Q: Which of the following journal entries correctly records a credit card sale of $5,000 with a 4% service fee?

$$ \begin{align*} \text{Cash} &\quad 4,800 \\ \text{Credit Card Discount Expense} &\quad 200 \\ \text{Sales Revenue} &\quad 5,000 \\ \end{align*} $$

Q: A company estimates that 5% of its $200,000 credit sales will be returned. What is the adjusting journal entry at year-end to record estimated sales returns?

$$ \begin{align*} \text{Sales Returns and Allowances} &\quad 10,000 \\ \text{Sales Refunds Payable} &\quad 10,000 \\ \end{align*} $$

Q: Which formula correctly calculates Net Sales?

$$\text{Net Sales} = \text{Sales Revenue} - \text{Sales Returns and Allowances} - \text{Sales Discounts}$$

Q: Which journal entry records the write-off of an uncollectible account under the allowance method?

$$ \begin{align*} \text{Allowance for Doubtful Accounts} &\quad xxx \\ \text{Accounts Receivable} &\quad xxx \\ \end{align*} $$

Q: A company issues a $1,000, 9-month, 9% note receivable on August 31, 2024. What is the total interest to be received at maturity?

$$ 1,000 \times 9\% \times \frac{9}{12} = 67.50 $$

Q: On December 1, Miller Co. accepts a 3-month, 6% note receivable for $3,000 to replace an account receivable. What is the maturity value of the note?

$$ 3,000 + (3,000 \times 6\% \times \frac{3}{12}) = 3,045 $$

Question 1

According to the revenue recognition principle, when should a company recognize revenue from the sale of goods?

Accepted Answer

When the company transfers control of the goods or services to the customer.

Question 2

Raider sold goods costing $35,000 to Texas Company FOB Shipping Point on September 1. The goods shipped on September 7 and arrived on September 15. When should Raider recognize sales revenue?

Accepted Answer

September 7

Question 3

Which of the following journal entries correctly records a credit card sale of $5,000 with a 4% service fee?

Accepted Answer

$$
\begin{align*}
	ext{Cash} &\quad 4,800 \
	ext{Credit Card Discount Expense} &\quad 200 \
	ext{Sales Revenue} &\quad 5,000 \
\end{align*}
$$

Question 4

A company sells $10,000 of goods on account with terms 2/10, n/30. If the customer pays on day 8, what is the amount of cash received?

Accepted Answer

$$9,800$$

Question 5

Which account is a contra-revenue account with a normal debit balance?

Accepted Answer

Sales Returns and Allowances

Question 6

A company estimates that 5% of its $200,000 credit sales will be returned. What is the adjusting journal entry at year-end to record estimated sales returns?

Accepted Answer

$$
\begin{align*}
	ext{Sales Returns and Allowances} &\quad 10,000 \
	ext{Sales Refunds Payable} &\quad 10,000 \
\end{align*}
$$

Question 7

Which formula correctly calculates Net Sales?

Accepted Answer

$$	ext{Net Sales} = 	ext{Sales Revenue} - 	ext{Sales Returns and Allowances} - 	ext{Sales Discounts}$$

Question 8

A company has Accounts Receivable of $$100,000 and an Allowance for Doubtful Accounts of 7$$,000. What is the Net Realizable Value (NRV) of Accounts Receivable?

Accepted Answer

$$93,000$$

Question 9

Which journal entry records the write-off of an uncollectible account under the allowance method?

Accepted Answer

$$
\begin{align*}
	ext{Allowance for Doubtful Accounts} &\quad xxx \
	ext{Accounts Receivable} &\quad xxx \
\end{align*}
$$

Question 10

A company uses the aging of receivables method. If the unadjusted balance in Allowance for Doubtful Accounts is a $$1,000 credit and the required ending balance is 4$$,900, what is the Bad Debt Expense for the period?

Accepted Answer

$$3,900$$

Question 11

Which of the following best describes a note receivable?

Accepted Answer

A written promise to pay a specified amount of money at a future date, usually with interest.

Question 12

A company issues a $1,000, 9-month, 9% note receivable on August 31, 2024. What is the total interest to be received at maturity?

Accepted Answer

$$
1,000 	imes 9\% 	imes \frac{9}{12} = 67.50
$$

Question 13

On December 1, Miller Co. accepts a 3-month, 6% note receivable for $3,000 to replace an account receivable. What is the maturity value of the note?

Accepted Answer

$$
3,000 + (3,000 	imes 6\% 	imes \frac{3}{12}) = 3,045
$$

Question 14

Which of the following is true regarding the classification of notes receivable on the balance sheet?

Accepted Answer

Notes receivable due within one year are current assets; those due beyond one year are long-term assets.

Question 15

A company has the following balances: Accounts Receivable $$158,000; Allowance for Doubtful Accounts 20$$,000. What is the Net Realizable Value (NRV) of Accounts Receivable?

Accepted Answer

$$138,000$$

Question 16

Which of the following best describes the purpose of the Allowance for Doubtful Accounts?

Accepted Answer

To estimate the amount of accounts receivable that will not be collected.

Question 17

If a company writes off a $2,000 account receivable that was previously estimated as uncollectible, what is the effect on total assets and net income?

Accepted Answer

No effect on total assets or net income.

Question 18

Which of the following is the correct formula for calculating interest revenue on a note receivable?

Accepted Answer

$$	ext{Interest} = 	ext{Principal} 	imes 	ext{Rate} 	imes 	ext{Time}$$

Receivables and Revenue: Financial Accounting Chapter 5 Study Notes

Study Guide - Practice Questions

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