1Dividing net credit sales or net sales by average net accou

1)Dividing net credit sales, or net sales, by average net accounts receivable yields:

Select one: a. Asset turnover. b. Inventory turns. c. Not a meaningful calculation since sales and receivables are both debits. d. Accounts receivable turnover. e. Receivables ageing.

2)Which of the following statements is false?

Select one:

a. The Allowance for Uncollectible Accounts reduces accounts receivable to their net realizable value.

b. None of these.

c. Any existing balance in the Allowance for Uncollectible Accounts is ignored in calculating the uncollectible accounts expense under the percentage-of-sales method except that the allowance account must have a credit balance after adjustment.

d. A write-off of an account reduces the net amount shown for accounts receivable on the balance sheet.

e. The percentage-of-receivables method may use either an overall rate or a different rate for each age category.

3) Hunt Company estimates uncollectible accounts using the percentage-of-receivables method and expects that 5 percent of outstanding receivables will be uncollectible for 2014. The balance in Accounts Receivable is $200,000, and the allowance account has a $3,000 credit balance before adjustment at year-end. The uncollectible accounts expense for 2014 will be:

Select one:

a. $7,000.

b. $9,850.

c. None of these.

d. $10,000.

e. $13,000.

Solution

1. (d) Accounts receivable turnover ratio =Net Sales or Credit sales/Average accounts receivable

2. (b) None of these

All the given statements are true

3. Uncollectible accounts expense for 2014 = (200000*5%)-3000 = 7000

Ans: Option (a) $7000