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Exam 7: Receivables and Investments

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Question 81

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Sweetson Enterprises' comparative balance sheets included accounts receivable of $220,300 at December 31,2017,and $200,900 at December 31,2018.Sales reported on Sweetson's 2018 income statement amounted to $2,350,000.What is the amount of cash collections that Sweetson will report in the Operating Activities category of its 2018 statement of cash flows assuming that the direct method is used? ​

A) $2,369,400
B) $2,350,000
C) $2,771,200
D) $2,330,600

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Question 82

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On January 15,2017,the accounts receivable balance was $7,000 and the balance in Allowance for Doubtful Accounts was $700.On January 16,2017,a $200 uncollectible account was written off.The net realizable value of accounts receivable on January 16 immediately after the write-off is

A) $6,300.
B) $6,800.
C) $6,500.
D) $7,900.

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Question 83

Multiple Choice

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The entry required to recognize the bad debts expense for 2017 will

Significant influence of one company over another has been defined by the accounting profession as the ownership of what minimum percent of the second company's stock?

If a company has a choice of acceptable methods to estimate bad debts,what factors should be considered in the selection?

When a note receivable has been discounted by a company,

Mellon Corporation The data presented below are for Mellon Corporation for the year ended December 31,2017: ?? $\begin{array}{lr}\text { Sales (100\% on credit) } & \$ 1,500,000 \\\text { Sales returns } & 60,000 \\\text { Accounts receivable (December 31, 2017) } & 250,000 \\\text { Allowance for doubtful accounts (credit balance) (before adjustment at December } & \\31,2017 & 3,000 \\\text { Estimated amount of uncoll ectible accounts based on an aging analysis } & 31,000\end{array}$ -Refer to the data for Mellon Corporation. ? If Mellon estimates its bad debts at 2% of net credit sales,what amount will be reported as bad debts expense for 2017?

A company invests excess cash in a certificate of deposit.At the end of an accounting period before the CD matures,the company will recognize interest expense.

Rural Ridge Company reported the following on its balance sheet at December 31,2017: ? $\text { Accounts receivable, less allowance of } \$ 12,400 \quad \$ 500,000$ A) How much is the net realizable value of Rural Ridge's receivables? B) What is the balance of the Accounts Receivable account? C) Are you able to determine whether Rural Ridge uses the allowance method or the direct write off method for uncollectibles? Why or why not?

Toppson Corp.invested cash in a nine-month certificate of deposit (CD) on October 1,2017.If Toppson has an accounting period that ends on December 31,2017,when would it most likely recognize interest revenue from the CD?

Why does the discounting of a note receivable with recourse result in a contingent liability? Should the liability be reported on the balance sheet? Explain.

Lynx Corp. The data presented below for Lynx Corp.are for the year ended December 31,2017: ? $\begin{array} { l r } \text { Sales (100\% on credit) } & \$ 1,000,000 \\\text { Sales returns } & 30,000 \\\text { Accounts receivable (December 31,2017) } & 170,000 \\\text { Allowance for doubtful accounts (credit balance) } & \\\quad \text { (before adjustment at December } 31,2017 ) & 1,300 \\\text { Estimated amount of uncollectible accounts based on aging analysis } & 14,000\end{array}$ ? -See the data for Lynx Corp. If Lynx Corp.uses the aging of accounts receivable approach to estimate its bad debts,what amount will be reported as bad debts expense for 2017?

Utah Co.sold merchandise to Big Sky Corp.on December 1,2017,for $9,000 and accepted a promissory note for payment in the same amount.The note has a term of 90 days and a stated interest rate of 8%.Utah's accounting period ends on December 31.What amount should Utah recognize as interest revenue on the maturity date of the note?

Genuine Parts received a promissory note from a customer on March 1,2017.The face amount of the note is $8,000;the terms are 90 days and 9% interest.What amount of interest will Genuine Parts receive when the note is paid?

When using the allowance method,what are the effects on the accounting equation when a company writes off a bad debt?

Fenchurch Corp.uses the direct write-off method to account for bad debts.What are the effects of the adjustment to record the write-off of a customer's account balance?

Espat Corp.reported net sales (all on credit) of $1,600,000 and cost of goods sold of $1,100,000 for 2017.Its beginning balance of Accounts Receivable was $150,000.The accounts receivable balance decreased by $10,000 during 2017.Rounded to two decimal places,what is Espat's accounts receivable turnover ratio for 2017?

Beatrice Equipment Beatrice Equipment sells merchandise only on credit.For the year ended December 31,2017,the following data are available: $\begin{array}{lr}\text { Sales } & \$ 2,400,000 \\\text { Sales returns and allowances } & 60,000 \\\text { Accounts Receivable-January 1, 2017 } & 270,000 \\\text { Allowance for doubtful accounts-January 1, 2017 } & 25,600 \\\text { Collections during 2017 } & 2,426,300 \\\text { Accounts written off as uncollectible during 2017 } & 23,700\end{array}$ -Refer to the data for Beatrice Equipment. Assume that Beatrice Equipment estimates bad debts on an aging analysis,and the aging schedule indicates that $28,000 of the December 31,2017,accounts receivable will be uncollectible. A) What amount will Beatrice Equipment recognize as bad debts expense for 2017 ? B) How much is the net realizable value of the receivables to be reported on Beatrice Equipment's balance sheet at December 31,2017?

Which one of the following is not an accurate statement regarding the direct write-off method of accounting for bad debts?

The maker of a note recognizes __________ on its income statement.