Chapter 8 FA

Receivables are frequently classified as:

• a. accounts receivable, company receivables, and other receivables.

• b. accounts receivable, notes receivable, and employee receivables.

• c. accounts receivable and general receivables.

• d. accounts receivable, notes receivable, and other receivables.

Buehler Company on June 15 sells merchandise on account to Chaz Co. for $1,000, terms 2/10, n/30. On June 20, Chaz Co. returns merchandise worth $300 to Buehler Company. On June 24, payment is received from Chaz Co. for the balance due. What is the amount of cash received?

• a. $700.

• b. $680.

• c. $686.

• d. None of the above.

Hughes plc has a credit balance of £5,000 in its Allowance for Doubtful Accounts before any adjustments are made at the end of the year. Based on review and aging of its accounts receivable at the end of the year, Hughes estimates that £60,000 of its receivables are uncollectible. The amount of bad debt expense which should be reported for the year is:

• a. £5,000.

• b. £55,000.

• c. £60,000.

• d. £65,000.

Use the same information as in Question 3, except that Hughes has a debit balance of £5,000 in its Allowance for Doubtful Accounts before any adjustments are made at the end of the year. In this situation, the amount of bad debt expense that should be reported for the year is:

• a. £5,000.

• b. £55,000.

• c. £60,000.

• d. £65,000.

Accounts receivable at the end of the month are €800,000. Bad debts are expected to be 1.5% of accounts receivable. If Allowance for Doubtful Accounts has a credit balance of €1,000 before adjustment, what is the balance after adjustment?

• a. €7,000.

• b. €11,000.

• c. €12,000.

• d. €13,000.

At December 31, 2020, Carlson Enterprises had accounts receivable of 750,000. On January 1, 2020, Allowance for Doubtful Accounts had a credit balance of 18,000. During 2020, 30,000 of uncollectible accounts receivable were written off . Past experience indicates that 3% of accounts receivable become uncollectible. What should be the bad debt expense for 2020?

• a. 10,500.

• b. 22,500.

• c. 30,000.

• d. 34,500.

An analysis and aging of the accounts receivable of Prince Ltd. at December 31 reveals the following data.

Accounts receivable £800,000

Allowance for doubtful accounts per books before adjustment 50,000

Amounts expected to become uncollectible 65,000

The cash realizable value of the accounts receivable at December 31, after adjustment, is:

• a. £685,000.

• b. £750,000.

• c. £800,000.

• d. £735,000.

Which of the following statements about Visa credit card sales is incorrect?

• a. The credit card issuer makes the credit investigation of the customer.

• b. The retailer is not involved in the collection process.

• c. Two parties are involved.

• d. The retailer receives cash more quickly than it would from individual customers on account.

Blinka Retailers accepted HK$500,000 of Citibank Visa credit card charges for merchandise sold on July 1. Citibank charges 4% for its credit card use. The entry to record this transaction by Blinka Retailers will include a credit to Sales Revenue of HK$500,000 and a debit(s) to:

• a. Cash HK$480,000

  and Service Charge Expense HK$20,000

• b. Accounts Receivable HK$480,000

  and Service Charge Expense HK$20,000

• c. Cash HK$500,000

• d. Accounts Receivable HK$500,000

One of the following statements about promissory notes is incorrect. The incorrect statement is:

• a. The party making the promise to pay is called the maker.

• b. The party to whom payment is to be made is called the payee.

• c. A promissory note is not a negotiable instrument.

• d. A promissory note is often required from high-risk customers.