Sunday, 30 August 2015

Accounts Receivable, MBA Multiple choice questions and Answers

91. When an account is written off, Accounts Receivable will be credited. Under the Allowance method, the debit will go to:
a.  Bad Debts Expense
b.  Allowance for Doubtful Accounts
c.  Cash
d.  None of these
Ans: b

92. If a VISA card is accepted from the customer for payment, the debit should be to:
a. Accounts Receivable.
b. Sales.
c. Cash
d.  None of these.
Ans: c

93. Johnson receives a 3-month 6% note from a customer in the amount of $1,000. At maturity, the note will have earned how much interest?
a.  $60
b.  $5
c.  $15
d.  None of these
Ans: c

94. Johnson receives a 60-day note on June 2. The maturity date of the note will be:
a.  June 30
b.  August 1
c.  July 30
d.  None of these
Ans: b

95. Accounts Receivable turnover is calculated by dividing:
a.  Net credit Sales by Average Accounts Receivable
b.  Average Accounts Receivable by Net Sales
c.  Average Accounts Receivable by Allowance for Doubtful Accounts
d.  None of these
Ans: a

96. Johnson computes bad debts as a percentage of sales. If 2% of sales amounts to $2,000 and the Allowance account currently has a balance of $900, the bad debts adjustment should be in the amount of:
a.  $2,000
b.  $2,900
c.  $1100
d.  None of these
Ans: a

97. Warren computes bad debts as a percent of accounts receivable. The ADA account has a credit balance of $900. If an aging reveals that bad debts are estimated at $3000, the bad debts adjustment should be in the amount of:
a.  $2100
b.  $3900
c.  $3000
d.  None of these
Ans: a

98.  The adjustment for accruing interest on a note receivable requires a debit to Interest Receivable and a credit to:
a.  Notes Receivable
b.  Cash
c.  Interest Revenue
d.  None of these
Ans: c

99. All of the following statements are true regarding bad debts expense except
a. When using the income statement method, we concentrate on percentage of net credit sales.
b. When using the balance sheet method, the percentage of net credit sales is not considered.
c. Calculation of bad debts expense is required at least once a year when a company has receivables.
d. All of the above are correct.
Ans: d

100. All of the following are valid bad debts expense assumptions except
a. percentage of receivables method
b. direct write off method
c. percentage of sales method
d. treat bad debts as unusual items that do not often occur
Ans: d

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