Reference no: EM131629476

1. A customer charges a treadmill at Mike's Sport Shop. The price is $2,000 and the financing charge is 9% per year if the bill is not paid in 30 days. The customer fails to pay the bill within 30 days and a finance charge is added to the customer's account. What is the amount of the finance charge?

a. $60

b. $15

c. $180

d. $6

2. A customer charges a treadmill at Mike's Sport Shop. The price is $2,000 and the financing charge is 9% per year if the bill is not paid in 30 days. The customer fails to pay the bill within 30 days and a finance charge is added to the customer's account. The accounts affected by the journal entry made by Mike's Sport Shop to record the finance charge are

a. Accounts Receivable and Cash.

b. Cash and Finance Receivable.

c. Accounts Receivable and Interest Payable.

d. Accounts Receivable and Interest Revenue.

3. If a company fails to record estimated bad debts expense,

a. cash realizable value is understated.

b. expenses are understated.

c.revenues are understated.

d. receivables are understated.

4. Fowler Company on July 15 sells merchandise on account to Coffey Co. for $1,000, terms 2/10, n/30. On July 20 Coffey Co. returns merchandise worth $400 to Fowler Company. On July 24 payment is received from Coffey Co. for the balance due. What is the amount of cash received?

a. $600

b. $588

c. $980

d. $580

5. The existing balance in Allowance for Doubtful Accounts is considered in computing bad debts expense in the

a. direct write-off method.

b. percentage of receivables basis..

c. percentage of sales basis.

d. percentage of receivables and percentage of sales basis.

6. When an account becomes uncollectible and must be written off,

a. Allowance for Doubtful Accounts should be credited.Allowance for Doubtful Accounts should be credited.

b. Accounts Receivable should be credited.

c. Bad Debts Expense should be credited. Bad Debts Expense should be credited.

d. Sales should be debited.

7. An aging of a company's accounts receivable indicates that $9,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,100 credit balance, the adjustment to record bad debts for the period will require a

a. debit to Bad Debts Expense for $7,900.

b. debit to Allowance for Doubtful Accounts for $7,900.

c. debit to Bad Debt Expense for $10,100.

d. debit to Bad Debts Expense for $9,000.

8. A debit balance in the Allowance for Doubtful Accounts

a. is the normal balance for that account.

b. indicates that actual bad debt write-offs have exceeded previous provisions for bad debts.

c. indicates that actual bad debt write-offs have been less than what was estimated.

d. cannot occur if the percentage of sales method of estimating bad debts is used.

9. To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a

a. debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts.

b. debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts.

c. debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable.

d. debit to Loss on Credit Sales and a credit to Accounts Receivable.

10. An aging of a company's accounts receivable indicates that $4,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 credit balance, the adjustment to record bad debts for the period will require a

a. debit to Bad Debts Expense for $4,000.

b. debit to Bad Debts Expense for $5,200.

c. debit to Bad Debts Expense for $2,800.

d. debit to Allowance for Doubtful Accounts for $2,800.

11. An aging of a company's accounts receivable indicates that $3,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 debit balance, the adjustment to record bad debts for the period will require a

a. debit to Bad Debts Expense for $3,000.

b. debit to Bad Debts Expense for $4,200.

c. debit to Bad Debts Expense for $1,800.

d. credit to Allowance for Doubtful Accounts for $4,000.

12. A company has net credit sales of $900,000 for the year and it estimates that uncollectible accounts will be 2% of sales. If Allowance for Doubtful Accounts has a credit balance of $1,000 prior to adjustment, its balance after adjustment will be a credit of

a. $18,000.

b. $19,000.

c. $17,980.

d. $17,000.

13. Newland Retailers accepted $75,000 of Citibank Visa credit card charges for merchandise sold on July 1. Citibank charges 4% for its credit card use. The entry to record this transaction by Newland Retailers will include a credit to Sales of $75,000 and a debit(s) to

a. Cash $72,000 and Service Charge Expense $3,000.

b. Accounts Receivable $72,000 and Service Charge Expense $3,000.

c. Cash $72,000 and Interest Expense $3,000.

d. Accounts Receivable $75,000.

14. ABC Company accepted a national credit card for a $3,000 purchase. The cost of the goods sold is $2,400. The credit card company charges a 3% fee. What is the impact of this transaction on net operating income?

a. Increase by $582

b. Increase by $600

c. Increase by $510

d. Increase by $2,910

15. The retailer considers Visa and MasterCard sales as

a. cash sales.

b. promissory sales.

c. credit sales.

d. contingent sales.

16. The maturity value of a $90,000, 10%, 60-day note receivable dated July 3 is

a. $90,000.

b. $99,000.

c. $105,000.

d. $91,500.

17. The maturity value of a $4,000, 9%, 60-day note receivable dated February 10th is

a. $4,060.

b. $4,030.

c. $4,000

d. $4,360.

18. On November 1, Kinder Company received a $6,000, 10%, three-month note receivable. The cash to be received by Kinder Company when the note becomes due is:

a. $6,000.

b. $6,100.

c. $6,150.

d. $6,600.

19. A company that receives an interest bearing note receivable will

a. debit Notes Receivable for the maturity value of the note.

b. credit Notes Receivable for the maturity value of the note.credit Notes Receivable for the maturity value of the note.

c. debit Notes Receivable for the face value of the note.

d. credit Notes Receivable for the face value of the note.

20. Writing off an uncollectible account under the allowance method requires a debit to

a. Accounts Receivable.

b. Allowance for Doubtful Accounts.

c. Bad Debt Expense.

d. Uncollectible Account Expense.