Which of the
following will not improve the current ratio?
a. Issuing long-term debt to
purchase inventory
b. Obtaining a short term
loan to finance additional fixed assets
c. Selling common stock to
reduce current liabilities.
d. Selling fixed assets to
reduce accounts payable
Why must companies
actively manage their outstanding receivables?
a. It is part of the job
of any accounting department
b. Customers will never pay
if they are not constantly reminded of the money due
c. Managing receivables
makes cash flow into the company quicker than it would if no attention is paid
to AR
d. Companies need to be
prompt in replying to customer requests
On a company's
Balance Sheet, A/R is the amount_____________.
a. that the company owes to
a particular party
b. that a party owes to
the company
c. not shown in the balance
sheet
A company recorded
two sales of $20.000 and $30,000 on March 1, 2007 under the credit terms of
3/10, n/30. Payment for the $20,000 sale was received on March 10, 2007.
Payment for the $30,000 sale was received on March 25, 2007.
Under the gross method and the net method, which of the following amounts should appear as net sales in the March income statements?
Gross method Net method
Under the gross method and the net method, which of the following amounts should appear as net sales in the March income statements?
Gross method Net method
a. $48,500 $48,500
b. $48,500 $49,400
c. $49,400 $48,500
d. $49,400 $49,400
To which column
should Sales Discount be extended (transferred) on the work sheet?
a. Income statement credit
column
b. Balance sheet debit
column
c. Income statement debit
column
d. Balance sheet credit
column
What is B2B?
a. A CRM software package
b. Best Business
c. An Accounting Software
d. Business to Business
The antecedents of
receivables are critical to the management of receivable assets and is the key
driver of the cost to manage a company's revenue stream. A simple formula to
illustrate this point is ____________.
a. high customer
satisfaction – accurate invoice = excellent receivable results
b. high customer
satisfaction + excellent receivable results = accurate invoice
c. high customer satisfaction
+ accurate invoice = excellent receivable results
d. None of the above
A company would
choose to factor it's receivables because:
a. it is the same as turning
them over to a collection agency
b. they need to raise
capital and do not want to rely on the credit worthiness of the business
c. they have given up hope
of ever collecting on the items
d. it is easier than trying
to collect themselves
Why would a company
break revenue up into specific accounts instead of having one master
"revenue" account?
a. Once a company chooses a
method, it is never changed. Someone early on made a mistake by creating the
level of detail
b. It allows the
management and the staff to examine and analyze each of the revenue streams for
errors, patterns, and comparisons
c. It creates work for the
accounting department
d. It is required by tax
laws
The antecedents of
Receivables are defined as all the up-front operations required for creating a
receivable. They do not involve which of the following:
a. Quotations
b. Advance payments
c. Contract and price
administration
d. Invoicing
Credit card
discounts are reported on the income statement as
a. a contra revenue
b. a selling expense
c. a miscellaneous expense
d. both (a) and (c)
ABC Services
provides accounting services to a client and collects $1,000 in cash. How and
in which of the accounts will the increase in cash be recorded by ABC Services
as a result of providing this service?
a. A credit to Accounts
Receivable
b. A debit to Accounts
Receivable
c. A credit to Service
Revenue
d. A debit to Service
Revenue’
Is the Accounts
Receivable department considered "revenue generating"?
a. Yes, it is the connection
between the company and the customer
b. Yes, as AR handles all
payments, it handles the revenue in the true sense
c. Yes, without an AR
department, no revenue would be collected
d. No, it is part of the
accounting operation function and is an overhead expense
You received an
invoice that shows credit terms of 2/10, n/60. What does the number 10 in the
credit terms refer to?
a. The number of days in the
credit period.
b. The amount of sales
discount available.
c. The number of days in
the discount period.
d. The amount of the trade
discount.
What is meant by
Factoring?
a. sale of Accounts
Receivables
b. Bank Loan
c. Discount
d. None of the above
An invoice
is____________.
a. a commercial document
issued by the seller to the buyer
b. a commercial document
issued by the buyer to the seller
c. a commercial document
issued by the buyer to the contractor
On the balance
sheet, Receivables may be classified as ____________.
a. trade and non-trade
b. current and
non-current
c. trade and current only
d. both (a) and (b)
Which of the
following is not true about interest on Receivables?
a. Interest receivable is
calculated by using the formula Interest= Principal x Interest Rate x Time.
b. Interest receivable
does not have to be recognized if interest is to be collected in the next year
c. We need to recognize
interest receivable to satisfy the matching principle.
d. Interest receivable is
interest earned but not collected.
Ninety-percent of
Vogel Bird Seeds' total sales of $600,000 is on credit. If its year-end
Receivables turnover is 5, the average collection period (based on a 365-day
year) and the year-end Receivables are, respectively
a. 365 days and $108,000
b. 73 days and $120,000
c. 73 days and $108,000
d. 81 days and $108,000
The net realizable
value of Accounts Receivable is____________.
a. the total of the
Individual accounts in the subsidiary ledger
b. Accounts Receivable minus
allowance for Doubtful Accounts
c. Accounts Receivable
minus Bad Debts Expense
d. the estimated amount of
the accounts that will not be collected
Where should Sales
Discount be recorded?
a. Income statement credit
column
b. Balance sheet debit
column
c. Income statement debit
column
d. Balance sheet credit
column
Costs that does not
carry enough inventory include____________.
a. lost sales
b. customer disappointment
c. possible worker layoffs
d. All of the above
Bad Debts are shown
on the following financial statements ____________.
a. the Profit & Loss
b. the Profit & Loss
& the Balance Sheet
c. the Balance Sheet and
Statement of Equity
d. Cash Flow statement
Allowance for
doubtful accounts is ___________.
a. the total of the accounts
that will not be collected
b. a contingent liability
c. a contra-owner's equity
account like withdrawals
d. the estimated amount of
Accounts Receivable that will not be collected
Why is "day's
sales in Accounts Receivable" important to calculate?
a. It tells you the total
day's sales that were made
b. It is required by the SEC
for all public companies
c. It indicates the
company's overall financial health
d. It makes comparison with
prior results possible to see improvements or non improvements, and lets a
company know how long people are taking to pay on average
A firm receives
cash for 30% of its sales with the remaining 70% being credit sales. Of the
credit sales, 20% are collected in the month of the sale, 60% in the month
following the sale, and 20% in the second month following the sale. The
anticipated sales for January through April are $400,000, $500,000, $600,000,
and $400,000 respectively. What will be the cash receipts in the month of
April?
a. $120,000
b. $400,000
c. $498,000
d. $530,000
A company's
accounting policy for recording revenues___________.
a. must be the same as that
of all other companies
b. can be different from
that of other companies
c. must be disclosed if
different from the revenue principle
d. can be (b), and if so, (c)
must follow
Why would a service
item be kept in inventory in the accounting system?
a. It would not; service is
not an inventory item
b. It allows for associating
a standard price with the service item and makes invoicing easier
c. It assigns a value to the
services of the company for the balance sheet
All of the
following are true about interest receivable except
a. Interest Receivable is
calculated by using the formula Interest= Principal x Interest Rate x Time
b. Interest Receivable is
interest earned but not collected
c. Interest Receivable does
not have to be recognized if interest will be collected in the next year
d. We need to recognize
Interest Receivable to satisfy the matching principle
Factoring
Receivables is a ___________.
a. continuous, ongoing
purchase of Receivables
b. finite portfolio of
Receivables
c. limited purchase of
Receivables
d. continuous, ongoing
selling of Receivables
Companies that do
not carry enough inventory will incur ____________.
a. lost sales
b. low employee morale
c. worker layoffs
d. All of the above
A transfer of
financial assets in accordance with SFAS 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities may be treated
as a sale if the transferor surrenders control of the assets. Which of the
following is one of the criteria that must be met before control is deemed to
be surrendered?
a. The transferred assets
are isolated from the transferor and its creditors expected in bankruptcy.
b. The transferee cannot pledge
or exchange the transferred assets.
c. The transferor is not a
party to an agreement that both entitles and obligates it to repurchase or
redeem the securities prior to maturity.
d. The consideration
received by the transferor consists solely of beneficial interests in the
transferred assets.
On January 1, Davis
College assigned $500,000 of Accounts Receivable to the Scholastic Finance
Company. It gave a 14% note for $450,000 representing 90% of the assigned
accounts and received proceeds of $432,000 after deduction of a Scholastic,
including interest for 1 month on the remittance. By what amount will Accounts
Receivable be assigned and notes payable decreased?
A/R Assigned Notes Payable
A/R Assigned Notes Payable
a. $80,000 $74,750
b. $80,000 $80,000
c. $72,000 $74,750
d. $74,750 $80,000
If the balance of
the Allowance for Doubtful Account exceeds the amount of a bad debt being
written off, the entry to record the write off against the allowance account results in:
a. an increase in the
expenses of the current period
b. a reduction in current
assets
c. a reduction in equity
d. no effect on the expenses
of the current period
Accounts Receivable
that arise from the regular sale of merchandise is also referred to
as___________.
a. Business Receivables
b. Other Receivables
c. Trade Receivables
d. Money Receivable
An accrued revenue
would be shown on the balance sheet as ____________.
a. a payable
b. a prepaid revenue
c. a receivable
d. unearned revenue
Which of the
following statements regarding the calculation of 'day's sales' in receivables
is incorrect?
a. Allowance for doubtful
accounts is generally not considered in the formula for 'day's sales'
b. This formula must be
applied in two steps.
c. The number of 'day's
sales' in Accounts Receivable is always 365.
d. Net sales are not used in
the calculation of 'day's sales' in Accounts Receivable.
When using the
indirect method of preparing the "Cash Flows from Operating
Activities" section of a statement of cash flows, a net increase between
the opening and closing balances of Net Accounts Receivable will ____________.
a. be added to net income
b. be deducted from net
income
c. not be considered
d. be shown as deferred
revenues
To which accounting
concept does Accounts Receivable relate?
a. Going concern
b. Cost concept
c. Matching concepts
d. Consistency concept
In accounting for
the transfer of financial assets, which of the following is the approach
underlying the accounting prescribed by SFAS 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities?
a. Financial-components
approach.
b. The risks-and-rewards
approach.
c. Inseparable-unit
approach.
d. Linked-presentation
approach.
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