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Exam 5: Receivables and Sales

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Question 21

True/False

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A sale on account for $1,000 offered with terms 2/10,n/30 means that the customers will get a $2 discount if payment is made within 10 days; otherwise,full payment is due within 30 days.

A) True
B) False

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Question 22

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Which accounting principle does the direct write-off method violate?

A) Cost.
B) Realization.
C) Revenue recognition.
D) Matching.

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

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Question 23

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The following information pertains to Lightning,Inc.at the end of the year: $\begin{array} { l r r } \text { Credit Sales } & \$ 60,000 \\\text { Accounts Payable } & 10,000 & \\\text { Accounts Receivable } & 7,000 & \\\text { Allowance for Uncollectible Accounts } & 400 & \text { credit } \\\text { Cash Sales } & 20,000 &\end{array}$ Lightning uses the percentage-of-credit-sales method and estimates 1% of sales are uncollectible.What is the ending balance of the allowance account after the year-end adjustment?

A company has the following accounts receivable and estimates of uncollectible accounts: Compute the total estimated uncollectible accounts.

A sales allowance is recorded as a debit to Accounts Receivable and a credit to Sales Allowances.

On March 17,Jackal Lumber sold building materials to Fredo Limited for $15,000 with terms of 3/10,net 20.What amount did Jackal record as revenue on March 25 when Fredo paid for the building materials?

At the end of 2012,Murray State Lenders had a balance in its Allowance for Uncollectible Accounts of $4,500 (debit) before any adjustment.The company estimated its future uncollectible accounts to be $12,000 using the percentage-of-receivables method.Murray State's adjustment on December 31,2012,to record its estimated uncollectible accounts included a:

The net realizable value of accounts receivable is the full amount owed by customers.

Trade discounts represent a discount offered to the purchasers for quick payment.

Discuss the differences between the allowance method and the direct write-off method for recording uncollectible accounts.Which of the two is acceptable under financial accounting rules?

On December 31,2012,Larry's Used Cars had balances in Accounts Receivable and Allowance for Uncollectible Accounts of $53,600 and $1,325,respectively.During 2013,Larry's wrote off $1,465 in accounts receivable and determined that there should be an allowance for uncollectible accounts of $1,280 at December 31,2013.Bad debt expense for 2013 would be:

The direct write-off method is used for tax purposes but is generally not permitted for financial reporting.

A company's adjustment for uncollectible accounts at year-end would include a:

The primary difference between a note receivable and an account receivable is:

Which method is not allowed under Generally Accepted Accounting Principles for the purpose of accounting for uncollectible accounts?

Gershwin Wallcovering Inc.shipped the wrong shade of paint to a customer.The customer agreed to keep the paint upon being offered a 15% price reduction.Gershwin would record this reduction by crediting Accounts Receivable and debiting:

The direct write-off method involves recording an adjustment at the end of each period to account for the possibility of future uncollectible accounts.

Credits sales are recorded as:

The percentage-of-credit-sales method for estimating uncollectible accounts is sometimes described as:

On April 1,2012,a company loans one of its suppliers $50,000 and accepts a 24-month,12% note receivable.Calculate the amount of interest revenue the company will recognize in 2012,2013,and 2014.