Management 200 Exam 2 ~ Purdue University || QUESTIONS AND ANSWERS 100% PASSED!
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Module
Mgmt
Institution
Mgmt
Credit sales are recorded as
A. Debit Cash, credit Deferred Revenue
B. Debit Service Revenue, credit Accounts Receivable
C. Debit Cash, credit Service Revenue
D. Debit Accounts Receivable, credit Service Revenue correct answers D. Debit Accounts Receivable, credit Service Revenue
Identify ...
Management 200 Exam 2 ~ Purdue University ||
QUESTIONS AND ANSWERS 100% PASSED!
Credit sales are recorded as
A. Debit Cash, credit Deferred Revenue
B. Debit Service Revenue, credit Accounts Receivable
C. Debit Cash, credit Service Revenue
D. Debit Accounts Receivable, credit Service Revenue correct answers D. Debit Accounts
Receivable, credit Service Revenue
Identify the condition(s) that must exist for a sale and the related receivable to be recognized.
A. Collection of cash is probable
B. The company must have collected cash from at least one previous sale to the customer
C. Goods or services have been provided to the customer
D. Two of the other answers are conditions that must exist correct answers D. Two of the
other answers are conditions that must exist
A and C
Which of the following items are classified as receivables
A. Tax refund claims
B. Amounts owed by customers
C. Amounts loaned and expected to be collected
D. All of the other answers are classified as receivables correct answers D. All of the other
answers are classified as receivables
Identify the likely disadvantage(s) of extending credit to customers
A. Delay or failure to collect cash
B Lower profitability
C. Lower Revenues
D. All of the other answers are disadvantages of extending credit to customers correct
answers A. Delay or failure to collect cash
The Sales Returns account is an expense account
A. True
B. False correct answers B. False
Sales Returns is a contra revenue account
Which of the following computations would be used to compute Net Revenue?
A. Total Revenue + Accounts Receivable - Sales Discounts Sales Allowances
B. Net Revenue + Sales Allowances - Sales Discounts
C. Total Revenue - Sales Discounts - Sales Allowances
,D. Net Income - Change in Accounts Receivable correct answers C. Total Revenue - Sales
Discounts - Sales Allowances
Trade discounts represent a discount offered to the purchasers for a quick payment
A. True
B. False correct answers B. False
Trade discounts represent a reduction in the listed price of a product and service
When customers purchase products on account, Knomark, Inc. offers them a 2% reduction in
the amount owed if they pay within 10 days. This is an example of a:
A. Bad debt
B. Sales Discount
C. Sales Return
D. Sales Allowances correct answers B. Sales Discount
When a comany sells a $100 service with a 20% trade discount, $80 of revenue is recognized.
A. True
B. False correct answers A. True
A sales allowance is recorded as a debit to Accounts Receivable and a credit to Sales
Allowances.
A. True
B. False correct answers B. False
A sales allowance is recorded as a debit to Sales Allowances and a credit to Accounts
Receivable.
The net realizable value of accounts receivable is the full amount owed by customers
A. True
B. False correct answers B. False
Net realizable value is a net amount of cash we expect to collect.
LePage's Inc. shipped the wrong color of paint to a customer. The customer agreed to keep
the paint upon being offered a 15% price reduction. The price
reduction is an example of a:
A. Sales Revenue
B. Sales Discount
C. Sales Return
D. Sales allowance correct answers D. Sales allowance
The purpose of recording an allowance for uncollectible accounts is to:
, A. Record the sales returns and allowances
B. Report net sales conservatively
C. Report accounts receivable at net realizable value
D. Report accounts receivable for the total amount of sales in the period correct answers C.
Report accounts receivable at net realizable value
If a company has total revenues of $100,000, sales discounts of $3,000, sales returns of
$4,000, and sales allowances of $2,000, the income statement will report net revenues of
$91,000.
One advantage of the allowance method for accounting for uncollectible accounts is that the
company reports:
A. Bad debt expense in the same period as the credit sale
B. Greater total sales to customers
C. Fewer returns by customers
D. Greater total cash collected from customers correct answers A. Bad debt expense in the
same period as the credit sale
The account "Allowance for Uncollectible Accounts" is classified as a(n):
A. Liability account in the balance sheet
B. Contra revenue to credit sales in the income statement
C. Expense in the income statement
D. Contra asset to accounts receivable in the balance sheet correct answers D. Contra asset to
accounts receivables in the balance sheet
The normal balance of the account "Allowance for Uncollectible Accounts" is a _______
because _______.
A. Debit; it is a contra account to Revenue (a credit account)
B. Credit; it is a contra account to Accounts Receivable (a debit account)
C. Debit; it is an expense in the income statement
D. Credit; it is a contra account to Bad Debt Expense (a debit account) correct answers B.
Credit; it is a contra account to Accounts Receivable (a debit account)
At the end of 2018, Murray State Lenders had a balance in its Allowance for Uncollectible
Accounts of $4,500 (credit) before any adjustment. The company estimated its future
uncollectible accounts to be $12,000 using the percentage‐of‐receivables method. Murray
State's adjustment on December 31, 2018, to record its estimated uncollectible accounts
included a:
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