ACCT 370: Chapter 9-Test Questions
Well Answered.
The net realizable value of a company's accounts receivable - Answer is the amount that the
company expects to collect.
and
is found on the balance sheet.
Conceptually, the expected credit losses should be shown as a deduction - Answer against
revenue
The beginning of the month balance of Allowance for credit losses is $100,000. There were no
account write-offs during the month. Under the Gross accounts receivable approach, the
desired end of the month balance for Allowance for credit losses is $122,000. In recording the
credit loss allowance, - Answer the Allowance for credit losses should be credited for $22,000.
Diaz Industries determined that a $12,500 receivable from Sarge Company cannot be collected.
Which of the following would be included in the journal entry to account for the uncollectible
account? - Answer Debit to Allowance for credit losses for $12,500.
Credit to Accounts receivable—Sarge Company for $12,500.
As an economy comes out of a recession, the Allowance for credit losses as a percentage of
gross accounts receivable would be expected to - Answer decrease.
The net realizable value of a company's accounts receivable - Answer is reported on the
balance sheet.
The beginning of the month balance of Allowance for credit losses is $45,000. There were no
account write-offs during the month. The gross receivables at the end of the month was
$2,000,000 and credit sales were $3,000,000. The company would use a 5% assumption with
the Gross accounts receivable approach and a 2% assumption with the Sales revenue approach.
In recording the Credit loss expense under the Sales revenue approach, - Answer the
Allowance for credit losses should be credited for $60,000.
The Allowance for sales returns and allowances is - Answer deducted from Accounts
receivable.
Which of the following is not true of the journal entry to write off credit losses? - Answer
Credit loss expense is recorded.
, As a recession worsens, the Allowance for credit losses as a percentage of gross accounts
receivable would be expected to - Answer increase
Which of the following are reasons for receivables growth exceeding sales growth? - Answer
Extending the payment period for receivables from 30 days to 90 days.
Deteriorating creditworthiness among existing customers.
Conceptually, the expected credit losses should be shown as a deduction - Answer against
revenue.
The journal entry to record the issuance of notes receivable would include a - Answer debit to
Note receivable.
All of the following represent aggressive revenue recognition practices, except recognizing
revenue - Answer after merchandise is shipped.
Which of the following are true of the disclosure requirements under ASC Topic 326? - Answer
Financial institutions are most affected by the requirements under ASC Topic 326.
All companies with receivable are affected by the requirements under ASC Topic 326.
All of following could cause net accounts receivable to grow more quickly than sales, except -
Answer making customers pay their bills more quickly.
When computing the present value of a noninterest-bearing note, one would use the - Answer
present value of $1 table with the prevailing interest rate.
Charles Corporation accepts a 4-year 1% note as payment for its merchandise. The prevailing
interest rate at the time is 7%. To compute the present value of the principal and interest
payments, Charles would - Answer compute the present value of the interest payments and
principal using a 7% rate.
Brinkman Corporation sold a machine to Hughes Company for $2,500,000. Hughes signs a two-
year, $2,500,000 interest-bearing note with 12% per year to be paid in quarterly installments.
12% approximates prevailing borrowing rates. Which of the following are journal entries
associated with this transaction? - Answer Debit to accrued interest receivable for $75,000
and a credit to Interest income for $75,000.
Debit to Note receivable for $2,500,000 and a credit to Sales revenue for $2,500,000.
Under the fair value method, - Answer both unrealized gains and losses are recognized as part
of net income.
Well Answered.
The net realizable value of a company's accounts receivable - Answer is the amount that the
company expects to collect.
and
is found on the balance sheet.
Conceptually, the expected credit losses should be shown as a deduction - Answer against
revenue
The beginning of the month balance of Allowance for credit losses is $100,000. There were no
account write-offs during the month. Under the Gross accounts receivable approach, the
desired end of the month balance for Allowance for credit losses is $122,000. In recording the
credit loss allowance, - Answer the Allowance for credit losses should be credited for $22,000.
Diaz Industries determined that a $12,500 receivable from Sarge Company cannot be collected.
Which of the following would be included in the journal entry to account for the uncollectible
account? - Answer Debit to Allowance for credit losses for $12,500.
Credit to Accounts receivable—Sarge Company for $12,500.
As an economy comes out of a recession, the Allowance for credit losses as a percentage of
gross accounts receivable would be expected to - Answer decrease.
The net realizable value of a company's accounts receivable - Answer is reported on the
balance sheet.
The beginning of the month balance of Allowance for credit losses is $45,000. There were no
account write-offs during the month. The gross receivables at the end of the month was
$2,000,000 and credit sales were $3,000,000. The company would use a 5% assumption with
the Gross accounts receivable approach and a 2% assumption with the Sales revenue approach.
In recording the Credit loss expense under the Sales revenue approach, - Answer the
Allowance for credit losses should be credited for $60,000.
The Allowance for sales returns and allowances is - Answer deducted from Accounts
receivable.
Which of the following is not true of the journal entry to write off credit losses? - Answer
Credit loss expense is recorded.
, As a recession worsens, the Allowance for credit losses as a percentage of gross accounts
receivable would be expected to - Answer increase
Which of the following are reasons for receivables growth exceeding sales growth? - Answer
Extending the payment period for receivables from 30 days to 90 days.
Deteriorating creditworthiness among existing customers.
Conceptually, the expected credit losses should be shown as a deduction - Answer against
revenue.
The journal entry to record the issuance of notes receivable would include a - Answer debit to
Note receivable.
All of the following represent aggressive revenue recognition practices, except recognizing
revenue - Answer after merchandise is shipped.
Which of the following are true of the disclosure requirements under ASC Topic 326? - Answer
Financial institutions are most affected by the requirements under ASC Topic 326.
All companies with receivable are affected by the requirements under ASC Topic 326.
All of following could cause net accounts receivable to grow more quickly than sales, except -
Answer making customers pay their bills more quickly.
When computing the present value of a noninterest-bearing note, one would use the - Answer
present value of $1 table with the prevailing interest rate.
Charles Corporation accepts a 4-year 1% note as payment for its merchandise. The prevailing
interest rate at the time is 7%. To compute the present value of the principal and interest
payments, Charles would - Answer compute the present value of the interest payments and
principal using a 7% rate.
Brinkman Corporation sold a machine to Hughes Company for $2,500,000. Hughes signs a two-
year, $2,500,000 interest-bearing note with 12% per year to be paid in quarterly installments.
12% approximates prevailing borrowing rates. Which of the following are journal entries
associated with this transaction? - Answer Debit to accrued interest receivable for $75,000
and a credit to Interest income for $75,000.
Debit to Note receivable for $2,500,000 and a credit to Sales revenue for $2,500,000.
Under the fair value method, - Answer both unrealized gains and losses are recognized as part
of net income.
