≡ MENU

MCQs Papers Definitions Flashcards

MCQs
Papers
Definitions
Flashcards

Categories

Home—›
Accounts Receivables

Accounts Receivables MCQs

?

An analysis of an entityâ€™s $150,000 accounts receivable at year end resulted in a $5,000 ending balance for its allowance for uncollectible ac...

$1,200
$1,800
$2,200
$2,800

?

The following information applies to Nichola Manufacturing Company, which has a 6-month operating cycle: Cash sales ......................$100,000 ...

$152,000
$160,000
$260,000
$262,000

?

Johnson Company uses the allowance method to account for uncollectible accounts receivable. After recording the estimate of uncollectible accounts ex...

Decrease Decrease
No effect Decrease
Decrease No effect
No effect No effect

?

Based on the industry average, Davis Corporation estimates that its bad debts should average 3% of credit sales. The balance in the allowance for unc...

$300,000
$260,000
$240,000
$160,000

?

The following information has been compiled by Able Manufacturing Company:  Sale of company products for the period to customers with net 30-day t...

$250,000
$252,000
$275,000
$277,000

?

Marr Co. had the following sales and accounts receivable balances, prior to any adjustments at year end: Credit sales .................................

$0
$40,000
$90,000
$140,000

?

When the allowance method of recognizing uncollectible accounts is used, the entry to record the write-off of a specific account

Decreases both accounts receivable and the allowance for uncollectible accounts
Decreases accounts receivable and increases the allowance for uncollectible accounts
Increases the allowance for uncollectible accounts and decreases net income.
Decreases both accounts receivable and net income.

?

Wren Company had the following account balances at December 31: Accounts receivable.......................... $ 900,000 Allowance for uncollectible ...

$51,000 $45,000
$51,000 $29,000
$35,000 $45,000
$35,000 $29,000

?

On March 31, Vale Co. had an unadjusted credit balance of $1,000 in its allowance for uncollectible accounts. An analysis of Vale’s trade accounts ...

$4,800
$4,000
$3,800
$3,000

?

Which method of recording uncollectible accounts expense is consistent with accrual accounting? Allowance ...Direct Write-Off

Yes Yes
Yes No
No Yes
No No

?

Under the allowance method of recognizing uncollectible accounts, the entry to write-off an uncollectible account

Increases the allowance for uncollectible accounts.
Has no effect on the allowance for uncollectible accounts.
Has no effect on net income.
Decreases net income.

?

The following accounts were abstracted from Roxy Co.’s unadjusted trial balance at December 31: .......................................Debit ........

$90,000
$82,000
$38,000
$30,000

?

A change in credit policy has caused an increase in sales, an increase in discounts taken, a reduction in the investment in accounts receivable, and a...

Net profit has increased.
The average collection period has decreased.
Gross profit has declined.
The size of the discount offered has decreased.

?

A change in credit policy has caused an increase in sales, an increase in discounts taken, a decrease in the amount of bad debts, and a decrease in th...

Average collection period has decreased.
Percentage discount offered has decreased.
Accounts receivable turnover has decreased.
Working capital has increased.

?

The average collection period for a firm measures the number of days

After a typical credit sale is made until the firm receives the payment.
For a typical check to “clear” through the banking system.
Beyond the end of the credit period before a typical customer payment is received.
Before a typical account becomes delinquent.

?

Which of the following represents a firmâ€™s average gross receivables balance? I. Daysâ€™ sales in receivables x accounts receivable turno...

I only.
I and II only.
II only.
II and III only.

?

An aging of accounts receivable measures the

Ability of the firm to meet short-term obligations.
Average length of time that receivables have been outstanding.
Percentage of sales that have been collected after a given time period.
Amount of receivables that have been outstanding for given lengths of time.

?

When a company analyzes credit applicants and increases the quality of the accounts rejected, the company is attempting to

Maximize sales.
Increase bad-debt losses.
Increase the average collection period.
Maximize profits.

?

An increase in sales resulting from an increased cash discount for prompt payment would be expected to cause

An increase in the operating cycle.
An increase in the average collection period.
A decrease in the cash conversion cycle.
A decrease in purchase discounts taken.

?

An organization would usually offer credit terms of 2/10, net 30 when

The organization can borrow funds at a rate exceeding the annual interest cost.
The organization can borrow funds at a rate less than the annual interest cost.
The cost of capital approaches the prime rate.
Most competitors are offering the same terms, and the organization has a shortage of cash.

?

Which one of the following statements is most likely to be true if a seller extends credit to a purchaser for a period of time longer than the purchas...

Will have a lower level of accounts receivable than those companies whose credit period is shorter than the purchaser’s operating cycle.
Is, in effect, financing more than just the purchaser’s inventory needs.
Can be certain that the purchaser will be able to convert the inventory into cash before payment is due.
Has no need for a stated discount rate or credit period.

?

The one item listed below that would warrant the least amount of consideration in credit and collection policy decisions is the

Quality of accounts accepted.
Quantity discount given.
Cash discount given.
Level of collection expenditures.

?

Jackson Distributors sells to retail stores on credit terms of 2/10, net 30. Daily sales average 150 units at a price of $300 each. All sales are on c...

$1,350,000
$990,000
$900,000
$810,000

?

A firm averages $4,000 in sales per day and is paid, on an average, within 30 days of the sale. After they receive their invoice, 55% of the customers...

$4,000
$48,000
$54,000
$120,000

?

Dartmoor Company’s budgeted sales for the coming year are $40,500,000, of which 80 are expected to be credit sales at terms of n/30. Dartmoor estima...

$540,000
$900,000
$1,620,000
$2,700,000

?

A company plans to tighten its credit policy. The new policy will decrease the average number of days in collection from 75 to 50 days and will reduce...

$6,500,000 decrease.
$3,819,445 decrease.
$3,333,334 decrease.
$18,749,778 increase.

?

Flyn Company’s budgeted sales for the coming year are expected to be $50,000,000, of which 75% are expected to be credit sales at terms of n/30. Fly...

$520,833
$1,822,917
$2,083,333
$3,906,250

?

Yonder Motors sells 20,000 automobiles per year for $25,000 each. The firm’s average receivables are $30,000,000 and average inventory is $40,000,00...

17 days.
22 days.
29 days.
61 days.

?

Lawson Company has the opportunity to increase annual sales by $100,000 by selling to a new, riskier group of customers. Based on sales, the uncollect...

$4,000
$6,000
$9,000
$10,000

?

Parkison Company can increase annual sales by $150,000 if it sells to a new, riskier group of customers. The uncollectible accounts expense is expecte...

$2,850
$4,650
$7,500
$8,370

?

Best Computers believes that its collection costs could be reduced through modification of collection procedures. This action is expected to result in...

$30,000
$36,000
$180,000
$360,000

?

Hest Computers believes that its collection costs could be reduced through modification of collection procedures. This action is expected to result in...

$22,500
$37,500
$125,000
$375,000

?

Clauson, Inc., grants credit terms of 1/15, net 30 and projects gross credit sales for the year of $2,000,000. The credit manager estimates that 40% o...

$50,000
$16,667
$150,000
$400,000

?

Northville Products is changing its credit terms from net 30 to 2/10, net 30. The least likely effect of this change would be a(n)

Increase in sales.
Shortening of the cash conversion cycle.
Increase in short-term borrowings.
Lower number of days’ sales outstanding

?

Snug-fit, a maker of bowling gloves, is investigating the possibility of liberalizing its credit policy. Currently, payment is made on a cash-on-deliv...

34.0%
36.2%
40.0%
42.5%

?

A credit manager considering whether to grant trade credit to a new customer is most likely to place primary emphasis on

Profitability ratios.
Valuation ratios.
Growth ratios.
Liquidity ratios.

?

Computer Services is an established firm that sells computer hardware, software, and services. The firm is considering a change in its credit policy. ...

The credit standards that presently exist.
The new credit standards.
The opportunity cost of funds.
No additional information is needed.

?

Locar Corporation had net sales last year of $18,600,000 (of which 20% were installment sales). It also had an average accounts receivable balance of ...

26.2 days.
26.7 days.
27.2 days.
33.4 days.

?

Powell Industries deals with customers throughout the country and is attempting to more efficiently collect its accounts receivable. A major bank has ...

0.67 days.
1.20 days.
1.25 days.
1.50 days.

?

Consider the following factors affecting a company as it is reviewing its trade credit policy. I. Operating at full capacity. II. Low cost of borrow...

I and II only.
I, II, and III only.
II and III only.
III and IV only.

?

A financial manager for a jewelry distributor is analyzing the cost of offering a cash discount to its credit policy. Currently, the firm’s sales te...

$822
$10,685
$49,315
$60,000

?

The cash manager for a large kitchen appliance retailer has been approached by a bank representative offering to set up a lock-box collection system. ...

$(150,500)
$(45,500)
$45,500
$210,000

?

Frame Co. has an 8% note receivable dated June 30, year 1, in the original amount of $150,000. Payments of $50,000 in principal plus accrued interes...

$0
$ 4,000
$ 8,000
$12,000

?

Fenn Stores, Inc. had sales of $1,000,000 during December, year 2. Experience has shown that merchandise equaling 7% of sales will be returned withi...

$900,000
$850,000
$780,000
$750,000

?

A method of estimating uncollectible accounts that emphasizes asset valuation rather than income measurement is the allowance method based on

Aging the receivables.
Direct write-off.
Gross sales.
Credit sales less returns and allowances.

?

Which method of recording uncollectible accounts expense is consistent with accrual accounting? Allowance Direct write-off

Yes Yes
Yes No
No Yes
No No

?

When the allowance method of recognizing uncollectible accounts is used, the entry to record the write-off of a specific account

Decreases both accounts receivable and the allowance for uncollectible accounts.
Decreases accounts receivable and increases the allowance for uncollectible accounts.
Increases the allowance for uncollectible accounts and decreases net income.
Decreases both accounts receivable and net income.

?

Which of the following is a method to generate cash from accounts receivables? Assignment Factoring

Yes No
Yes Yes
No Yes
No No

?

Gar Co. factored its receivables. Control was surrendered in the transaction which was on a without recourse basis with Ross Bank. Gar received cash...

Loan from Ross collateralized by Gar’s accounts receivable.
Loan from Ross to be repaid by the proceeds from Gar’s accounts receivable.
Sale of Gar’s accounts receivable to Ross, with the risk of uncollectible accounts retained by Gar.
Sale of Gar’s accounts receivable to Ross, with the risk of uncollectible accounts transferred to Ross.

?

Taylored Corp. factored $400,000 of accounts receivable to Rich Corp. on July 1, year 2. Control was surrendered by Taylored. Rich accepted the rece...

$385,260
$357,260
$365,260
$377,260

?

Taylored Corp. factored $400,000 of accounts receivable to Rich Corp. on July 1, year 2. Control was surrendered by Taylored. Rich accepted the rece...

Rich should record an asset of $8,000 for the recourse obligation.
Taylored should record a liability and corresponding loss of $12,000 related to the recourse obligation.
Taylored should record a liability of $12,000, but no loss, related to the recourse obligation.
No entry for the recourse obligation should be made by Taylored or Rich until the debtor fails to pay.

?

Taylored Corp. factored $400,000 of accounts receivable to Rich Corp. on July 1, year 2. Control was surrendered by Taylored. Rich accepted the rece...

$ 8,000
$34,740
$42,740
$14,740

?

Scarbrough Corp. factored $600,000 of accounts receivable to Duff Corp. on October 1, year 2. Control was surrendered by Scarbrough. Duff accepted t...

$529,685
$538,685
$547,685
$556,685

?

Synthia Corp. factored $750,000 of accounts receivable to Thomas Company on December 3, year 2. Control was surrendered by Synthia. Thomas accepted ...

$12,575
$15,000
$27,575
$42,575

?

Bannon Corp. transferred financial assets to Chapman, Inc. The transfer meets the conditions to be accounted for as a sale. As the transferor, Banno...

Remove all assets sold from the balance sheet.
Record all assets received and liabilities incurred as proceeds from the sale.
Measure the assets received and liabilities incurred at cost.
Recognize any gain or loss on the sale.

?

All but one of the following are required before a transfer of receivables can be recorded as a sale.

The transferred receivables are beyond the reach of the transferor and its creditors.
The transferor has not kept effective control over the transferred receivables through a repurchase agreement.
The transferor maintains continuing involvement.
The transferee can pledge or sell the transferred receivables.

?

Which of the following is not an objective for each entity accounting for transfers of financial assets?

To derecognize assets when control is gained.
To derecognize liabilities when extinguished.
To recognize liabilities when incurred.
To derecognize assets when control is given up.

?

Which of the following is false?

A servicing asset shall be assessed for impairment based on its fair value.
A servicing liability shall be assessed for increased obligation based on its fair value.
An obligation to service financial assets may result in the recognition of a servicing asset or servicing liability.
A servicing asset or liability should be amortized for a period of five years.

?

Fusion Corporation uses the amortization method to account for its servicing assets. Which of the following statements is true?

Increases in fair value are reported in other comprehensive income
Increases in fair value are reported in earnings of the period.
The assets are measured at fair value at the end of each reporting period.
The assets are measured for impairment at the end of each reporting period.

?

The procedures followed by the firm for ensuring payment of its accounts receivables are called its

Discount policy.
Credit policy.
Collection policy.
Payables policy.

?

Effective September 1, a company initiates seasonal dating as a component of its credit policy, allowing wholesale customers to make purchases early...

Reduced storage costs.
Reduced credit costs.
Attractive credit terms for customers.
Reduced uncertainty about sales volume.

?

Effective September 1, a company initiates seasonal dating as a component of its credit policy, allowing wholesale customers to make purchases early...

$0
$6,370
$6,860
$7,000

?

Which of the following describes a firmâ€™s credit criteria?

The length of time a buyer is given to pay for his/her purchases.
The percentage of discount allowed for early payment.
The diligence to collect slow-paying accounts.
The required financial strength of acceptable customers.

?

A company plans to tighten its credit policy. The new policy will decrease the average number of days in collection from 75 to 50 days and reduce th...

$ 3,819,445 decrease.
$ 6,500,000 decrease.
$ 3,333,334 decrease.
$18,749,778 increase.

?

A company plans to tighten its credit policy. The new policy will decrease the average number of days in collection from 75 to 50 days and reduce th...

$2,500,000 decrease.
$2,166,667 decrease.
$ 83,334 increase.
$ 33,334 increase.

?

A company enters into an agreement with a firm who will factor the company’s accounts receivable. The factor agrees to buy the company’s receiva...

10.0%
14.0%
16.0%
17.5%

?

A company with $4.8 million in credit sales per year plans to relax its credit standards, projecting that this will increase credit sales by $720,00...

$0
$ 28,800
$144,000
$120,000

?

Which of the following statements is (are) correct regarding debtorsâ€™ rights? I. State exemption statutes prevent all of a debtorâ€™s pe...

I only.
II only.
Both I and II
Neither I nor II.

?

Under the Federal Fair Debt Collection Practices Act, which of the following would a collection service using improper debt collection practices be ...

Abolishment of the debt.
Reduction of the debt.
Civil lawsuit for damages for violating the Act.
Criminal prosecution for violating the Act.

?

Which of the following liens generally require(s) the lienholder to give notice of legal action before selling the debtorâ€™s property to satis...

Yes Yes
Yes No
No Yes
No No

?

Which of the following prejudgment remedies would be available to a creditor when a debtor owns no real property? Writ of attachment . . . Garnishme...

Yes Yes
Yes No
No Yes
No No

?

Which of the following involve(s) a suretyship relationship? I. Transferee of a note requires transferor to obtain an accommodation endorser to guar...

I only
II only.
I and II only.
I and III only.

?

Which of the following events will reduce a suretyâ€™s liability to the creditor?

The principal debtor was involuntarily petitioned into bankruptcy.
The creditor failed to notify the surety of a partial surrender of the principal debtorâ€™s collateral.
The creditor was adjudicated incompetent after the debt arose.
The principal debtor exerted duress to obtain the surety agreement.

?

Reuter Bank loaned Sabean Corporation $500,000 in writing. As part of the agreement, Reuter required that the three owners of Sabean act as sureties...

I and III only.
II only.
I, II, and III only
IV only

?

Belmont acts as a surety for a loan to Diablo from Chaffin. In which of the following cases would Belmont be released from liability? I. Diablo die...

I only.
III only
I and III only.
I, II, and III.

?

A party contracts to guaranty the collection of the debts of another. As a result of the guaranty, which of the following statements is correct?

The creditor may proceed against the guarantor without attempting to collect from the debtor.
The guaranty must be in writing.
The guarantor may use any defenses available to the debtor.
The creditor must be notified of the debtorâ€™s default by the guarantor

?

Sorus and Ace have agreed, in writing, to act as guarantors of collection on a debt owed by Pepper to Towns, Inc. The debt is evidenced by a promiss...

Sorus and Ace are in the process of exercising their rights against Pepper.
Sorus and Ace prove that Pepper was insolvent at the time the note was signed.
Pepper dies before the note is due.
Towns has not attempted to enforce the promissory note against Pepper.

?

Under the law of suretyship, which are generally among the rights that the surety may use? I. Subrogation. II. Exoneration. III. Reimbursement fro...

I only
III only.
I and II only.
I, II, and III.

?

Which of the following defenses would a surety be able to assert successfully to limit the suretyâ€™s liability to a creditor?

A discharge in bankruptcy of the principal debtor.
A personal defense the principal debtor has against the creditor.
The incapacity of the surety.
The incapacity of the principal debtor.

?

Which of the following events will release a noncompensated surety from liability?

Release of the principal debtorâ€™s obligation by the creditor but with the reservation of the creditorâ€™s rights against the surety.
Modification by the principal debtor and creditor of their contract that materially increases the suretyâ€™s risk of loss.
Filing of an involuntary petition in bankruptcy against the principal debtor.
Insanity of the principal debtor at the time the contract was entered into with the creditor.

?

Which of the following is not a defense that a surety may use to avoid payment of a debtorâ€™s obligation to a creditor?

The creditor had committed fraud against the debtor to induce the debtor to take on the debt with this creditor.
The creditor had committed fraud against the surety to induce the surety to guarantee the debtorâ€™s payment of a loan.
The statute of limitations has run on the debtorâ€™s obligation.
The debtor took out bankruptcy.

?

Which of the following acts always will result in the total release of a compensated surety?

The creditor changes the manner of the principal debtorâ€™s payment.
The creditor extends the principal debtorâ€™s time to pay.
The principal debtorâ€™s obligation is partially released.
The principal debtorâ€™s performance is tendered.

?

Green was unable to repay a loan from State Bank when due. State refused to renew the loan unless Green provided an acceptable surety. Green asked R...

If Royal can show that State was aware of the fraudulent representations.
If Royal was an uncompensated surety.
Because the discharge in bankruptcy will prevent Royal from having a right of reimbursement.
Because the arrangement was void at the inception.

?

Wright agreed to assure Kingâ€™s loan from Ace Bank. Which of the following events would release Wright from the obligation to pay the loan?

Ace seeking payment of the loan only from Wright.
King is granted a discharge in bankruptcy.
Ace is paid in full by Kingâ€™s spouse.
King is adjudicated mentally incompetent

?

The sales manager at Ryan Company feels confident that if the credit policy at Ryanâ€™s were changed, sales would increase and consequently, the ...

Cost of funds for Ryan.
Current bad debt experience.
Impact on the current customer base of extending terms to only certain customers.
Bank loan covenants on daysâ€™ sales outstanding.

?

Amicable Wireless, Inc. offers credit terms of 2/10, net 30 for its customers. Sixty percent of Amicableâ€™s customers take the 2% discount and p...

6
12
18
20

?

An increase in sales collections resulting from an increased cash discount for prompt payment would be expected to cause a (n):

Increase in the operating cycle.
Increase in the average collection period.
Decrease in the cash conversion cycle.
Increase in bad debt losses.

?

Which one of the following represents methods for converting accounts receivable to cash?

Trade discounts, collection agencies, and credit approval.
Factoring, pledging, and electronic funds transfers.
Cash discounts, collection agencies, and electronic funds transfers.
Trade discounts, cash discounts, and electronic funds transfers.

Home

Privacy Policy DMCA Policy Contact Us

Copyright © 2015 accountingMCQs.com | All Rights Reserved