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    Homework   1.1  1.2   2.1  2.2  3.1  3.2   4.1  4.2  5.1  5.2   6.1   6.2  7.1  7.2  8.1  8.2  9.1  9.2  10.1   10.2  11.1   11.2  12.1  12.2   13.1  13.2

Gary Marks is paid on a monthly basis. For the month of January of the current year, he earned a
total of $8,938. FICA tax for Social Security is 6.2% on the first $128,400 of earnings each calendar
year and the FICA tax for Medicare is 1.45% of all earnings. The FUTA tax rate is 0.6%, and the SUTA
tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay.
The amount of Federal Income Tax withheld from his earnings was $1,483.07.
What is the amount of the employer's payroll taxes expenses for this employee?
(Round your intermediate calculations to two decimal places.)
 
$129.60
$378.00
$554.16
$42.00
$1,103.76
 
8,938 x 0.062 = 554.16
8,938 x .0145 = 129.60
7,000 x .06 = 42.00
7,000 x .054 = 378
554.16 + 129.60 + 42 + 378 = 1,103.76
   
A company had interest expense of $9,000, income before interest expense and income taxes of
$20,000, and net income of $10,400. The company's times interest earned ratio equals:
Times Interest Earned Ratio = Income before Interest Expense and Income Taxes/Interest Expense
 
2.44
2.76
2.22
3.23
1.56

20,000 / 9,000 = 2.22
   
A company has a selling price of $1,650 each for its printers. Each printer has a 2 year warranty that
covers replacement of defective parts. It is estimated that 3% of all printers sold will be returned
under the warranty at an average cost of $147 each. During November, the company sold 27,000
printers, and 370 printers were serviced under the warranty at a total cost of $52,000.
The balance in the Estimated Warranty Liability account at November 1 was $27,500.
What is the company's warranty expense for the month of November?
 
$46,000
$47,190
$20,500
$49,335
$94,570
 
27,000 x .03 x 147 = 119,070
119,070 – 52,000 = 94,570
   
A company's interest expense is $18,000. Its income before interest expense and income taxes is
$117,000. Its net income is $46,800. The company's times interest earned ratio equals:
Times Interest Earned Ratio = Income before Interest Expense and Income Taxes/Interest Expense
 
6.50

117,000 / 18,000 = 6.50
   
A company's income before interest expense and income taxes is $350,000 and its interest
expense is $100,000. Its times interest earned ratio is:
Times Interest Earned Ratio = Income before Interest Expense and Income Taxes/Interest Expense
 
3.50
4.07
1.90
5.06
3.35

350,000 / 100,000 = 3.50
   
On November 1, Alan Company signed a 120-day, 9% note payable, with a face value of $25,200.
What is the maturity value (principal plus interest) of the note on March 1? (Use 360 days a year.)
 
$25,956
$22,734
$26,747
$22,734
$26,747
 
25,200 × 0.09 × 120 / 360 = $756
25,200 + 756 = 25,956
   
An employee earned $44,100 working for an employer in the current year. The current rate for
FICA Social Security is 6.2% payable on earnings up to $118,500 maximum per year and the rate
for FICA Medicare 1.45%. The employer's total FICA payroll tax for this employee is:
 
$639.45.
$2,734.20.
$6,747.30.
$0
$3,373.65
 
44,100 x .062) + (44,100 x .0145) = 3,375.65
   
On December 1, Victoria Company signed a 90-day, 6% note payable, with a face value of $12,000.
What amount of interest expense is accrued at December 31 on the note? (Use 360 days a year.)
Interest Expense = Principal × Interest Rate × Time
 
$60.00
$30.00
$50.00
$100.00
$80.00
 
12,000 × 0.06 × 30 / 360 = 60
   
An employee earns $5,550 per month working for an employer. The FICA tax rate for Social
Security is 6.2% of the first $118,500 earned each calendar year and the FICA tax rate for
Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is
5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay.
The employee has $184 in federal income taxes withheld. The employee has voluntary deductions
for health insurance of $152 and contributes $76 to a retirement plan each month.
What is the amount of net pay for the employee for the month of January?
(Round your intermediate calculations to two decimal places.)
 
$4,413.72
$4,369.32
$4,713.42
$4,793.90
$4,669.02
 
Gross Pay                                                                            $5550
Less: Deductions                             
FICA Social security tax (5550 x 6.20%)                  $344.1
FICA Medicare tax (5550 x 1.45%)                           $80.475              
Federal Income tax                                                         $184    
Health insurance                                                             $152    
Retirement plan contribution                                    $76       
Total Deduction                                                                ($836.575)
Net Pay                                                                                $4713.425
   
On November 1, Alan Company signed a 120-day, 10% note payable, with a face value of $21,000.
Alan made the appropriate year-end accrual. What is the journal entry as of March 1 to record the
payment of the note assuming no reversing entry was made? (Use 360 days a year.)
 
Debit Notes Payable                       $21,000
Debit Interest Payable   $350
Debit Interest Expense $350
Credit Cash                                                         $21,700

21,000 × 0.10 × 60 / 360 = 350
21,000 × 0.10 × 60 / 360 = 350
21,000 + 700 = 21,700
   
On April 12, Hong Company agrees to accept a 60-day, 10%, $6,000 note from Indigo Company to
extend the due date on an overdue account. What is the journal entry needed to record the transaction
by Indigo Company?
 
Debit Accounts Payable $6,000; credit Notes Payable $6,000.
Debit Notes Payable $6,000; credit Accounts Payable $6,000.
Debit Cash $6,000; credit Notes Payable $6,000.
Debit Sales $6,000; credit Notes Payable $6,000.
Debit Accounts Receivable $6,000; credit Notes Payable $6,000
   
An employee earned $45,200 during the year working for an employer when the maximum limit for
Social Security was $128,400. The FICA tax rate for Social Security is 6.2% and the FICA tax rate for
Medicare is 1.45%. The employee's annual FICA taxes amount is:
 
$1,487.80
$2,457.80
$3,457.80
$5,477.80
$2,437.80
 
45,200 × (0.062 + 0.0145) = 3,457.80
   
Portia Grant is an employee who is paid monthly. For the month of January of the current year, she
earned a total of 8,838. The FICA tax for social security is 6.2% of the first $118,500 of employee
earnings each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The FUTA
tax rate of 0.6% and the SUTA tax rate of 5.4% are applied to the first $7,000 of an employee's pay.
The amount of federal income tax withheld from her earnings was $1,466.47. Her net pay for the
month is: (Round your intermediate calculations to two decimal places.)
 
$5,099.53
$6,261.42
$7,243.38
$6,695.42
$6,566.00
 
8838 x .062 = 547.96
8838 x 0.145 = 128.14
8,838 - 547.96 - 128.14 - 1466.47 = 6695.42
   
The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both taxes are applied to the first
$7,000 of an employee's pay. Assume that an employee earned total wages of $10,900.
What is the amount of total unemployment taxes the employer must pay on this employee's wages?
 
$320.00
$420.00
$380.00
$620.00
$820.00
 
7,000 × (0.006 + 0.054) = 420.00
   
Springfield Company offers a bonus plan to its employees and the amount of the employee bonuses
for the current year is estimated to be $950,000 to be paid during January of the following year.
The journal entry on December 31 to record the bonuses is:
 
Debit Unearned Bonuses $950,000; credit Bonus Payable $950,000.
Debit Estimated Bonus Payable $950,000; credit Cash $950,000.
Debit Employee Bonus Expense $950,000; credit Bonus Payable $950,000.
No entry since the bonuses are not paid until January.
Debit Employee Bonus Expense $950,000; credit Prepaid Employee Bonus $950,000
   
The chief executive officer earns $20,100 per month. As of May 31, her gross pay was $100,500.
The tax rate for Social Security is 6.2% of the first $118,500 earned each calendar year and the FICA
tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax
rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee’s pay.
What is the amount of FICA - Medicare withheld from this employee for the month of June?
 
$1,246.20
$261.00
$1,116.00
$7,347.00
$291.45
 
118,500 – 100,500 x .0145 = 261
   
During the first week of January, an employee works 49 hours. For this company, workers
earn 150% of their regular rate for hours in excess of 40 per week. Her pay rate is $24 per
hour, and her wages are subject to no deductions other than FICA Social Security, FICA
Medicare, and federal income taxes. The tax rate for Social Security is 6.2% of the first $118,500
earned each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings.
The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes
are applied to the first $7,000 of an employee’s pay. The employee has $100 in federal income
taxes withheld. What is the amount of this employee’s net pay for the first week of January?
 
$1,479.19
$1,220.99
$204.01
$1,629.01
$1,315.99
 
Regular pay                                                                        $ 1,440.00
(40 hours x 36)                
Overtime (45 (-) 40) hours x $ 36 x 150%)             $ 270.00             
Gross Pay                                                                            $ 1,710.00
Less: FICA Social security                                              -$ 106.02 (1710 x 6.2% )                              
Less: FICA Medicare                                                       -$ 24.80 (1710 x 1.45% )                              
Less: Federal income tax                                              -$ 100.00            -$ 230.82
Net pay                                                                                $ 1,479.19
   
An employee earned $42,900 working for an employer in the current year.
The current rate for FICA Social Security is 6.2% payable on earnings up to $128,400 maximum
per year and the rate for FICA Medicare 1.45%. The employer's total FICA payroll tax for this employee is:
 
$2,280.85
$3,281.85
$3,299.85
$5,261.85
$4,288.85
 
42,900 × (0.062 + 0.0145) = $3,281.85
   
Athena Company provides employee health insurance that costs $14,200 per month. In addition,
the company contributes an amount equal to 5% of the employees' $142,000 gross salary to a
retirement program. The entry to record the accrued benefits for the month would include a:
 
Debit to Employee Retirement Program Payable $7,100.
Credit to Employee Benefits Expense $14,200.
Debit to Payroll Taxes Expense $21,300.
Debit to Employee Benefits Expense $21,300.
Debit to Medical Insurance Payable $14,200
 
142,000 x .5 = 71,000
71,000 + 14,000 = 21,300
   
Interest is usually associated with
 
notes receivable.
   
The receivable that is usually evidenced by a formal instrument of credit is a(n)
 
note receivable.
   
Accounts receivable are valued and reported on the balance sheet
 
at cash realizable value.
   
Three accounting issues associated with accounts receivable are
 
recognizing, valuing, and accelerating collections.
   
Under the allowance method, writing off an uncollectible account
 
affects only balance sheet accounts.
   
The net amount expected to be received in cash from receivables is termed the
 
cash realizable value.
   
If a company fails to record estimated bad debts expense,
 
expenses are understated.
   
If the amount of uncollectible account expense is understated at year end
 
net Accounts Receivable will be overstated.
   
The term "receivables" refers to
 
amounts due from individuals or companies.
   
Receivables are
 
claims that are expected to be collected in cash.
   
The interest rate for a three-month loan would normally be stated in terms of which of the following rates of interest?
 
Annual
   
Which of the following is a way of disposing of a note receivable?
All of these are ways to dispose of notes receivable.
 
A dishonored note receivable
 
Is no longer negotiable.
  When a note is dishonored, the payee's entry includes a
 
credit to Notes Receivable.
   
A note receivable is executed in December. When the note is paid the following February, the payee's entry includes
(assuming a calendar-year accounting period and no reversing entries) a:
 
credit to Interest Receivable.
   
Allowance for Doubtful Accounts on the balance sheet
 
is deducted from accounts receivable.
   
When an account is written off using the allowance method, the
 
net accounts receivable will stay the same.
 
Which of the following is not true regarding a promissory note?
 
Promissory notes may not be transferred to another party by endorsement.
   
The two key parties to a promissory note are the
 
maker and the payee.
   
When calculating interest on a promissory note with the maturity date stated in terms of days, the
 
payee receives more interest if 360 days are used instead of 365.
   
A note receivable is a negotiable instrument which
 
can be transferred to another party by endorsement.
   
If an account is collected after having been previously written off
 
There will be both a debit and a credit to accounts receivable.
   
A write off of a specific accounts receivable under the allowance method
 
should be formally approved by an authorized employee.
   
You have just received notice that a customer of yours with an account receivable balance of
$100 has gone bankrupt and will not make any future payments.
Assuming you use the allowance method, the entry you make is to
 
debit                     Allowance for Doubtful Accounts
credit                    Accounts Receivable.
   
The direct write-off method of accounting for uncollectible accounts
 
is not generally accepted as a basis for estimating bad debts.
   
A debit balance in the Allowance for Doubtful Accounts
 
indicates that actual bad debt write-offs have exceeded previous provisions for bad debts.
   
Under the direct write-off method of accounting for uncollectible accounts, Bad Debt Expense is debited
 
when an account is determined to be uncollectible.
   
An alternative name for Bad Debt Expense is
 
Uncollectible Accounts Expense.
   
When the allowance method of accounting for uncollectible accounts is used, Bad Debt Expense is recorded
 
in the same year as the credit sale.
   
To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a
 
debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts.
   
Under the allowance method of accounting for uncollectible accounts,
 
the cash realizable value of accounts receivable in the balance sheet is the same before and after an account is written off.
   
Bad Debt Expense is considered
 
a necessary risk of doing business on a credit basis.
   
A company estimates that warranty expense will be 4% of sales.
The company's sales for the current period are $233,000.
The current period's entry to record the warranty expense is:
 
Debit Estimated Warranty Liability $9,320 credit Cash $9,320.
Debit Warranty Expense $9,320 credit Estimated Warranty Liability $9,320.
Debit Warranty Expense $9,320 credit Sales $9,320.
Debit Estimated Warranty Liability $9,320 credit Warranty Expense $7,400.
No entry is recorded until the items are returned for warranty repairs
 
233,000 x .04 = 9,320
   
During August, Boxer Company sells $363,000 in merchandise that has a one year warranty.
Experience shows that warranty expenses average about 4% of the selling price. The warranty
liability account has a credit balance of $12,100 before adjustment. Customers returned
merchandise for warranty repairs during the month that used $8,700 in parts for repairs.
The entry to record the estimated warranty expense for the month is:
 
Debit Warranty Expense $14,520; credit Estimated Warranty Liability $14,520.
Debit Estimated Warranty Liability $8,700; credit Warranty Expense $8,700.
Debit Estimated Warranty Liability $14,520; credit Warranty Expense $14,520.
Debit Warranty Expense $11,120; credit Estimated Warranty Liability $11,120.
Debit Warranty Expense $2,420; credit Estimated Warranty Liability $2,420
 
363,000 x .04 = 14,520 On December 1, Victoria Company signed a 90-day, 7% note payable, with a face value of $15,600.
What amount of interest expense is accrued at December 31 on the note? (Use 360 days a year.)
 
$0
$273
$1,092
$182
$91
 
6600 x .07 x / 12
   
A company's income before interest expense and income taxes is $350,000 and its interest expense is
$100,000. Its times interest earned ratio is:
 
0.29
3.21
1.02
2.19
3.50
 
350,000 / 100,000 = 3.5
   
The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both taxes are applied to the first
$7,000 of an employee's pay. Assume that an employee earned total wages of $9,500.
What is the amount of total unemployment taxes the employer must pay on this employee's wages?
 
$513.00.
$57.00.
$420.00.
$.00.
$570.00
 
.054 x 7000 = 378
378 + 42 = 420
   
On November 1, Alan Company signed a 120-day, 10% note payable, with a face value of $11,700.
What is the adjusting entry for the accrued interest at December 31 on the note? (Use 360 days a year.)
 
Debit interest expense, $390; credit interest payable, $390.
Debit interest expense, $0; credit interest payable, $0.
Debit interest expense, $260; credit interest payable, $260.
Debit interest expense, $195; credit interest payable, $195.
Debit interest expense, $130; credit interest payable, $130.
 
11,700 x .10 x 60 / 360 = 195
   
Athena Company's salaried employees earn two weeks of vacation per year. It pays $858,000 in total
employee salaries for 52 weeks but its employees work only 50. Record Athena Company's weekly journal
entry to record the vacation expense:
 
Debit Vacation Benefits Expense $15,600; credit Vacation Benefits Payable $15,600.
Debit Vacation Benefits Expense $624; credit Vacation Benefits Payable $624.
Debit Vacation Benefits Payable $16,500; credit Vacation Benefits Expense $16,500.
Debit Vacation Benefits Expense $16,224; credit Vacation Benefits Payable $16,224.
Debit Vacation Benefits Expense $16,939; credit Vacation Benefits Payable $16,939
 
858,000 / 52
   
Portia Grant is an employee who is paid monthly. For the month of January of the current year, she
earned a total of 9,188. The FICA tax for social security is 6.2% of the first $118,500 of employee
earnings each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The FUTA
tax rate of 0.6% and the SUTA tax rate of 5.4% are applied to the first $7,000 of an employee's pay.
The amount of federal income tax withheld from her earnings was $1,524.57.
Her net pay for the month is: (Round your intermediate calculations to two decimal places.)
 
$1,648.77
$6,960.54
$2,649.33
$4,088.27
$2,572.00
 
January
Gross pay                                            9,188   
Less                      
FICA social security tax  569.66 (9,188 x .062)
FICA Medicare tax                           133.23 (9,188 x .0145)
Federal income tax withheld      1,524.57             
Total      2227.46              
Net pay                                                6,960.54              (9,188 - 2227.46)
   
The chief executive officer earns $21,600 per month. As of May 31, her gross pay was $108,000.
The tax rate for Social Security is 6.2% of the first $118,500 earned each calendar year and the FICA
tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate
is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee’s pay.
What is the amount of FICA- Social Security withheld from this employee for the month of June?
 
$1,339.20
$313.20
$651.00
$152.25
$7,347.00
 
21,600 x 0145 = 313.2
   
An employee earned $44,100 during the year working for an employer when the maximum limit for
Social Security was $118,500. The FICA tax rate for Social Security is 6.2% and the FICA tax rate for
Medicare is 1.45%. The employee's annual FICA taxes amount is:
 
$643.80.
$3,373.65
$6,793.20.
$2,752.80.
$6,149.40
 
FICA Taxes = (44,100 x .062 + (44,100 x 0.145) = 3,373.65

 
On November 1, Alan Company signed a 120-day, 10% note payable, with a face value of $20,700.
What is the adjusting entry for the accrued interest at December 31 on the note? (Use 360 days a year.)
 
Debit Interest Expense $345
Credit Interest Payable $345
 
20,700 × 0.10 × 60 / 360 = 345


 
An employee earned $62,000 during the year working for an employer. The FICA tax rate for Social
Security is 6.2% of the first $128,400 of employee earnings per calendar year and the FICA tax rate
for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%.
Both unemployment taxes are applied to the first $7,000 of an employee's pay.
What is the amount of total unemployment taxes the employee must pay?
 
0


The employer is the one responsible for unemployment taxes; not the employee.
   
Gary Marks is paid on a monthly basis. For the month of January of the current year, he earned a total
of $9,238. FICA tax for Social Security is 6.2% on the first $128,400 of earnings each calendar year and
the FICA tax for Medicare is 1.45% of all earnings. The FUTA tax rate is 0.6%, and the SUTA tax rate is
5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay.
The amount of Federal Income Tax withheld from his earnings was $1,532.87.
What is the amount of the employer's payroll taxes expenses for this employee?
(Round your intermediate calculations to two decimal places.)
 
$1,126.71

9,238 × 0.062 = 572.76
9,238 × 0.0145 = 133.95
7,000 × 0.006 = 42.00
7,000 × 0.054 = 378.00
572.761 + 133.952 + 42.003 + 378.004 = 1,126.71
   
Belkin Co. provides medical care and insurance benefits to its retirees. In the current year,
Belkin agrees to contribute 5% of the employees' $330,000 gross salaries to a retirement program.
What is the amount of employee benefits expense for the current period?
A company estimates that warranty expense will be 5% of sales. The company's sales for the current
period are $206,000. The current period's entry to record the warranty expense is:
 
Debit Warranty Expense                               $10,300
Credit Estimated Warranty Liability                         $10,300

206,000 × 0.05 = 10,300
   
A company has a selling price of $1,300 each for its printers. Each printer has a 2 year warranty that
covers replacement of defective parts. It is estimated that 2% of all printers sold will be returned under
the warranty at an average cost of $140 each. During November, the company sold 20,000 printers,
and 300 printers were serviced under the warranty. What is the company's warranty expense for the month of November?
 
$56,000
 
(20,000 units × 140) × 0.02 = 56,000
   
Springfield Company offers a bonus plan to its employees and the amount of the employee bonuses for the
current year is estimated to be $964,000 to be paid during January of the following year.
The journal entry on December 31 to record the bonuses is:
 
Debit Employee Bonus Expense                                $964,000
Credit Bonus Payable                                                     $964,000.
   
Cantrell Company is required by law to collect and remit sales taxes to the state. If Cantrell has $5,500 of cash
sales that are subject to an 8% sales tax,
what is the journal entry to record the cash sales?
 
Debit Cash                                          $5,940
Credit Sales                                        $5,500
Credit Sales Taxes Payable           $440.


5,500 × 0.08 = 440
5,500 + 440 = 5,940
   
On April 12, Hong Company agrees to accept a 60-day, 10%, $5,300 note from Indigo Company to extend the
due date on an overdue accounts payable. What is the journal entry needed to record the transaction by Indigo Company?
 
Debit Accounts Payable                $5,300
credit Notes Payable                                      $5,300.
   
On April 12, Hong Company agrees to accept a 60-day, 10%, $10,500 note from Indigo Company
to extend the due date on an overdue account. What is the journal entry that Indigo Company would make,
when it records payment of the note on the maturity date? (Use 360 days a year.)
 
Debit Notes Payable                       $10,500
Debit Interest Expense                  $175
Credit Cash                                         $10,675.

10,500 × 0.10 × 60 / 360 = 175
10,500 + 175 = 10,675
   
During the first week of January, an employee works 47 hours. For this company, workers earn 150%
of their regular rate for hours in excess of 40 per week. Her pay rate is $22 per hour, and her wages
are subject to no deductions other than FICA Social Security, FICA Medicare, and federal income taxes.
The tax rate for Social Security is 6.2% of the first $128,400 earned each calendar year and the FICA tax
rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is
5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay.
The employee has $86 in federal income taxes withheld.
What is the amount of this employee's gross pay for the first week of January?
 
$1,111
 
40 x 22 = 880
7 x 33 = 231
880 + 231 = 1,111
   
Which of the following receivables would not be classified as an "other receivable"?
 
Notes receivable
   
Two methods of accounting for uncollectible accounts are the
 
direct write-off method and the allowance method.
   
The allowance method of accounting for uncollectible accounts is required if
 
bad debts are significant in amount.
   
Bad Debt Expense is reported on the income statement as
 
an operating expense.
   
Notes or accounts receivables that result from sales transactions are often called
 
trade receivables.
   
When an account becomes uncollectible and must be written off
 
Accounts Receivable should be credited.
   
The collection of an account that had been previously written off under the allowance method of accounting for uncollectibles.
 
does not affect income in the period it is collected.
   
Non-trade receivables should be reported separately from trade receivables. Why is this statement either true or false?
 
It is true because non-trade receivables do not result from business operations and should not be included with accounts receivable.
   
When using the balance sheet approach, the balance in Allowance for Doubtful Accounts must be
considered prior to the end of period
adjustment when using which of the following methods?
 
Allowance method
   
One might infer from a debit balance in Allowance for Doubtful Accounts that
 
more accounts have been written off than had been estimated.
   
Using the allowance method, the uncollectible accounts for the year are estimated to be $50,000.
If the balance for the Allowance for Doubtful Accounts is a $9,000 credit before adjustment,
what is the balance after adjustment?
 
$50,000
   
Using the allowance method, the uncollectible accounts for the year is estimated to be $50,000.
If the balance for the Allowance for Doubtful Accounts is a $9,000 credit before adjustment,
what is the amount of bad debt expense for the period?
 
$41,000
   
The account Allowance for Doubtful Accounts is classified as a(n)
 
contra account to Accounts Receivable
   
The expense recognition
 
necessitates the recording of an estimated amount for bad debts.
   
The balance of Allowance for Doubtful Accounts prior to making the adjusting entry to record Bad Debt Expense
 
is relevant when using the percentage-of-receivables basis.
   
The direct write-off method of accounting for bad debts
 
does not require estimates of bad debt losses.
   
If the adjusting entry for depreciation is not made,
 
expenses will be understated.
   
An adjusting entry
 
affects a balance sheet account and an income statement account.
   
Under the direct write-off method of accounting for uncollectible accounts
 
a specific account receivable is decreased for the actual amount of bad debt at the time of write-off.
   
The percentage of receivables basis for estimating uncollectible accounts emphasizes
 
cash realizable value.
   
Under the allowance method, when a year-end adjustment is made for estimated uncollectible accounts
 
total assets decrease.
   
The direct write-off method is acceptable for financial reporting purposes only if the bad debt losses are insignificant.
 
This is a true statement based on the concept of materiality.
   
Under the allowance method of accounting for bad debts, why must uncollectible accounts receivable
be estimated at the end of the accounting period?
 
To match bad debt expense to the period in which the revenues were earned.
   
A promissory note
 
may be used to settle an accounts receivable.
   
When an account is written off using the allowance method, accounts receivable
 
decreases and the allowance account decreases.
   
Under the allowance method, when a specific account is written off
 
total assets will be unchanged.
   
All of the following statements regarding the financial statement presentation of receivables are true except:
 
Short-term receivables are reported above the short-term investments in the balance sheet.
   
Which of the following is least likely to help a company minimize losses as credit standards are relaxed?
 
Increase the estimate of uncollectible accounts at the end of each period.
   
Which of the following would probably be the most significant type of a claim held by a company?
 
accounts receivable
   
Which one of the following is not an accounting problem (issue) associated with accounts receivable?
 
Depreciating accounts receivable
   
The sale or transfer of accounts receivable in order to raise funds is called
 
factoring.
   
If a company sells its accounts receivables to a factor
 
the seller pays a commission to the factor.
   
A captive finance company refers to
 
a company that is wholly owned by another company and provides financing to purchasers of its owner company's goods.
   
Receivables might be sold to
 
generate cash quickly.
   
A company regularly sells its receivables to a factor who assesses a 2% service charge on the amount of receivables purchased.
Which of the following statements is true for the seller of the receivables?
 
Selling expenses will increase each time accounts are sold.
   
If the amount of uncollectible account expense is overstated at year end
 
net Accounts Receivable will be understated.
   
All of the following statements are true regarding the average collection period except:
 
it should generally exceed the credit term period.
   
Factoring arrangements
 
are ways to accelerate receivable collections.
   
The sale of receivables by a business:
 
can be a quick way to generate cash for operating needs.
   
If a retailer regularly sells its receivables to a factor, the service charge of the factor should be classified as a(n)
 
selling expense.
   
When customers make purchases with a national credit card, the retailer
 
is not involved in the collection process.
   
The retailer considers Visa and MasterCard sales as
 
cash sales.
   
When a company receives an interest-bearing note receivable, it will
 
debit Notes Receivable for the face value of the note.
   
The face value of a note refers to the amount
 
at which the note receivable is recorded.
   
Which one of the following is not a principle of sound accounts receivable management?
 
Delay cash receipts from receivables if necessary.
   
The accounts receivable turnover is computed by dividing
 
net credit sales by average receivables.
   
The accounts receivable turnover is used to analyze
 
liquidity.
   
A high accounts receivable turnover ratio indicates
 
customers are making payments very quickly.
   
The accounts receivable turnover is needed to calculate
 
the average collection period in days.
   
The average collection period for receivables is computed by dividing 365 days by
 
accounts receivable turnover.
   
A popular variation of the accounts receivable turnover is the
 
average collection period.
   
The accounts receivable turnover
 
can be used to compute the average collection period.
   
Short-term notes receivable
 
use the same estimations and computations as accounts receivable to determine cash realizable value.
   
A 90-day note dated June 30, 2017, would mature on:
 
September 28, 2017.
   
The expense recognition principle relates to credit losses by stating that bad debt expense should be recorded
 
in the period of the sale.
   
When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when
 
management estimates the amount of uncollectibles.
   
The Allowance for Doubtful Accounts is necessary because
 
when recording uncollectible accounts expense, it is not possible to know which specific accounts will not pay.

    Homework   1.1  1.2   2.1  2.2  3.1  3.2   4.1  4.2  5.1  5.2   6.1   6.2  7.1  7.2  8.1  8.2  9.1  9.2  10.1   10.2  11.1   11.2  12.1  12.2   13.1  13.2