Q: Which formula correctly calculates Net Realizable Value (NRV) of accounts receivable?

$$\text{NRV} = \text{Accounts Receivable} - \text{Allowance for Uncollectible Accounts}$$

Q: Which formula is used to calculate the Quick (Acid-Test) Ratio?

$$\text{Quick Ratio} = \frac{\text{Cash} + \text{Short-term investments} + \text{Net current receivables}}{\text{Total current liabilities}}$$

Q: Which formula calculates accounts receivable turnover?

$$\text{Accounts Receivable Turnover} = \frac{\text{Net credit sales}}{\text{Average net accounts receivable}}$$

Q: If Apple Inc.'s accounts receivable turnover is 14.48, what is the formula to calculate days' sales outstanding (DSO)?

$$\text{DSO} = \frac{365}{\text{Accounts receivable turnover}}$$

Question 1

According to GAAP, revenue is recognized when which of the following conditions is met?

Accepted Answer

When goods are delivered or services are performed and the company has a present right to payment.

Question 2

Apple Inc. sells 30,000 iPhones to AT&T Wireless for $100 each, FOB shipping point. When should Apple recognize revenue?

Accepted Answer

When the iPhones leave Apple's shipping dock.

Question 3

A company offers a sales discount of 2/10, n/30. If a customer pays a $5,000 invoice within 10 days, how much cash does the company receive?

Accepted Answer

Question 4

Which account is used to estimate and record future sales returns for companies with significant return experience?

Accepted Answer

Sales Refunds, Returns, and Allowances

Question 5

A company estimates that 1% of its $200 million sales will be returned. What is the estimated amount of sales returns?

Accepted Answer

$2 million

Question 6

Carson Company sells merchandise for $$2,000, terms 2/10, n/30. The customer returns 800 of $$merchandise and pays within the discount period. What is the net revenue recorded?

Accepted Answer

$1,176

Question 7

Which formula correctly calculates Net Realizable Value (NRV) of accounts receivable?

Accepted Answer

$$	ext{NRV} = 	ext{Accounts Receivable} - 	ext{Allowance for Uncollectible Accounts}$$

Question 8

Which method estimates uncollectible accounts as a percentage of total revenue?

Accepted Answer

Percent-of-sales method

Question 9

Bradley Company has $$100,000 current A/R, 9$$,000 1-30 days past due, and $$12,000 over 30 days past due. Estimated uncollectibles are 1%, 10%, and 15% respectively. Allowance before adjustment is 500. $$What is the uncollectible account expense for the year?

Accepted Answer

$3,200

Question 10

Which journal entry is made when a company writes off a specific uncollectible account using the allowance method?

Accepted Answer

Debit Allowance for Uncollectible Accounts, Credit Accounts Receivable

Question 11

Which of the following is NOT a benefit of using an aging schedule for accounts receivable?

Accepted Answer

It guarantees collection of all receivables.

Question 12

A promissory note for $1,000 at 9% annual interest is outstanding for 4 months. What is the interest revenue earned?

Accepted Answer

$30

Question 13

Which formula is used to calculate the Quick (Acid-Test) Ratio?

Accepted Answer

$$	ext{Quick Ratio} = \frac{	ext{Cash} + 	ext{Short-term investments} + 	ext{Net current receivables}}{	ext{Total current liabilities}}$$

Question 14

Which formula calculates accounts receivable turnover?

Accepted Answer

$$	ext{Accounts Receivable Turnover} = \frac{	ext{Net credit sales}}{	ext{Average net accounts receivable}}$$

Question 15

If Apple Inc.'s accounts receivable turnover is 14.48, what is the formula to calculate days' sales outstanding (DSO)?

Accepted Answer

$$	ext{DSO} = \frac{365}{	ext{Accounts receivable turnover}}$$

Question 16

Which of the following is a reason for using a contra account for the allowance for uncollectible accounts?

Accepted Answer

To estimate the amount of receivables that will not be collected without knowing which customers will default.

Question 17

Which method is NOT in conformance with GAAP for accounting for uncollectible receivables?

Accepted Answer

Direct write-off method

Question 18

A company’s accounts receivable at year-end is $$20,000, and the allowance for uncollectible accounts is 4$$,450. What is the net realizable value?

Accepted Answer

$15,550

Question 19

Which of the following is a strategy to speed up cash flow from sales?

Accepted Answer

Offering sales discounts for early payment

Chapter 5: Receivables and Revenue – Financial Accounting Study Notes

Guida di studio - Domande di pratica

Study guide - Flashcard