016?


A) $ 40
B) $ 107
C) $ 120
D) $ 160

E) B) and C)
F) None of the above

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The amount of money received, or the fair value of the products or services received by the maker when a promissory note is issued is called the ____________________.

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Match the following definitions with their appropriate terms . -Direct write-off method


A) A receivable arising from the sale of goods or services
B) A form used to categorize the various individual with a verbal promise to pay. accounts receivable according to the length of time each has been outstanding.
C) A method of estimating bad debts on the basis of either
D) A measure of the number of times receivables are the net credit sales of the period or the accounts collected in a period. receivable at the end of the period.
E) The general ledger account that is supported by a
F) A contra-asset account used to reduce accounts subsidiary ledger. receivable to its net realizable value.
G) The detail for a number of individual items that
H) The recognition of bad debts expense at the point an collectively make up a single general ledger account. account is written off as uncollectible.

I) E) and F)
J) A) and B)

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Match the following definitions with their appropriate terms . -Control account


A) A receivable arising from the sale of goods or services
B) A form used to categorize the various individual with a verbal promise to pay. accounts receivable according to the length of time each has been outstanding.
C) A method of estimating bad debts on the basis of either
D) A measure of the number of times receivables are the net credit sales of the period or the accounts collected in a period. receivable at the end of the period.
E) The general ledger account that is supported by a
F) A contra-asset account used to reduce accounts subsidiary ledger. receivable to its net realizable value.
G) The detail for a number of individual items that
H) The recognition of bad debts expense at the point an collectively make up a single general ledger account. account is written off as uncollectible.

I) C) and F)
J) A) and B)

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The _______________ the accounts receivable turnover ratio, the quicker the each dollar of accounts receivable can be collected.

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The accounts receivable turnover ratio is used to evaluate how well a company does in collecting its accounts receivable.

A) True
B) False

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Match the following definitions with their appropriate terms . -Debt securities


A) A liability resulting from the signing of a
B) A measure of how long it takes to collect receivables. promissory note.
C) A written promise to repay a definite sum of
D) The length of time a note is outstanding, that is, the money on demand or at a fixed or determinable period of time between the date it is issued and the date date in the future. it matures.
E) The party that will receive the money from a
F) The process of selling a promissory note. promissory note at some future date.
G) The date the promissory note is due.
H) The amount of cash the maker is to pay the payee on the maturity date of the note.
I) The difference between the principal amount of
J) An asset resulting from the acceptance of a promissory the note and its maturity value. note from another company.
K) Securities issued by corporations and
L) Securities issued by corporations as a form of ownership governmental bodies as a form of borrowing. in the business.
M) The party that agrees to repay the money for a
N) The amount of cash received, or the fair value of the promissory note at some future date. products or services received, by the maker when a promissory note is issued.

O) B) and N)
P) A) and F)

Correct Answer

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