Accounts Receivable Test Which of the following will not improve the current ratio? a.

Issuing long-term debt to purchase inventory b. Obtaining a short term loan to finance additional fi ed assets c. !elling common stoc" to reduce current liabilities. d. !elling fi ed assets to reduce accounts payable Why must companies actively manage their outstanding receivables? a. It is part of the #ob of any accounting department b. $ustomers will never pay if they are not constantly reminded of the money due c. %anaging receivables ma"es cash flow into the company &uic"er than it would if no attention is paid to AR d. $ompanies need to be prompt in replying to customer re&uests On a company's (alance !heet) A*R is the amount+++++++++++++. a. that the company owes to a particular party b. that a party owes to the company c. not shown in the balance sheet A company recorded two sales of ,-..... and ,/.)... on %arch 0) -..1 under the credit terms of /*0.) n*/.. 2ayment for the ,-.)... sale was received on %arch 0.) -..1. 2ayment for the ,/.)... sale was received on %arch -3) -..1. 4nder the gross method and the net method) which of the following amounts should appear as net sales in the %arch income statements? 5ross method 6et method a. ,78)3.. ,78)3.. b. ,78)3.. ,79)7.. c. ,79)7.. ,78)3.. d. ,79)7.. ,79)7.. To which column should !ales :iscount be e tended ;transferred< on the wor" sheet? a. Income statement credit column b. (alance sheet debit column c. Income statement debit column d. (alance sheet credit column What is (-(? a. A $R% software pac"age b. (est (usiness c. An Accounting !oftware d. (usiness to (usiness The antecedents of receivables are critical to the management of receivable assets and is the "ey driver of the cost to manage a company's revenue stream. A simple formula to illustrate this point is ++++++++++++. a. high customer satisfaction = accurate invoice > e cellent receivable results b. high customer satisfaction ? e cellent receivable results > accurate invoice c. high customer satisfaction ? accurate invoice > e cellent receivable results d. 6one of the above A company would choose to factor it's receivables because@ a. it is the same as turning them over to a collection agency

b. they need to raise capital and do not want to rely on the credit worthiness of the business c. they have given up hope of ever collecting on the items d. it is easier than trying to collect themselves Why would a company brea" revenue up into specific accounts instead of having one master ArevenueA account? a. Once a company chooses a method) it is never changed. !omeone early on made a mista"e by creating the level of detail b. It allows the management and the staff to e amine and analyBe each of the revenue streams for errors) patterns) and comparisons c. It creates wor" for the accounting department d. It is re&uired by ta laws The antecedents of Receivables are defined as all the up-front operations re&uired for creating a receivable. They do not involve which of the following@ a. Cuotations b. Advance payments c. $ontract and price administration d. Invoicing $redit card discounts are reported on the income statement as a. a contra revenue b. a selling e pense c. a miscellaneous e pense d. both ;a< and ;c< A($ !ervices provides accounting services to a client and collects ,0)... in cash. Dow and in which of the accounts will the increase in cash be recorded by A($ !ervices as a result of providing this service? a. A credit to Accounts Receivable b. A debit to Accounts Receivable c. A credit to !ervice Revenue d. A debit to !ervice RevenueE Is the Accounts Receivable department considered Arevenue generatingA? a. Fes) it is the connection between the company and the customer b. Fes) as AR handles all payments) it handles the revenue in the true sense c. Fes) without an AR department) no revenue would be collected d. 6o) it is part of the accounting operation function and is an overhead e pense Fou received an invoice that shows credit terms of -*0.) n*G.. What does the number 0. in the credit terms refer to? a. The number of days in the credit period. b. The amount of sales discount available. c. The number of days in the discount period. d. The amount of the trade discount. What is meant by Hactoring? a. sale of Accounts Receivables b. (an" Ioan c. :iscount d. 6one of the above

An invoice is++++++++++++. a. a commercial document issued by the seller to the buyer b. a commercial document issued by the buyer to the seller c. a commercial document issued by the buyer to the contractor On the balance sheet) Receivables may be classified as ++++++++++++. a. trade and non-trade b. current and non-current c. trade and current only d. both ;a< and ;b< Which of the following is not true about interest on Receivables? a. Interest receivable is calculated by using the formula Interest> 2rincipal Interest Rate Time. b. Interest receivable does not have to be recogniBed if interest is to be collected in the ne t year c. We need to recogniBe interest receivable to satisfy the matching principle. d. Interest receivable is interest earned but not collected. 6inety-percent of Jogel (ird !eeds' total sales of ,G..)... is on credit. If its year-end Receivables turnover is 3) the average collection period ;based on a /G3-day year< and the year-end Receivables are) respectively a. /G3 days and ,0.8)... b. 1/ days and ,0-.)... c. 1/ days and ,0.8)... d. 80 days and ,0.8)... The net realiBable value of Accounts Receivable is++++++++++++. a. the total of the Individual accounts in the subsidiary ledger b. Accounts Receivable minus allowance for :oubtful Accounts c. Accounts Receivable minus (ad :ebts K pense d. the estimated amount of the accounts that will not be collected Where should !ales :iscount be recorded? a. Income statement credit column b. (alance sheet debit column c. Income statement debit column d. (alance sheet credit column $osts that does not carry enough inventory include++++++++++++. a. lost sales b. customer disappointment c. possible wor"er layoffs d. All of the above (ad :ebts are shown on the following financial statements ++++++++++++. a. the 2rofit L Ioss b. the 2rofit L Ioss L the (alance !heet c. the (alance !heet and !tatement of K&uity d. $ash Hlow statement Allowance for doubtful accounts is +++++++++++. a. the total of the accounts that will not be collected b. a contingent liability

c. a contra-owner's e&uity account li"e withdrawals d. the estimated amount of Accounts Receivable that will not be collected Why is Aday's sales in Accounts ReceivableA important to calculate? a. It tells you the total day's sales that were made b. It is re&uired by the !K$ for all public companies c. It indicates the company's overall financial health d. It ma"es comparison with prior results possible to see improvements or non improvements) and lets a company "now how long people are ta"ing to pay on average A firm receives cash for /.M of its sales with the remaining 1.M being credit sales. Of the credit sales) -.M are collected in the month of the sale) G.M in the month following the sale) and -.M in the second month following the sale. The anticipated sales for Nanuary through April are ,7..)...) ,3..)...) ,G..)...) and ,7..)... respectively. What will be the cash receipts in the month of April? a. ,0-.)... b. ,7..)... c. ,798)... d. ,3/.)... A company's accounting policy for recording revenues+++++++++++. a. must be the same as that of all other companies b. can be different from that of other companies c. must be disclosed if different from the revenue principle d. can be ;b<) and if so) ;c< must follow Why would a service item be "ept in inventory in the accounting system? a. It would notO service is not an inventory item b. It allows for associating a standard price with the service item and ma"es invoicing easier c. It assigns a value to the services of the company for the balance sheet All of the following are true about interest receivable e cept a. Interest Receivable is calculated by using the formula Interest> 2rincipal Interest Rate Time b. Interest Receivable is interest earned but not collected c. Interest Receivable does not have to be recogniBed if interest will be collected in the ne t year d. We need to recogniBe Interest Receivable to satisfy the matching principle Hactoring Receivables is a +++++++++++. a. continuous) ongoing purchase of Receivables b. finite portfolio of Receivables c. limited purchase of Receivables d. continuous) ongoing selling of Receivables $ompanies that do not carry enough inventory will incur ++++++++++++. a. lost sales b. low employee morale c. wor"er layoffs d. All of the above A transfer of financial assets in accordance with !HA! 07.) Accounting for Transfers and !ervicing of Hinancial Assets and K tinguishments of Iiabilities may be treated as a sale

if the transferor surrenders control of the assets. Which of the following is one of the criteria that must be met before control is deemed to be surrendered? a. The transferred assets are isolated from the transferor and its creditors e pected in ban"ruptcy. b. The transferee cannot pledge or e change the transferred assets. c. The transferor is not a party to an agreement that both entitles and obligates it to repurchase or redeem the securities prior to maturity. d. The consideration received by the transferor consists solely of beneficial interests in the transferred assets. On Nanuary 0) :avis $ollege assigned ,3..)... of Accounts Receivable to the !cholastic Hinance $ompany. It gave a 07M note for ,73.)... representing 9.M of the assigned accounts and received proceeds of ,7/-)... after deduction of a !cholastic) including interest for 0 month on the remittance. (y what amount will Accounts Receivable be assigned and notes payable decreased? A*R Assigned 6otes 2ayable a. ,8.)... ,17)13. b. ,8.)... ,8.)... c. ,1-)... ,17)13. d. ,17)13. ,8.)... If the balance of the Allowance for :oubtful Account e ceeds the amount of a bad debt being written off) the entry to record the write off against the allowance account results in@ a. an increase in the e penses of the current period b. a reduction in current assets c. a reduction in e&uity d. no effect on the e penses of the current period Accounts Receivable that arise from the regular sale of merchandise is also referred to as+++++++++++. a. (usiness Receivables b. Other Receivables c. Trade Receivables d. %oney Receivable An accrued revenue would be shown on the balance sheet as ++++++++++++. a. a payable b. a prepaid revenue c. a receivable d. unearned revenue Which of the following statements regarding the calculation of 'day's sales' in receivables is incorrect? a. Allowance for doubtful accounts is generally not considered in the formula for 'day's sales' b. This formula must be applied in two steps. c. The number of 'day's sales' in Accounts Receivable is always /G3. d. 6et sales are not used in the calculation of 'day's sales' in Accounts Receivable.

When using the indirect method of preparing the A$ash Hlows from Operating ActivitiesA section of a statement of cash flows) a net increase between the opening and closing balances of 6et Accounts Receivable will ++++++++++++. a. be added to net income b. be deducted from net income c. not be considered d. be shown as deferred revenues To which accounting concept does Accounts Receivable relate? a. 5oing concern b. $ost concept c. %atching concepts d. $onsistency concept In accounting for the transfer of financial assets) which of the following is the approach underlying the accounting prescribed by !HA! 07.) Accounting for Transfers and !ervicing of Hinancial Assets and K tinguishments of Iiabilities? a. Hinancial-components approach. b. The ris"s-and-rewards approach. c. Inseparable-unit approach. d. Iin"ed-presentation approach.

Accounting !"ills Test ;Assets and Revenue< Which of the following costs would 6OT be included in the cost of machinery? a. Invoice price b. Installation costs c. Testing of machinery prior to its intended use d. All of the above would be included. When an asset impairment occurs) a company writes down the asset to ++++++++++. a. the sum of its undiscounted cash flows b. its then-current fair value c. Bero d. 6one of the above A fast food restaurant chain sells a division that operates movie theaters. What type of activity is this? a. 2rimary operating activity) which is recurring b. 2rimary operating activity) which is nonrecurring c. A recurring activity) which is peripheral to primary operations d. A nonrecurring activity) which is peripheral to primary operations When all else is e&ual) analysts +++++++++++. a. prefer that firms have high recurring earnings b. will give a higher valuation to a firm with a one-time charge than to a firm that reports an e pense that continues year to year c. regard recurring earnings as higher &uality than one-shot earnings d. All of the above PFQ $ompany reports Accounts Receivable of ,G.)... and an Allowance for 4ncollectible Accounts of ,G)... on its :ecember /0 Fear 0 (alance !heet. :uring Fear -) credit sales total ,0)8..)...) collections on account total ,0)G8.)...) and write-offs total ,9)G... After aging its Accounts Receivable) PFQ $ompany estimates that 0. percent of its Accounts Receivable at :ecember /0 of Fear - will be uncollectible. What is the balance in Accounts Receivable on :ecember /0 of Fear -? a. ,0G7)7.. b. ,0GG)8.. c. ,01.)7.. d. ,017)...

When the +++++++++ method is used to estimate uncollectible accounts) the balance in the Allowance for 4ncollectible Accounts is ad#usted to reflect the desired ending balance. a. A2 Aging b. 4ncollectible Horecasting c. 2rogressive Aging d. Aging of Accounts Receivable When using the indirect method to determine operating cash flows in a cash flow statement) which of the following would be deducted from net income? a. 5ain on retirement of a plant asset b. :epreciation c. Ioss on retirement of a plant asset d. 6one of the above Which of the following is a functional factor in determining depreciation? a. !alvage value b. Obsolescence c. %ar"et cost d. %ar"et value Which of the following is a characteristic of grouping assets into one of seven life classes? a. !um-of-the-years digits method b. %odified accelerated cost recovery system c. :eclining balance method d. 6one of the above PFQ $ompany had sales of ,383)... during Fear 0) ,-G.)... of which were on account. The account balances in Accounts Receivable and in Allowance for 4ncollectible Accounts on :ecember /0 of Fear 0 were ,18)... and ,0.)7.. respectively. 2ast e perience indicates that 3 percent of all credit sales will not be collected. An aging of accounts indicated that ,09)3.. of the receivable balance would not be collected. Dow much should PFQ $ompany debit to the (ad :ebt K pense Account? a. ,-9)9.. b. ,0/)... c. ,09)3.. d. ,9)0..

PFQ $ompany reports its net assets at a boo" value of ,03.).... Investigation reveals that the net assets had a mar"et value of ,013).... In addition) PFQ $ompany had been offered ,--.)... for the company by A($ $ompany. What is the amount of goodwill that should be recorded on the boo"s of PFQ $ompany? a. ,. b. ,-3)... c. ,73)... d. ,1.)... Iate in Fear 0) PFQ $ompany signs a contract to construct a bridge for the Hlorida :ept. of Transportation. The contract price is ,7-)...).... The costs during the /-year construction period are as follows@ Fear -@ ,0.)...)... Fear /@ ,03)...)... Fear 7@ ,3)...)... If PFQ $ompany recogniBes income under the percentage-of-completion method) how much income would they recogniBe on the bridge contract in Fear /? a. ,-0)...)... b. ,0-)...)... c. ,0.)...)... d. ,G)...)... If a reasonable estimate of the amount of cash to be received can be made) when should revenue be recogniBed? a. At the time of sale b. At the time of cash collection c. At the time of cash collection) using the cost-recovery-first method d. 6one of the above Which of the following basic patterns would be appropriate for allocation of land? a. K pense immediately b. !traight line depreciation c. :ecelerated depreciation d. 6o depreciation The sum-of-the-years digits method is an e ample of a*an ++++++++++++. a. accelerated method b. double declining method c. %A$R!

d. straight line method PFQ $ompany generates five new products in -..8. The interest capitaliBed for these items is referred to as ++++++++++++. a. self-constructed assets b. purchased fi ed assets c. fully depreciated assets d. e pensed purchases PFQ $ompany owns machinery with a cost of ,0..)... and an accumulated depreciation of ,G.)... on Nanuary 0) -..1. On Nuly 0) -..1) the machinery is sold for ,7/).... The straight line depreciation method has been used during the previous si years of life. Dow much gain or loss will be recorded on the sale? a. ,/)... gain b. ,0/)... gain c. ,--)... gain d. ,8)... gain On its :ecember /0 (alance !heet in Fear 0) PFQ $ompany reports Accounts Receivable of ,G.)... and an Allowance for 4ncollectible Accounts of ,G).... :uring Fear -) credit sales total ,0)8..)...) collections on account total ,0)G8.)...) and writeoffs total ,9)G... After aging its Accounts Receivable) PFQ $ompany estimates that 0. percent of its Accounts Receivable at :ecember /0 of Fear - will be uncollectible. 5iven the above data) what amount would PFQ $ompany report as (ad :ebt K pense in its Fear - Income !tatement? a. ,01).7. b. ,08)... c. ,-0)G.. d. ,-.)G7. 6atural resources are referred to as ++++++++++++. a. Intangible assets b. 2lant assets c. Wasting assets d. 6one of the above The situation in which a company uses its accounts receivable to obtain a loan is called +++++++++++. In this process) the company usually maintains control of the receivables) collects from customers) and forwards the proceeds to the lending institution to li&uidate the loan. a. Assigning

b. Hactoring c. !ales d. 2ledging What is the proper accounting for all research and development costs when incurred? a. $apitaliBe b. Iiability c. K pense d. Asset When using the indirect method to determine operating cash flows in a cash flow statement) which of the following would be added to net income? a. AmortiBation b. :epreciation c. Ioss on retirement of a plant asset d. All of the above In the indirect method) which of the following is included in the cash flow from investing activities? a. 2roceeds from the retirement of plant assets b. AmortiBation c. :epreciation d. 6et Income Which of the following events reduces total assets? a. A customer returns merchandise for credit. b. 4ncollectible accounts are written off under the allowance method. c. An accounts receivable is collected. d. 6one of the above The denominator of the sum-of-the-years digits fraction is ++++++++++++++. a. n?n b. n*c. n?0*d. n;n?0<*PFQ $ompany purchases a piece of e&uipment on Nanuary 0) -..1 at a cost of ,0..).... The e&uipment has a five-year useful life and can be sold for ,0.)... at the end of five years. If PFQ $ompany uses the -..M percent declining balance depreciation method) how much depreciation would be recorded in the second year?

a. ,0-)... b. ,-.)... c. ,03)9.. d. 6one of the above In which of the following depreciation methods is the estimate of useful life 6OT re&uired? a. !traight line b. !um-of-the-years digits c. -..M declining balance d. %A$R! What occurs when the then-current boo" value of an asset e ceeds the sum of e pected undiscounted cash flow? a. !alvage b. Hair value c. Impairment d. :epletion When managers choose estimates that lead to higher current income) analysts refer to those earnings as ++++++++++++. a. higher &uality of earnings b. at par c. off budget d. lower &uality of earnings The matching of costs with the benefits derived from the use of an asset is ++++++++++++. a. the goal of depreciation accounting for financial statement purpose b. e pensing c. 5AA2 d. HA!( An asset impairment occurs when the then-current boo" value of an asset e ceeds +++++++++. a. the sum of e pected undiscounted cash flows of the asset b. the mar"et value of the asset c. the discounted future cash flows of the asset d. 6one of the above Which of the following costs is capitaliBed for a self-constructed asset?

a. Interest prior to construction b. Interest during construction c. Interest after construction d. All of the above Karly in Fear 0) PFQ $ompany begins construction of an office building. The contract price for the construction is ,-/)7..).... The pro#ect) which is completed in Fear /) incurs costs as follows@ Fear 0@ ,3)-..)... Fear -@ ,G)3..)... Fear /@ ,/)9..)... If PFQ $ompany recogniBes income under the completed contract method) how much income would they recogniBe on the office building contract in Fear /? a. ,0)93.)... b. ,/)9..)... c. ,3)83.)... d. ,1)8..)... Which of the following life spans would be used for automobiles if the %A$R! method of depreciation is employed? a. / years b. 3 years c. 0. years d. 03 years PFQ $ompany purchases a machine with a cost of ,-.)...) a salvage value of ,-)...) and life of five years. If the company uses the sum-of-the-years digits method) what would the depreciation charge be for the first year? a. ,0)-.. b. ,G)... c. ,G)GG1 d. ,8)... On Nanuary 0) -..1) PFQ $ompany has machinery on the boo"s that originally cost ,-..).... In -..1) the following e penditures were made@ %inor Repairs@ ,3)... I%prove%ents@ ,0.)... Additions@ ,/1)... 5iven the above data) how much would be recorded in the %achinery Account on :ecember /0)-..1?

a. ,-3-)... b. ,-71)... c. ,-/3)... d. ,--3)... A Hlorida hotel chain's properties located on the Kmerald $oast are destroyed when the area is devastated by an earth&ua"e. What type of activity is this? a. 2rimary operating activity) which is recurring b. 2rimary operating activity) which is nonrecurring c. A recurring activity) which is peripheral to primary operations d. A nonrecurring activity) which is peripheral to primary operations Iate in Fear 0) PFQ $ompany signs a contract to construct a bridge for the Hlorida :ept. of Transportation. The contract price is ,7-)...).... The costs during the /-year construction period are as follows@ Fear -@ ,0.)...)... Fear /@ ,03)...)... Fear 7@ ,3)...)... If PFQ $ompany recogniBes income under the percentage-of-completion method) how much income would they recogniBe on the bridge contract in Fear 7? a. ,. b. ,-)...)... c. ,1)...)... d. ,0-)...)... PFQ $ompany had sales of ,383)... during Fear 0) ,-G.)... of which were on account. The account balances in Accounts Receivable and in Allowance for 4ncollectible Accounts on :ecember /0 of Fear 0 were ,18)... and ,0.)7.. respectively. 2ast e perience indicates that 3 percent of all credit sales will not be collected. Dow much should PFQ $ompany debit to the (ad :ebt K pense Account? a. ,/9)... b. ,0/)... c. ,G)3.. d. -G)... Assets that can provide future benefits without having physical form are called +++++++++++. a. fi ed assets b. cash c. intangible assets d. accounts receivable