101. Before year-end adjusting entries, Dunn Company's account balances at December 31, 2017, for accounts receivable and the related allowance for uncollectible accounts were $1,500,000 and $90,000, respectively. An aging of accounts receivable indicated that $125,000 of the December 31 receivables are expected to be uncollectible. The net realizable value of accounts receivable after adjustment is
a. $1,465,000.
b. $1,375,000.
c. $1,285,000.
d. $1,410,000.
102. During the year, Kiner Company made an entry to write off a $32,000 uncollectible account. Before this entry was made, the balance in accounts receivable was $400,000 and the balance in the allowance account was $36,000. The net realizable value of accounts receivable after the write-off entry was
a. $400,000.
b. $396,000.
c. $332,000.
d. $364,000.
103. The following information is available for Murphy Company:
Allowance for doubtful accounts at December 31, 2016 $ 24,000
Credit sales during 2017 1,200,000
Accounts receivable deemed worthless and written off during 2017 27,000
As a result of a review and aging of accounts receivable in early January 2018, it has been determined that an allowance for doubtful accounts of $16,000 is needed at December 31, 2017. What amount should Murphy record as "bad debt expense" for the year ended December 31, 2017?
a. $13,000
b. $16,000
c. $19,000
d. $40,000
Use the following information for questions 104 and 105.
A trial balance before adjustments included the following:
Debit Credit
Sales $1,700,000
Sales returns and allowance $56,000
Accounts receivable 172,000
Allowance for doubtful accounts 3,040
104. If the estimate of uncollectible accounts is made by taking 5% of gross accounts receivables, the amount of the adjustment is
a. $8,448.
b. $5,560.
c. $8,600.
d. $11,640.
105. If the estimate of uncollectible accounts is made by taking 10% of gross account receivables, the amount of the adjustment is
a. $14,160.
b. $17,200.
c. $16,896.
d. $20,240.
106. Lankton Company has the following account balances at year-end:
Accounts receivable $90,000
Allowance for doubtful accounts 4,800
Sales discounts 3,200
Lankton should report accounts receivable at a net amount of
a. $82,000.
b. $85,200.
c. $86,800.
d. $90,000.
107. Smithson Corporation had a 1/1/17 balance in the Allowance for Doubtful Accounts of $30,000. During 2017, it wrote off $21,600 of accounts and collected $6,300 on accounts previously written off. The balance in Accounts Receivable was $600,000 at 1/1 and $720,000 at 12/31. At 12/31/17, Smithson estimates that 5% of accounts receivable will prove to be uncollectible. What is Bad Debt Expense for 2017?
a. $6,000.
b. $21,300.
c. $27,600.
d. $36,000.
108. Black Corporation had a 1/1/17 balance in the Allowance for Doubtful Accounts of $21,000. During 2017, it wrote off $15,120 of accounts and collected $4,410 on accounts previously written off. The balance in Accounts Receivable was $420,000 at 1/1 and $504,000 at 12/31. At 12/31/17, Black estimates that 5% of accounts receivable will prove to be uncollectible. What should Black report as its Allowance for Doubtful Accounts at 12/31/17?
a. $10,080.
b. $10,290.
c. $14,490.
d. $25,200.
109. Shelton Company has the following account balances at year-end:
Accounts receivable $140,000
Allowance for doubtful accounts 7,200
Sales discounts 4,800
Shelton should report accounts receivable at a net amount of
a. $128,000.
b. $132,800.
c. $135,200.
d. $140,000.
110. Vasguez Corporation had a 1/1/17 balance in the Allowance for Doubtful Accounts of $40,000. During 2017, it wrote off $28,800 of accounts and collected $8,400 on accounts previously written off. The balance in Accounts Receivable was $800,000 at 1/1 and $960,000 at 12/31. At 12/31/17, Vasguez estimates that 5% of accounts receivable will prove to be uncollectible. What is Bad Debt Expense for 2017?
a. $8,000.
b. $28,400.
c. $36,800.
d. $48,000.
111. McGlone Corporation had a 1/1/17 balance in the Allowance for Doubtful Accounts of $40,000. During 2017, it wrote off $28,000 of accounts and collected $8,400 on accounts previously written off. The balance in Accounts Receivable was $800,000 at 1/1 and $960,000 at 12/31. At 12/31/17, McGlone estimates that 5% of accounts receivable will prove to be uncollectible. What should McGlone report as its Allowance for Doubtful Accounts at 12/31/17?
a. $19,200.
b. $19,600.
c. $27,600.
d. $48,000.
112. Lester Company received a seven-year zero-interest-bearing note on February 22, 2017, in exchange for property it sold to Porter Company. There was no established exchange price for this property and the note has no ready market. The prevailing rate of interest for a note of this type was 6% on February 22, 2017, 6.5% on December 31, 2017, 6.7% on February 22, 2018, and 7% on December 31, 2018. What interest rate should be used to calculate the interest revenue from this transaction for the years ended December 31, 2017 and 2018, respectively?
a. 0% and 0%
b. 6% and 6%
c. 6% and 7.7%
d. 6.5% and 7%
113. On December 31, 2017, Flint Corporation sold for $150,000 an old machine having an original cost of $270,000 and a book value of $120,000. The terms of the sale were as follows:
$30,000 down payment
$60,000 payable on December 31 each of the next two years
The agreement of sale made no mention of interest; however, 9% would be a fair rate for this type of transaction. What should be the amount of the notes receivable net of the unamortized discount on December 31, 2017 rounded to the nearest dollar? (The present value of an ordinary annuity of 1 at 9% for 2 years is 1.75911.)
a. $105,547
b. $135,546.
c. $120,000.
d. $211,092.
114. Assume Royal Palm Corp., an equipment distributor, sells a piece of machinery with a list price of $900,000 to Arch Inc. Arch Inc. will pay $975,000 in one year. Royal Palm Corp. normally sells this type of equipment for 90% of list price. How much should be recorded as revenue?
a. $810,000.
b. $877,500.
c. $900,000.
d. $975,000.
115. Equestrain Roads sold $120,000 of goods and accepted the customer's $120,000 10%,
1-year note receivable in exchange. Assuming 10% approximates the market rate of return, what would be the debit in this journal entry to record the sale?
a. No journal entry until cash is collected.
b. Debit Notes Receivable for $120,000.
c. Debit Accounts Receivable for $120,000.
d. Debit Notes Receivable for $108,000.
116. Equestrain Roads sold $120,000 of goods and accepted the customer's $120,000 10%,
1-year note in exchange. Assuming 10% approximates the market rate of return, how much interest would be recorded for the year ending December 31 if the sale was made on June 30?
a. $0.
b. $3,000.
c. $6,000.
d. $12,000.
117. Equestrain Roads accepted a customer's $100,000 zero-interest-bearing six-month note in a sales transaction. The product sold normally sells for $92,000. If the sale was made on June 30, how much interest revenue from this transaction would be recorded for the year ending December 31?
a. $0.
b. $4,000.
c. $8,000.
d. $10,000.
118. Assuming the market interest rate is 10% per annum, how much would Green Co. record as a note payable if the terms of the loan with a bank are that it would have to make one $120,000 payment in two years? (The present value of $1 for two periods at 10% is 0.82645).
a. $120,000.
b. $108,844.
c. $109,090.
d. $99,174.
119. Jones Company has notes receivable that have a fair value of $950,000 and a carrying amount of $1,250,000. Jones decides on December 31, 2017, to use the fair value option for these recently-acquired receivables. Which of the following entries will be made on December 31, 2017 to record the unrealized holding gain/loss?
a. Unrealized Holding Gain or LossEquity 300,000
Notes Receivable 300,000
b. Unrealized Holding Gain or LossIncome 300,000
Notes Receivable 300,000
c. Notes Receivable 300,000
Unrealized Holding Gain or LossIncome 300,000
d. Notes Receivable 300,000
Unrealized Holding Gain or LossEquity 300,000
120. Sun Inc. factors $6,000,000 of its accounts receivables without recourse for a finance charge of 5%. The finance company retains an amount equal to 10% of the accounts receivable for possible adjustments. Sun estimates the fair value of the recourse liability at $230,000. What would be recorded as a gain (loss) on the transfer of receivables?
a. Loss of $300,000.
b. Gain of $530,000.
c. Loss of $1,130,000.
d. Loss of $230,000.
121. Sun Inc. factors $6,000,000 of its accounts receivables with recourse for a finance charge of 3%. The finance company retains an amount equal to 10% of the accounts receivable for possible adjustments. Sun estimates the fair value of the recourse liability at $300,000. What would be recorded as a gain (loss) on the transfer of receivables?
a. Gain of $180,000.
b. Loss of $480,000.
c. Gain of $1,080,000.
d. Loss of $300,000.
122. Sun Inc. assigns $6,000,000 of its accounts receivables as collateral for a $2 million 8% loan with a bank. Sun Inc. also pays a finance fee of 1% on the transaction upfront. What would be recorded as a gain (loss) on the transfer of receivables?
a. Loss of $60,000.
b. Loss of $480,000.
c. Loss of $540,000.
d. $0.
123. Moon Inc. factors $3,000,000 of its accounts receivables without recourse for a finance charge of 4%. The finance company retains an amount equal to 8% of the accounts receivable for possible adjustments. Moon estimates the fair value of the recourse liability at $300,000. What would be the debit to Cash in the journal entry to record this transaction?
a. $3,000,000.
b. $2,880,000.
c. $2,640,000.
d. $2,340,000.
124. Moon Inc. assigns $4,500,000 of its accounts receivables as collateral for a $3 million loan with a bank. The bank assesses a 3% finance charge on the loan amount and charges interest on the note at 6%. What would be the journal entry to record this transaction?
a. Debit Cash for $2,910,000, debit Interest Expense for $90,000, and credit Notes Payable for $3,000,000.
b. Debit Cash for $2,910,000, debit Interest Expense for $90,000, and credit Accounts Receivable for $3,000,000.
c. Debit Cash for $1,940,000, debit Interest Expense for $90,000, debit Due from Bank for $1,500,000, and credit Accounts Receivable for $4,500,000.
d. Debit Cash for $2,730,000, debit Interest Expense for $270,000, and credit Notes Payable for $3,000,000.
125. Geary Co. assigned $1,600,000 of accounts receivable to Kwik Finance Co. as security for a loan of $1,340,000. Kwik charged a 2% commission on the amount of the loan; the interest rate on the note was 10%. During the first month, Geary collected $440,000 on assigned accounts after deducting $1,520 of discounts. Geary accepted returns worth $5,400 and wrote off assigned accounts totaling $11,920.
The amount of cash Geary received from Kwik at the time of the assignment was
a. $1,206,000.
b. $1,308,000.
c. $1,313,200.
d. $1,340,000.
126. Geary Co. assigned $1,600,000 of accounts receivable to Kwik Finance Co. as security for a loan of $1,340,000. Kwik charged a 2% commission on the amount of the loan; the interest rate on the note was 10%. During the first month, Geary collected $440,000 on assigned accounts after deducting $1,520 of discounts. Geary accepted returns worth $5,400 and wrote off assigned accounts totaling $11,920.
Entries during the first month would include a
a. debit to Cash of $441,520.
b. debit to Bad Debt Expense of $11,920.
c. debit to Allowance for Doubtful Accounts of $11,920.
d. debit to Accounts Receivable of $458,840.
127. On February 1, 2017, Henson Company factored receivables with a carrying amount of $700,000 to Agee Company. Agee Company assesses a finance charge of 3% of the receivables and retains 5% of the receivables. Relative to this transaction, you are to determine the amount of loss on sale to be reported in the income statement of Henson Company for February.
Assume that Henson factors the receivables on a without recourse basis. The loss to be reported is
a. $0.
b. $21,000.
c. $35,000.
d. $56,000.
128. On February 1, 2017, Henson Company factored receivables with a carrying amount of $700,000 to Agee Company. Agee Company assesses a finance charge of 3% of the receivables and retains 5% of the receivables. Relative to this transaction, you are to determine the amount of loss on sale to be reported in the income statement of Henson Company for February.
Assume that Henson factors the receivables on a with recourse basis. The recourse obligation has a fair value of $3,500. The loss to be reported is
a. $21,000.
b. $24,500.
c. $35,000.
d. $59,500.
129. Maxwell Corporation factored, with recourse, $200,000 of accounts receivable with Huskie Financing. The finance charge is 3%, and 5% was retained to cover sales discounts, sales returns, and sales allowances. Maxwell estimates the recourse obligation at $4,800. What amount should Maxwell report as a loss on sale of receivables?
a. $ -0-.
b. $6,000.
c. $10,800.
d. $20,800.
130. Wilkinson Corporation factored, with recourse, $500,000 of accounts receivable with Huskie Financing. The finance charge is 3%, and 5% was retained to cover sales discounts, sales returns, and sales allowances. Wilkinson estimates the recourse obligation at $12,000. What amount should Wilkinson report as a loss on sale of receivables?
a. $ -0-.
b. $15,000.
c. $27,000.
d. $52,000.
131. Remington Corporation had accounts receivable of $100,000 at 1/1. The only transactions affecting accounts receivable were sales of $900,000 and cash collections of $850,000. The accounts receivable turnover is
a. 6.0.
b. 6.6.
c. 7.2.
d. 9.0.
132. Laventhol Corporation had accounts receivable of $100,000 at 1/1. The only transactions affecting accounts receivable were sales of $1,050,000 and cash collections of $1,000,000. The accounts receivable turnover is
a. 7.0.
b. 7.7.
c. 8.4.
d. 10.5.
133. The opening balance of Accounts Receivable for George Company was $25,000. Net sales (all on account) for the year amounted to $200,000. The Company doesn’t offer any cash discount. During the year $180,000 was collected on accounts receivable. Compute accounts receivable turnover for the year.
a. 5.7 times
b. 5.1 times
c. 4.4 times
d. 8.0 times
134. During the year Tulip reported net sales of $960,000. The company had accounts receivable of $75,000 at the beginning of the year and $120,000 at the end of the year Compute Tulip’s average collection period (assume 365 days a year.)
a. 28.5 days
b. 37.2 days.
c. 45.7 days.
d. 74.2 days.
*135. If a petty cash fund is established in the amount of $300, and contains $180 in cash and $115 in receipts for disbursements when it is replenished, the journal entry to record replenishment should include credits to the following accounts
a. Petty Cash, $90.
b. Petty Cash, $120.
c. Cash, $115; Cash Over and Short, $5.
d. Cash, $120.
*136. If the month-end bank statement shows a balance of $144,000, outstanding checks are $48,000, a deposit of $16,000 was in transit at month end, and a check for $2,000 was erroneously charged by the bank against the account, the correct balance in the bank account at month end is
a. $110,000.
b. $114,000.
c. $82,000.
d. $174,000.
*137. In preparing its bank reconciliation for the month of April 2017, Henke, Inc. has the following information available.
Balance per bank statement, 4/30/17 $102,420
NSF check returned with 4/30/17 bank statement 1,350
Deposits in transit, 4/30/17 15,000
Outstanding checks, 4/30/17 15,600
Bank service charges for April 60
What should be the correct balance of cash at April 30, 2017?
a. $103,110
b. $101,820
c. $100,470
d. $100,410
*138. Finley, Inc.’s checkbook balance on December 31, 2017 was $84,800. In addition, Finley held the following items in its safe on December 31.
(1) A check for $1,800 from Peters, Inc. received December 30, 2017, which was not included in the checkbook balance.
(2) An NSF check from Garner Company in the amount of $3,600 that had been deposited at the bank, but was returned for lack of sufficient funds on December 29. The check was to be redeposited on January 3, 2018. The original deposit has been included in the December 31 checkbook balance.
(3) Coin and currency on hand amounted to $5,800.
The proper amount to be reported on Finley's balance sheet for cash at December 31, 2017 is
a. $85,200.
b. $81,600.
c. $88,800.
d. $87,100.
*139. The cash account shows a balance of $85,000 before reconciliation. The bank statement does not include a deposit of $4,600 made on the last day of the month. The bank statement shows a collection by the bank of $1,880 and a customer's check for $640 was returned because it was NSF. A customer's check for $900 was recorded on the books as $1,080, and a check written for $158 was recorded as $194. The correct balance in the cash account was
a. $86,024.
b. $86,096.
c. $86,456.
d. $90,696.
*140. In preparing its May 31, 2017 bank reconciliation, Catt Co. has the following information available:
Balance per bank statement, 5/31/17 $40,000
Deposit in transit, 5/31/17 5,400
Outstanding checks, 5/31/17 4,900
Note collected by bank in May 1,250
The correct balance of cash at May 31, 2017 is
a. $45,400.
b. $39,250.
c. $40,500.
d. $41,750.
MULTIPLE CHOICE—CPA Adapted
141. On the December 31, 2017 balance sheet of Vanoy Co., the current receivables consisted of the following:
Trade accounts receivable $ 65,000
Allowance for uncollectible accounts (2,000)
Claim against shipper for goods lost in transit (November 2017) 3,000
Selling price of unsold goods sent by Vanoy on consignment
at 130% of cost (not included in Vanoy 's ending inventory) 26,000
Security deposit on lease of warehouse used for storing
some inventories 30,000
Total $122,000
At December 31, 2017, the correct total of Vanoy's current net receivables was
a. $66,000.
b. $92,000.
c. $96,000.
d. $122,000.
142. Ace Co. prepared an aging of its accounts receivable at December 31, 2017 and determined that the net realizable value of the receivables was $900,000. Additional information is available as follows:
Allowance for uncollectible accounts at 1/1/17—credit balance $102,000
Accounts written off as uncollectible during 2017 69,000
Accounts receivable at 12/31/17 975,000
Uncollectible accounts recovered during 2017 15,000
For the year ended December 31, 2017, Ace's bad debt expense would be
a. $75,000.
b. $69,000.
c. $48,000.
d. $27,000.
143. For the year ended December 31, 2017, Dent Co. estimated its allowance for uncollectible accounts using the year-end aging of accounts receivable. The following data are available:
Allowance for uncollectible accounts, 1/1/17 $126,000
Provision for uncollectible accounts during 2017 90,000
Uncollectible accounts written off, 11/30/17 104,000
Estimated uncollectible accounts per aging, 12/31/17 156,000
After year-end adjustment, the bad debt expense for 2017 should be
a. $104,000.
b. $90,000.
c. $156,000.
d. $134,000.
144. Nenn Co.'s allowance for uncollectible accounts was $190,000 at the end of 2017 and $180,000 at the end of 2016. For the year ended December 31, 2017, Nenn reported bad debt expense of $31,000 in its income statement. What amount did Nenn debit to the appropriate account in 2017 to write off actual bad debts?
a. $10,000
b. $21,000
c. $31,000
d. $41,000
145. Under the allowance method of recognizing uncollectible accounts, the entry to write off an uncollectible account
a. increases the allowance for uncollectible accounts.
b. has no effect on the allowance for uncollectible accounts.
c. has no effect on net income.
d. decreases net income.
146. The following accounts were abstracted from Starr Co.'s unadjusted trial balance at December 31, 2017:
Debit Credit
Accounts receivable $750,000
Allowance for uncollectible accounts 8,000
Net credit sales $3,000,000
Starr estimates that 6% of the gross accounts receivable will become uncollectible. After adjustment at December 31, 2017, the allowance for uncollectible accounts should have a credit balance of
a. $180,000.
b. $168,000.
c. $57,000.
d. $45,000.
147. On January 1, 2017, West Co. exchanged equipment for an $800,000 zero-interest-bearing note due on January 1, 2020. The prevailing rate of interest for a note of this type at January 1, 2017 was 10%. The present value of $1 at 10% for three periods is 0.75. What amount of interest revenue should be included in West's 2018 income statement?
a. $0
b. $60,000
c. $66,000
d. $80,000
148. On June 1, 2017, Yang Corp. loaned Gant $500,000 on a 12% note, payable in five annual installments of $100,000 beginning January 2, 2018. In connection with this loan, Gant was required to deposit $5,000 in a zero-interest-bearing escrow account. The amount held in escrow is to be returned to Gant after all principal and interest payments have been made. Interest on the note is payable on the first day of each month beginning July 1, 2017. Gant made timely payments through November 1, 2017. On January 2, 2018, Yang received payment of the first principal installment plus all interest due. At
December 31, 2017, Yang's interest receivable on the loan to Gant should be
a. $0.
b. $5,000.
c. $10,000.
d. $15,000.
149. Which of the following is a method to generate cash from accounts receivable?
Assignment Factoring
a. Yes No
b. Yes Yes
c. No Yes
d. No No
*150. In preparing its August 31, 2017 bank reconciliation, Bing Corp. has available the
following information:
Balance per bank statement, 8/31/17 $25,650
Deposit in transit, 8/31/17 3,900
Return of customer's check for insufficient funds, 8/30/17 600
Outstanding checks, 8/31/17 2,750
Bank service charges for August 100
At August 31, 2017, Bing's correct cash balance is
a. $26,800.
b. $26,200.
c. $26,100.
d. $24,500.
*151. Tresh, Inc. had the following bank reconciliation at March 31, 2017:
Balance per bank statement, 3/31/17 $74,400
Add: Deposit in transit 20,600
95,000
Less: Outstanding checks 25,200
Balance per books, 3/31/17 $69,800
Data per bank for the month of April 2017 follow:
Deposits $87,400
Disbursements 99,400
All reconciling items at March 31, 2017 cleared the bank in April. Outstanding checks at April 30, 2017 totaled $12,000. There were no deposits in transit at April 30, 2017. What is the cash balance per books at April 30, 2017?
a. $50,400
b. $57,800
c. $62,400
d. $71,000
