MGMT 200 EXAM 2|UPDATED&VERIFIED|100% SOLVED|GUARANTEED SUCCESS

Identify the likely disadvantages of extending credit to customers A. Lower profitability B. Lower revenues C. Delay or failure to collect cash D. All of the other answers are disadvantages of extending credit to customers C. Delay or failure to collect cash A sales allowance is recorded as a debit to Accounts Receivable and a credit to Sales Allowances. A. True B. False B. False (A sales allowance is recorded as a debit to Sales Allowances and a credit to Accounts Receivable) Cotswolds Company has the following information: Total revenues $800,000 Sales returns and allowances $50,000 Sales expenses $20,000 Ending inventory $100,000 What is the amount of net revenues for Cotswolds? A. $630,000 B. $730,000 C. $750,000 D. $870,000 C. $750,000 (800,000-50,000) Burford Inc. shipped the wrong color of paint to a customer. The customer agreed to keep the paint after being offered a 10% price reduction. The price reduction is an example of a A. sales discount. B. sales return. C. sales allowance. D. sales expense. C. Sales Allowance The amount of cash owed to a company by its customers from the sale of products or services on account is commonly referred to as: A. Income B. Accounts receivable C. Revenue D. Sales B. Accounts receivable The ending balance of the Accounts Receivable account was $10,000. Services billed to customers for the period were $20,000, and collections on account from customers were $25,000. What was the beginning balance of Accounts Receivable? A. $30,000 B. $15,000 C. $10,000 D. $20,000 B. $15,000 Trade discounts represent a discount offered to the purchasers for quick payment. A. True B. False B. False (Trade discounts represent a reduction in the listed price of a product or service) Witney Company has the following information: Total revenues $1,000,000 Sales returns and allowances $100,000 Sales discounts $50,000 Sales expenses $100,000 What is the amount of net revenues for Witney? A. $750,000 B. $850,000 C. $900,000 D. $1,000,000 B. 850,000 (1,000,000-100,000-50,000=850,000) A company purchased $5,250 of merchandise on May 1 with terms of 2/10, n/30. On May 6, it returned $250 of that merchandise. On May 8, it paid the balance owed for merchandise taking any discount it is entitled to. The cash paid on May 8 is A. $250 B. $4,000 C. $4,900 D. $5,000 E. $5,250 C. $4,900 (5250-250)x(100%-2%)=x ($5000)x(98%) =4900 If a company has total revenues of $100,000, sales discounts of $5,000, sales returns of $10,000, and sales allowances of $15,000, the income statement will report net revenues of $75,000. A. True B. False B. False Revenues 100,000 Less: Sales Discounts (5,000) Less: Sales Returns (10,000) Less: Sales allowances (15,000) Net Revenues 70,000 One advantage of the allowance method for accounting for uncollectible accounts is that the company reports A. which customer accounts are uncollectible. B. fewer bad debts from customer receivables. C. bad debt expense in the same period as the credit sale. D. greater total cash collected from customers. C. bad debt expense in the same period as the credit sale. Cambridge, Inc. estimates uncollectible accounts based on the percentage of accounts receivable. What effect will recording the estimate of uncollectible accounts have on the accounting equation? A. Decrease assets and decrease liabilities B. Decrease assets and decrease stockholders' equity C. Increase liabilities and decrease stockholders' equity D. Increase assets and decrease stockholders' equity B. Decrease assets and decrease stockholders' equity A company's Accounts Receivable balance at its December 31 year‐end is $125,000, and its Allowance for Doubtful Accounts has a credit balance of $300 before year‐end adjustment. It estimates that 4% of outstanding accounts receivable are uncollectible. What amount of bad debt expense is recorded at December 31? A. $22,880 B. $300 C. $5,000 D. $4,700 E. $22,580 D. $4,700 When a company, using the allowance method, writes off a specific customer's account receivable from the accounting system, how many of the following are true? • Total stockholders' equity remains the same. • Total assets remain the same • Total expenses remain the same A. none B. one C. two D. three D. Three