Multiple Choice Question
Select the right answer (only one possible answers, unless otherwise stated).
1 Doubtful debts represent
(a) Liabilities which are challenged by one of the parties
(b) Receivables which might not be collected
(c) All of these
(d) None of these
2 Accounts receivable is equivalent to
(a) Trade creditors
(b) Trade partners
(c) Trade accounts payable
(d) Trade accounts receivable
(e) All of these
(f) None of these
3 A bank overdraft should be
(a) Included in the financial fixed assets
(b) Reported as a current asset
(c) Reported as a current liability
(d) Netted against positive cash balances at other banks
(e) None of these
4 The direct write-off method is consistent with the matching accounting principle while the allowance method is not
(a) True
(b) False
5 Accounts receivable are generally valued at the
(a) Amounts invoiced to customers
(b) Net realizable value
(c) Present value of future cash flows
(d) None of these
6 Given the following information, determine the accounts receivable turnover for a retailer (two possible answers)
Beginning accounts receivable
20
Ending accounts receivable
40
Beginning cash
50
Ending cash
60
Cash sales
40
Credit sales
300
Net income
35
(a) 15
(b) 7.5
(c) 10
(d) 17
(e) 8.5
(f) 11.33
(g) 1
(h) 2
(i) 2.5
(j) 3
(k) None of these
7 An accounts receivable with a 100 percent probability of being collected is a cash equivalent
(a) True
(b) False
8 When a note receivable is discounted
(a) The note is removed from the assets
(b) The note is maintained in the assets and a liability is recorded
(c) The note is removed from the assets or maintained in the assets with a liability recorded, depending on the national GAAP
(d) None of these
9 When a provision (allowance) is no longer necessary
(a) An expense account is decreased
(b) A revenue account is increased