Accounting Ch 6-8 2025
Which of the following concepts relates to using the allowance method in accounting for
accounts receivable?
- bad debt expense is an estimate that is based only on an analysis of the receivables
aging
- bad debt expense is based on the actual amounts determined to be uncollectible
- bad debt is an estimate that is based on historical and prospective info
- bad debt expense is management's determination of which accounts will be sent to the
attorney for collection - CORRECT ANSWERbad debt expense is an estimate that is
based on historical and prospective information
Cullumber company sells land with a book value of $178125 to Marin corp in exchange
for a 285000 zero-interest bearing note payable in 3 years. The market rate of interest
for a transaction of this nature for Marin is 8%. The PV of 1 at 8% for 3 years is 0.7938
and the PV of an ordinary annuity of 1 at 8% for 3 years is 2.5771. If the sale occurred
on January 1 and the fiscal year ends on December 31, to which of the following is the
amount of the adjusting journal entry amount for interest revenue at the end of the first
year using an effective-interest method closest?
- $14250
- $22800
- $11312
- $18099 - CORRECT ANSWER$18099
The accounting for cash discounts and trade discounts are:
- the same
- tied to the timing of cash collections on the account
- always recorded net
- not the same - CORRECT ANSWERnot the same
, Wildhorse and Co sold goods with a market price of $153000 on April 1. They accepted
a note from Windsor Inc for $153000 due in two years, with interest paid each year on
April 1, bearing 8% interest. If 8% interest approximates the market rate of interest for
this transaction, how much interest should be accrued at the company's December 31
year-end?
- $24480
- $12240
- $6120
- $9180 - CORRECT ANSWER$9180
On the December 31, 2025 Balance sheet of Waterway Co, the current receivables
consisted of the following:
- Trade accounts receivable $74,000
- Allowance for uncollectible accounts ($2700)
- Claim against shipper for goods lost in transit (Nov 25) $3700
- Selling price of unsold goods sent by Waterway on consignment at 130% of cost (not
included in Waterway's ending inventory $34000
- Security deposit on lease of warehouse used for storing some inventories $38000
Total $147,000
At December 31, 2025 the correct total of Waterway's current net receivables was:
- $109000
- $147000
- $113000
- $75000 - CORRECT ANSWER$75,000
Sheridan Company sold $96,000 worth of goods on account to Cheyenne Inc on June
20. Sheridan marks all goods up to 25%. Cheyenne has 45 days to return the goods for
any reason. On July 1, Cheyenne returns $8400 worth of goods. Sheridan expects to be
able to resell the returned goods at a profit.
The journal entries for Sheridan to record the return on July 1 include debits to:
- sales returns and allowance for 8400, and return inventory for 6720
Which of the following concepts relates to using the allowance method in accounting for
accounts receivable?
- bad debt expense is an estimate that is based only on an analysis of the receivables
aging
- bad debt expense is based on the actual amounts determined to be uncollectible
- bad debt is an estimate that is based on historical and prospective info
- bad debt expense is management's determination of which accounts will be sent to the
attorney for collection - CORRECT ANSWERbad debt expense is an estimate that is
based on historical and prospective information
Cullumber company sells land with a book value of $178125 to Marin corp in exchange
for a 285000 zero-interest bearing note payable in 3 years. The market rate of interest
for a transaction of this nature for Marin is 8%. The PV of 1 at 8% for 3 years is 0.7938
and the PV of an ordinary annuity of 1 at 8% for 3 years is 2.5771. If the sale occurred
on January 1 and the fiscal year ends on December 31, to which of the following is the
amount of the adjusting journal entry amount for interest revenue at the end of the first
year using an effective-interest method closest?
- $14250
- $22800
- $11312
- $18099 - CORRECT ANSWER$18099
The accounting for cash discounts and trade discounts are:
- the same
- tied to the timing of cash collections on the account
- always recorded net
- not the same - CORRECT ANSWERnot the same
, Wildhorse and Co sold goods with a market price of $153000 on April 1. They accepted
a note from Windsor Inc for $153000 due in two years, with interest paid each year on
April 1, bearing 8% interest. If 8% interest approximates the market rate of interest for
this transaction, how much interest should be accrued at the company's December 31
year-end?
- $24480
- $12240
- $6120
- $9180 - CORRECT ANSWER$9180
On the December 31, 2025 Balance sheet of Waterway Co, the current receivables
consisted of the following:
- Trade accounts receivable $74,000
- Allowance for uncollectible accounts ($2700)
- Claim against shipper for goods lost in transit (Nov 25) $3700
- Selling price of unsold goods sent by Waterway on consignment at 130% of cost (not
included in Waterway's ending inventory $34000
- Security deposit on lease of warehouse used for storing some inventories $38000
Total $147,000
At December 31, 2025 the correct total of Waterway's current net receivables was:
- $109000
- $147000
- $113000
- $75000 - CORRECT ANSWER$75,000
Sheridan Company sold $96,000 worth of goods on account to Cheyenne Inc on June
20. Sheridan marks all goods up to 25%. Cheyenne has 45 days to return the goods for
any reason. On July 1, Cheyenne returns $8400 worth of goods. Sheridan expects to be
able to resell the returned goods at a profit.
The journal entries for Sheridan to record the return on July 1 include debits to:
- sales returns and allowance for 8400, and return inventory for 6720
