1. The sales method for estimating bad debts is calculated using ________.

A) aging of accounts receivable

B) a percentage of credit sales

C) a percentage of net accounts receivable

D) the current balance in accounts receivable

2. Team Shirts had a balance in its allowance for uncollectible accounts of $(200). Aging the accounts receivable showed that the allowance should be $(1,800). Bad debts expense should be ________.

A) $1,400

B) $1,600

C) $1,800

D) $2,000

Learning Objective 4-4

3. Credit card sales benefit companies because ________.

A) the risk of uncollectible accounts is transferred to credit card companies

B) fewer customers will be able to buy products or services

C) the credit card company is not responsible for evaluating customers credit-worthiness

D) they will receive less than the full amount of the sale from the credit card company

4. Timmys Tires sold $18,750 worth of tires to customers using VISA. The credit card fee is 4% of sales. The amount of sales Timmys Tires should recognize is ________.

A) $750

B) $19,500

C) $18,750

D) $18,000

5. Team Shirts decided to accept bankcards from credit customers. Team Shirts should expect ________.

A) an increase in its allowance for uncollectible accounts

B) a decrease in its bad debts expense

C) a decrease in its credit card expense

D) an increase in its write-off of specific customer accounts

6. Magic Cow Co. made a sale for $5,000 to a customer who paid with MasterCard. MasterCard charges Magic Cow a fee of 3% of sales. MasterCard will directly deposit the cash from this sale within 24 hours. How much cash will MasterCard deposit?

A) $5,000

B) $4,850

C) $150

D) $5,150

7. Sally has a new VISA card that was issued by MBNA (Maryland Bank of North America). Sally used her VISA card to buy five kegs of beer at Crockn Keg. Three months later, Sally still has not paid her VISA bill. Which company carries the account receivable from this sale?

A) MBNA

B) Sally

C) Crockn Keg

D) both Sally and Crockn Keg

8. Magic Cow Co. made a sale for $5,000 to a customer who paid with MasterCard. MasterCard charges Magic Cow a fee of 3% of sales. How much sales revenue will Magic Cow record?

A) $5,000

B) $4,850

C) $150

D) $5,150

Learning Objective 4-7

9. Ace Electronics accepted a promissory note from Fenstermaker, who promised to pay Ace $2,000 plus 6% interest at the end of six months. What is the amount of interest that will be paid at the end of the six-month period?

A) $120

B) $240

C) $60

D) $2,060

10. Ace Electronics accepted a promissory note from Fenstermaker, who promised to pay Ace $2,000 plus 6% interest at the end of six months. When Ace first accepts the note, it should record interest receivable of ________.

A) $120

B) $0

C) $60

D) $240

11. Acme, Inc. accepted a promissory note from NadirCo, who promised to pay Acme $5,000 plus 6% interest at the end of four months. What is the amount of interest that will be paid at the end of the four-month period?

A) $300

B) $100

C) $600

D) $5,000