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Exam 7: Receivables and Investments

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Question 81

True/False

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An aging schedule typically categorizes the various accounts by the length of time each invoice is outstanding.

A) True
B) False

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Question 82

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If Ash Company had sales during the year of $10,000,000, an average accounts receivable of $2,000,000, and net income of $500,000, its accounts receivable turnover ratio would be 0.25.

A) True
B) False

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Question 83

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Match the following definitions with their appropriate terms . -Maturity date

Select the term from the list below that matches each of the following six descriptions. -The length of time a note is outstanding-the period of time between the date it is issued and the date it matures

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.What is the total amount of interest that Genuine Parts will receive when the note is paid?

When are consolidated financial statements prepared?

The following information was presented in the balance sheet of Gloria Company as of December 31, 2016: $\begin{array}{l}\text {Trade accounts receivable, net of allowance for }\\\text { uncollectibles of \$ 100,000 }&\$1,600,000\\\end{array}$ ? Which one of the following statements is true?

The gross accounts receivable less the allowance for doubtful accounts is known as the _________________________.

The data presented below for Lynx Corp.is for the year ended December 31, 2016: $\begin{array} { l r } \text { Sales (100\% on credit) } & \$ 1,000,000 \\\text { Sales returns } & 30,000 \\\text { Accounts Receivable (December 31,2016) } & 170,000 \\\text { Allowance for Doubtful Accounts [Cr. B alance] } & \\\quad \text { (Before adjustment at December 31, 2016) } & 1,300 \\\text { Estimated amount of uncollectible accounts based on aging analysis } & 14,000\end{array}$ -See the data for Lynx Corp. If Lynx Corp.uses the aging of accounts receivable approach to estimate its bad debts, what will be the net realizable value of its accounts receivable after the adjustment for bad debt expense?

Fenchurch Corp.uses the direct write-off method to account for bad debts.What are the effects on the accounting equation of the entry to record the write-off of a customer's account balance?

If a company discounts a note at a bank, but still is contingently liable for the maturity value, then the note was discounted with ____________________.

The data below is for Benton Corporation for 2016. $\begin{array} { l r } \text { Accounts Receivable-January 1, 2016 } & \$ 334,000 \\\text { Credit sales during 2016 } & 850,000 \\\text { Collections from credit customers during 2016 } & 725,000 \\\text { Customer accounts written off as uncollectible during 2016 } & 12,000 \\\text { Allowance for Doubtful Accounts [Credit B alance] } & \\\text { (After write-off of uncollectible accounts) } & 1,700 \\\text { Estimated uncollectible accounts based on an aging analysis } & 13,200\end{array}$ ​ ​ -Refer to the data for Benton Corporation. If the aging approach is used to estimate bad debts, what amount should be recorded as bad debt expense for 2016?

The comparative balance sheets of Midnite Corp.for 2017 and 2016 indicate that short-term trade notes receivable increased from $5,000 in 2016 to $75,000 in 2017.How will this change be reported on Midnite's statement of cash flows, if Midnite uses the indirect method?

The use of the allowance method is an attempt by accountants to match bad debts as an expense with the revenue of the period in which a sale on credit takes place.

Securities issued by corporations as a form of ownership in the business, such as common or preferred stock, are called _________________________.

Significant influence of one company over another has been defined by the accounting profession as the ownership of what minimum percent of the second company's stock?

The percentage of net credit sales approach for recognizing bad debts considers any existing balance in Allowance for Doubtful Accounts.

Match the following definitions with their appropriate terms . -Interest

Verilux Company sold merchandise to Flight Corp.on November 1, 2016, for $10,000.Verilux accepted a promissory note from Flight Corp.for $10,000.The note has a term of 5 months and a stated interest rate of 7%.Verilux's accounting period ends on December 31, 2016.What amount should Verilux recognize as interest revenue on the maturity date of the note?

Baggs buys $100,000 of Vista Company bonds on January 1, 2016 at face value.The bonds pay 10% interest semiannually on June 30 and December 31.If Baggs sells the bonds at 99 on July 1, 2016, there will be a loss reported on the income statement.