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Financial and Managerial Accounting 7Th Edition Wild Test Bank Full Chapter PDF
Financial and Managerial Accounting 7Th Edition Wild Test Bank Full Chapter PDF
True/False Questions
Answer: True
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 1 Easy
Learning Objective: 07-C1
Topic: Accounts Receivable
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2. Credit sales are recorded by crediting Accounts Receivable.
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Answer: False
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Measurement
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Difficulty: 1 Easy
Learning Objective: 07-C1
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3. As long as a company accurately records total credit sales information, it is not necessary to
have separate accounts for specific customers.
Answer: False
Blooms: Understand
AACSB: Communication
AICPA BB: Industry
AICPA FN: Reporting
Difficulty: 2 Medium
Learning Objective: 07-C1
Topic: Accounts Receivable
7-1
Answer: False
Blooms: Remember
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 1 Easy
Learning Objective: 07-C1
Topic: Accounts Receivable
5. If a credit card sale is made, the seller debits Cash and credits Sales for the same amount.
Answer: False
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Blooms: Understand
AACSB: Analytic
AICPA BB: Industry
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AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 07-C1
Topic: Accounts Receivable
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6. Installment Accounts Receivable are classified as non-current assets if the installment
period is more than one year, even if the seller regularly offers customers such terms
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Answer: False
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Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Reporting
D
Difficulty: 2 Medium
Learning Objective: 07-C1
Topic: Accounts Receivable
7. Companies can report credit card expense as a reduction in net sales or as a selling
expense.
Answer: True
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Reporting
Difficulty: 1 Easy
Learning Objective: 07-C1
Topic: Accounts Receivable
7-2
Answer: False
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 3 Hard
Learning Objective: 07-C1
Topic: Accounts Receivable
9. The maturity date of a note refers to the date the note must be repaid.
Answer: True
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Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Decision Making
Difficulty: 1 Easy
Learning Objective: 07-C2
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Topic: Notes Receivable
10. A promissory note is a written promise to pay a specified amount of money either on
demand or at a definite future date.
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Answer: True
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Blooms: Remember
AACSB: Communication
AICPA BB: Industry
D
11. The formula for computing interest on a note is: Principal of the note x Annual interest
rate x Time expressed in fraction of year.
Answer: True
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 1 Easy
Learning Objective: 07-C2
Topic: Notes Receivable
7-3
Answer: True
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Decision Making
Difficulty: 1 Easy
Learning Objective: 07-C2
Topic: Notes Receivable
13. A company borrowed $10,000 by signing a six-month promissory note at 5% interest. The
amount of interest to be paid at maturity is $25.
Answer: False
Bloom’: Apply
AACSB: Analytic
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AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 07-C2
Topic: Notes Receivable
Answer: True
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Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
D
15. Sellers generally prefer to receive notes receivable rather than accounts receivable when
the credit period is long and the receivable is for a large amount.
Answer: True
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Decision Making
Difficulty: 1 Easy
Learning Objective: 07-C2
Topic: Notes Receivable
7-4
Answer: False
Blooms: Understand
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Decision Making
Difficulty: 1 Easy
Learning Objective: 07-C3
Topic: Disposal of Receivables
17. The process of using accounts receivable as security for a loan is known as pledging
accounts receivable.
Answer: True
Blooms: Understand
AACSB: Analytic
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AICPA BB: Industry
AICPA FN: Decision Making
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Difficulty: 2 Medium
Learning Objective: 07-C3
Topic: Disposal of Receivables
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18. Since pledged accounts receivables only serve as collateral for a loan and are not sold, it is
not necessary to disclose the pledging.
Answer: False
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Blooms: Understand
AACSB: Communication
AICPA BB: Industry
AICPA FN: Reporting
Difficulty: 2 Medium
D
19. A company factored $30,000 of its accounts receivable and was charged a 2% factoring
fee. The journal entry to record this transaction would include a debit to Cash of $30,000, a
debit to Factoring Fee Expense of $600, and credit to Accounts Receivable of $30,600.
Answer: False
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 07-C3
Topic: Disposal of Receivables
7-5
Answer: True
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Risk Analysis
Difficulty: 1 Easy
Learning Objective: 07-A1
Topic: Accounts Receivable Turnover
21. The accounts receivable turnover indicates how often accounts receivable are received
and collected during the period.
Answer: True
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Blooms: Remember
AACSB: Communication
AICPA BB: Industry
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AICPA FN: Risk Analysis
Difficulty: 1 Easy
Learning Objective: 07-A1
Topic: Accounts Receivable Turnover
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22. A high accounts receivable turnover in comparison with competitors suggests that the firm
should tighten its credit policy.
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Answer: False
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Blooms: Understand
AACSB: Communication
AICPA BB: Industry
AICPA FN: Risk Analysis
D
Difficulty: 2 Medium
Learning Objective: 07-A1
Topic: Accounts Receivable Turnover
23. The accounts receivable turnover is calculated by dividing average accounts receivable by
net sales.
Answer: False
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Risk Analysis
Difficulty: 1 Easy
Learning Objective: 07-A1
Topic: Accounts Receivable Turnover
7-6
Answer: True
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Risk Analysis
Difficulty: 3 Hard
Learning Objective: 07-A1
Topic: Accounts Receivable Turnover
25. A Company had net sales of $23,000, and its average account receivables were $5,700. Its
accounts receivable turnover is 0.24.
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Answer: False
Blooms: Apply
AACSB: Analytic
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AICPA BB: Industry
AICPA FN: Risk Analysis
Difficulty: 2 Medium
Learning Objective: 07-A1
Topic: Accounts Receivable Turnover
26. The direct write-off method of accounting for bad debts records the loss from an
D
Answer: True
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 1 Easy
Learning Objective: 07-P1
Topic: Valuing Accounts Receivable—Direct Write-off Method
7-7
Answer: True
Blooms: Understand
AACSB: Communication
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 07-P2
Topic: Valuing Accounts Receivable—Allowance Method
28. Companies follow both the expense recognition (matching) principle and the materiality
constraint when applying the direct write-off method.
Answer: False
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Blooms: Understand
AACSB: Communication
AICPA BB: Industry
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AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 07-P1
Topic: Valuing Accounts Receivable—Direct Write-off Method
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29. The use of the direct write-off method is allowed under the materiality constraint.
Answer: True
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Blooms: Understand
AACSB: Communication
AICPA BB: Industry
AICPA FN: Measurement
D
Difficulty: 2 Medium
Learning Objective: 07-P1
Topic: Valuing Accounts Receivable—Direct Write-off Method
30. The advantage of the allowance method of accounting for bad debts is that it identifies the
specific customers who will not pay their bills.
Answer: False
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 1 Easy
Learning Objective: 07-P2
Topic: Valuing Accounts Receivable—Allowance Method
7-8
Answer: True
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 1 Easy
Learning Objective: 07-P1
Learning Objective: 07-P2
Topic: Valuing Accounts Receivable—Direct Write-off Method
Topic: Valuing Accounts Receivable—Allowance Method
32. No attempt is made to estimate bad debts expense under the allowance method of
accounting for uncollectible accounts receivable.
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Answer: False
Blooms: Understand
AACSB: Communication
AICPA BB: Industry
AICPA FN: Measurement
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Difficulty: 2 Medium
Learning Objective: 07-P3
Topic: Valuing Accounts Receivable—Allowance Method
33. The expense recognition (matching) principle permits the use of the direct write-off
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method of accounting for uncollectible accounts when bad debts are very large in relation to
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a company's other financial statement items such as sales and net income.
Answer: False
D
Blooms: Understand
AACSB: Communication
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 07-P1
Topic: Valuing Accounts Receivable—Direct Write-off Method
7-9
Answer: True
Blooms: Understand
AACSB: Communication
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 07-P2
Topic: Valuing Accounts Receivable—Allowance Method
35. After adjustment, the balance in the Allowance for Doubtful Accounts has the effect of
reducing Accounts Receivable to its estimated realizable value.
Answer: True
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Blooms: Remember
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AACSB: Communication
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 1 Easy
Learning Objective: 07-P2
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Topic: Valuing Accounts Receivable—Allowance Method
36. When using the allowance method of accounting for uncollectible accounts, the entry to
write off Jeannie’s uncollectible account is a debit to Allowance for Doubtful Accounts and a
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Answer: True
D
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 07-P2
Topic: Valuing Accounts Receivable—Allowance Method
37. The realizable value refers to the expected proceeds from converting an asset into cash.
Answer: True
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 07-P2
Topic: Valuing Accounts Receivable—Allowance Method
7-10
Answer: False
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 07-P2
Topic: Valuing Accounts Receivable—Allowance Method
39. The allowance method of accounting for bad debts matches the estimated loss from
uncollectible accounts receivable against the sales they helped produce.
Answer: True
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Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
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Learning Objective: 07-P2
Topic: Valuing Accounts Receivable—Allowance Method
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D
7-11
Answer: False
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 3 Hard
Learning Objective: 07-P2
Topic: Valuing Accounts Receivable—Allowance Method
41. The aging of accounts receivable involves classifying each account receivable by how
long it is past its due date and estimating the percent of each uncollectible class.
Answer: True
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Blooms: Remember
AACSB: Communication
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AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 1 Easy
Learning Objective: 07-P3
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Topic: Estimate uncollectible accounts receivable – based on receivables
42. Installment accounts receivable is another name for aging of accounts receivable.
Answer: False
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Blooms: Remember
AACSB: Communication
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43. The accounts receivable method to estimate bad debts obtains the estimated balance in the
Allowance for Doubtful Accounts in one of two ways: (1) computing the percent
uncollectible from the total accounts receivable or (2) aging accounts receivable.
Answer: True
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 1 Easy
Learning Objective: 07-P3
Topic: Estimate uncollectible accounts receivable – based on receivables
7-12
Answer: True
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 1 Easy
Learning Objective: 07-P3
Topic: Estimate uncollectible accounts receivable – based on sales
45. The percent of sales method for estimating bad debts uses only income statement account
balances to estimate bad debts.
Answer: True
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Blooms: Understand
AACSB: Communication
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AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 07-P3
tO
Topic: Estimate uncollectible accounts receivable – based on sales
46. The aging method of determining bad debts expense is based on the knowledge that the
longer a receivable is past due, the higher the likelihood of collection.
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Answer: False
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Blooms: Remember
AACSB: Communication
D
7-13
Answer: False
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Topic: Estimate uncollectible accounts receivable – based on receivables
48. A company has $80,000 in outstanding accounts receivable and it uses the allowance
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method to account for uncollectible accounts. Experience suggests that 6% of outstanding
receivables are uncollectible. The current debit balance (before adjustments) in the allowance
for doubtful accounts is $1,200. The journal entry to record the adjustment to the allowance
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account includes a debit to Bad Debts Expense for $6,000.
Answer: True
f
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 3 Hard
Learning Objective: 07-P3
Topic: Estimate uncollectible accounts receivable – based on receivables
7-14
Answer: True
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 07-P3
Topic: Estimate uncollectible accounts receivable – based on sales
50. A company using the percentage of sales method for estimating bad debts has sales of
$350,000 and estimates that 1.0% of its sales are uncollectible. The unadjusted balance in
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Allowance for Doubtful Accounts is a $300 credit. The estimated amount of bad debts
expense is $3,200.
Answer: False
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Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 07-P3
Topic: Estimate uncollectible accounts receivable – based on sales
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Feedback: $350,000 * 0.01 = $3,500 (existing balance in Allowance for Doubtful Accounts is
ignored.)
D
51. The percent of sales method of estimating bad debts focuses more on the realizable value
of accounts receivable than on expense recognition.
Answer: False
Blooms: Understand
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 07-P3
Topic: Estimate uncollectible accounts receivable – based on sales
52. The period of a note is the time from the note’s (contract) date to its maturity date.
7-15
53. Notes receivable are classified as current liabilities regardless of the time to maturity.
Answer: False
Blooms: Remember
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
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Difficulty: 1 Easy
Learning Objective: 07-C2
Topic: Notes Receivable
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54. A company received a $15,000, 90-day, 10% note receivable. The journal entry to record
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receipt of the note includes a debit to Notes Receivable.
Answer: True
Blooms: Understand
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AACSB: Analytic
AICPA BB: Industry
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55. For legal reasons, it is not advisable to accept a note receivable in exchange for an
overdue account receivable.
Answer: False
Blooms: Remember
AACSB: Reflective Thinking
AICPA BB: Legal
AICPA FN: Risk Analysis
Difficulty: 1 Easy
Learning Objective: 07-C2
Topic: Notes Receivable
56. A note that the maker is unable or refuses to pay at maturity is called a dishonored note.
7-16
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Decision Making
Difficulty: 1 Easy
Learning Objective: 07-P4
Topic: Valuing and Settling Notes
57. A maker who dishonors a note is one who does not pay it at maturity.
Answer: True
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Decision Making
Difficulty: 1 Easy
Learning Objective: 07-P4
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Topic: Valuing and Settling Notes
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58. When a note receivable is dishonored, it reverts to an account receivable.
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Answer: True
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Decision Making
f
Difficulty: 1 Easy
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59. The notes receivable account of a business should include both the notes that have not yet
matured and the dishonored notes.
Answer: False
Blooms: Understand
AACSB: Communication
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 07-P4
Topic: Valuing and Settling Notes
60. The practice of placing dishonored notes receivable into accounts receivable keeps only
notes that have not yet matured in the Notes Receivable account.
Answer: True
7-17
61. The expense recognition (matching) principle requires that accrued interest on outstanding
notes receivable be recorded at the end of each accounting period.
Answer: True
Blooms: Understand
AACSB: Communication
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 07-P4
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Topic: Valuing and Settling Notes
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62. When posting a dishonored note to a customer’s account, an explanation is included so as
not to misinterpret the debit as a sale on account.
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Answer: True
Blooms: Understand
AACSB: Communication
f
Difficulty: 2 Medium
Learning Objective: 07-P4
Topic: Valuing and Settling Notes
D
63. The banker’s rule simplifies interest computations by treating a year as having 365 days.
Answer: False
Blooms: Understand
AACSB: Communication
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 07-P4
Topic: Valuing and Settling Notes
7-18
Answer: E
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 1 Easy
Learning Objective: 07-C1
Topic: Accounts Receivable
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D
7-19
Answer: A
Blooms: Understand
AACSB: Communication
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 07-C1
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Topic: Accounts Receivable
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66. Sellers allow customers to use credit cards for all of the following reasons except:
A. To be able to charge more due to fees and interest.
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B. To lessen the risk of extending credit to customers who cannot pay.
C. To speed up receipt of cash from the credit sale.
D. To increase total sales volume.
E. To avoid having to evaluate a customer's credit standing for each sale.
f
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Answer: A
Blooms: Remember
AACSB: Communication
D
7-20
Answer: D
Blooms: Understand
AACSB: Communication
AICPA BB: Industry
AICPA FN: Reporting
Difficulty: 2 Medium
Learning Objective: 07-C1
Topic: Accounts Receivable
68. A promissory note received from a customer in exchange for an account receivable is
recorded by the payee as:
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A. A cash equivalent.
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B. An account receivable.
C. A note receivable.
D. A short-term investment.
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E. A note payable.
Answer: C
Blooms: Remember
AACSB: Communication
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7-21
70. Reporting the details of notes is consistent with which accounting principle that requires
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financial statements (including footnotes) to report all relevant information?
A. Relevance.
B. Full disclosure.
C. Evaluation.
D. Materiality. nl
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E. Expense recognition (matching).
Answer: B
Blooms: Remember
f
AACSB: Communication
AICPA BB: Industry
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Answer: B
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Decision Making
Difficulty: 1 Easy
Learning Objective: 07-C2
Topic: Notes Receivable
7-22
Answer: C
Blooms: Remember
AACSB: Communication
AICPA BB: Legal
AICPA FN: Decision Making
Difficulty: 1 Easy
Learning Objective: 07-C2
Topic: Notes Receivable
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A. $ 450.00
B. $ 37.50.
C. $ 112.50.
D. $ 11.25.
E. $1,800.00. nl
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Answer: C
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
f
Difficulty: 2 Medium
Learning Objective: 07-C2
Topic: Notes Receivable
Answer: A
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 07-C2
Topic: Notes Receivable
7-23
Answer: A
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 07-C2
Topic: Notes Receivable
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Feedback: $1,500 * 0.10 * 120/360 = $50.00
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76. A company borrowed $10,000 by signing a 180-day promissory note at 9%. The total
interest due on the maturity date is.
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A. $900
B. $75
C. $450
D. $300
E. $1,800
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Answer: C
Blooms: Apply
AACSB: Analytic
D
7-24
Answer: A
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 07-C2
Topic: Notes Receivable
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78. A finance company or bank that purchases and takes ownership of another company's
accounts receivable is called a:
A. Payer.
B. Pledger. nl
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C. Factor.
D. Payee.
E. Pledgee.
Answer: C
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Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Decision Making
Difficulty: 1 Easy
D
7-25
Answer: C
Blooms: Understand
AACSB: Communication
AICPA BB: Industry
AICPA FN: Decision Making
Difficulty: 2 Medium
Learning Objective: 07-C3
Topic: Disposal of Receivables
80. A company factored $45,000 of its accounts receivable and was charged a 4% factoring
fee. The journal entry to record this transaction would include a:
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A. Debit to Cash of $45,000, a debit to Factoring Fee Expense of $1,800, and credit to
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Accounts Receivable of $46,800.
B. Debit to Cash of $45,000 and a credit to Accounts Receivable of $45,000.
C. Debit to Cash of $43,200, a debit to Factoring Fee Expense of $1,800, and a credit to
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Accounts Receivable of $45,000.
D. Debit to Cash of $46,800 and a credit to Accounts Receivable of $46,800.
E. Debit to Cash of $45,000 and a credit to Notes Payable of $45,000.
Answer: C
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Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
D
7-26
Answer: C
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Risk Analysis
Difficulty: 1 Easy
Learning Objective: 07-A1
Topic: Accounts Receivable Turnover
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A. How long it takes to sell accounts receivable to a factor.
B. How often, on average, receivables are received and collected during the period.
C. The relation of cash sales to credit sales.
D. How long it takes to sell merchandise inventory.
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E. All of the options are correct.
Answer: B
Blooms: Remember
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AACSB: Communication
AICPA BB: Industry
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Answer: A
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Risk Analysis
Difficulty: 1 Easy
Learning Objective: 07-A1
Topic: Accounts Receivable Turnover
7-27
Answer: E
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Risk Analysis
Difficulty: 2 Medium
Learning Objective: 07-A1
Topic: Accounts Receivable Turnover
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Accounts Receivable Turnover = $1,200,000/$400,000 = 3.0
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85. Pepperdine reported net sales of $8,600 million, net income of $126 million and average
accounts receivable of $890 million. Its accounts receivable turnover is:
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A. 37.8.
B. 9.7.
C. 68.3.
D. 7.1.
E. 51.7.
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Answer: B
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
D
7-28
Answer: B
Blooms: Analyze
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Risk Analysis
Difficulty: 3 Hard
Learning Objective: 07-A1
Topic: Accounts Receivable Turnover
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87. A company had net sales of $600,000, total sales of $750,000, and an average accounts
receivable of $75,000. Its accounts receivable turnover equals:
A. .13
B. .80
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C. 7.75
D. 8.00
E. 10.00
Answer: D
f
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Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Risk Analysis
Difficulty: 3 Hard
D
7-29
Answer: A
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Risk Analysis
Difficulty: 3 Hard
Learning Objective: 07-A1
Topic: Accounts Receivable Turnover
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Accounts Receivable Turnover = $550,000/$90,000 = 6.1
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89. The expense recognition (matching) principle, as applied to bad debts, requires:
A. That expenses be ignored if their effect on the financial statements is unimportant to users'
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business decisions.
B. The use of the direct write-off method for bad debts.
C. The use of the allowance method of accounting for bad debts.
D. That bad debts be disclosed in the financial statements.
E. That bad debts not be written off.
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Answer: C
Blooms: Understand
AACSB: Communication
D
7-30
Answer: A
Blooms: Understand
AACSB: Communication
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 07-P1
Topic: Valuing Accounts Receivable—Direct Write-off Method
y
91. If the credit balance of the Allowance for Doubtful Accounts account exceeds the amount
of a bad debt being written off, the entry to record the write-off against the allowance
account results in:
A. An increase in the expenses of the current period.
B. A reduction in current assets.
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C. A reduction in equity.
D. No effect on the expenses of the current period.
E. A reduction in current liabilities.
Answer: D
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Blooms: Analyze
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
D
Difficulty: 3 Hard
Learning Objective: 07-P2
Topic: Valuing Accounts Receivable—Allowance Method
7-31
Answer: B
Blooms: Analyze
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 3 Hard
Learning Objective: 07-P2
Topic: Valuing Accounts Receivable—Allowance Method
y
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93. On October 12 of the current year, a company determined that a customer's account
receivable was uncollectible and that the account should be written off. Assuming the direct
write-off method is used to account for bad debts, what effect will this write-off have on the
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company's net income and total assets?
A. Decrease in net income; no effect on total assets.
B. No effect on net income; no effect on total assets.
C. Decrease in net income; decrease in total assets.
D. Increase in net income; no effect on total assets.
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Answer: C
D
Blooms: Analyze
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 3 Hard
Learning Objective: 07-P1
Topic: Valuing Accounts Receivable— Direct Write-off Method
94. Gideon Company uses the allowance method of accounting for uncollectible accounts. On
May 3, the Gideon Company wrote off the $2,000 uncollectible account of its customer, A.
Hopkins. The entry or entries Gideon makes to record the write off of the account on May 3
is:
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E. Cash 2,000
Accounts Receivable—A. Hopkins 2,000
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Answer: D
Blooms: Apply
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AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
tO
Learning Objective: 07-P2
Topic: Valuing Accounts Receivable—Allowance Method
95. Gideon Company uses the direct write-off method of accounting for uncollectible
accounts. On May 3, the Gideon Company wrote off the $2,000 uncollectible account of its
customer, A. Hopkins. The entry or entries Gideon makes to record the write off of the
account on May 3 is:
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E. Cash 2,000
Accounts Receivable—A. Hopkins 2,000
Answer: D
7-33
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D
7-34
B. Cash 2,000
Bad Debts Expense 2,000
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D. Allowance for Doubtful Accounts 2,000
Accounts Receivable—A. Hopkins
Accounts Receivable—A. Hopkins
Cash
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2,000
2,000
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E. Cash 2,000
Accounts Receivable—A. Hopkins 2,000
Answer: A
f
Blooms: Apply
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AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 07-P2
D
97. Gideon Company uses the direct write-off method of accounting for uncollectible
accounts. On May 3, the Gideon Company wrote off the $2,000 uncollectible account of its
customer, A. Hopkins. On July 10, Gideon received a check for the full amount of $2,000
from Hopkins. On July 10, the entry or entries Gideon makes to record the recovery of the
bad debt is:
B. Cash 2,000
Bad Debts Expense 2,000
7-35
E. Cash 2,000
Accounts Receivable—A. Hopkins 2,000
Answer: C
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
y
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 07-P1
nl
Topic: Valuing Accounts Receivable—Direct Write-off Method
tO
98. The allowance method based on the idea that a given percent of a company’s credit sales
for the period is uncollectible is:
A. The percent of sales method.
B. The percent of accounts receivable method.
C. The aging of accounts receivable method.
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E. Factoring method.
Answer: A
D
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Decision Making
Difficulty: 1 Easy
Learning Objective: 07-P3
Topic: Estimate uncollectible accounts receivable – based on sales
7-36
Answer: B
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Decision Making
Difficulty: 1 Easy
Learning Objective: 07-P3
Topic: Estimate uncollectible accounts receivable – based on receivables
y
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D
7-37
Answer: A
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Decision Making
Difficulty: 1 Easy
Learning Objective: 07-P2
Topic: Valuing Accounts Receivable—Allowance Method
y
101. On December 31 of the current year, the unadjusted trial balance of a company using the
nl
percent of receivables method to estimate bad debt included the following: Accounts
Receivable, debit balance of $95,250; Allowance for Doubtful Accounts, credit balance of
$921. What amount should be debited to Bad Debts Expense, assuming 6% of outstanding
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accounts receivable at the end of the current year are estimated to be uncollectible?
A. $5,715.
B. $6,636.
C. $4,794.
D. $5,770.
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E. $5,660.
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Answer: C
D
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 3 Hard
Learning Objective: 07-P3
Topic: Estimate uncollectible accounts receivable – based on receivables
Feedback:
Desired balance in allowance account: $95,250 * .06 = $5,715 credit
Current balance in allowance account: – 921 credit
Required: amount of Bad Debts Expense: $4,794 credit
7-38
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Sales 16,125
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E. Accounts Receivable 16,125
Allowance for Doubtful Accounts 16,125
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Answer: C
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
f
Difficulty: 3 Hard
Learning Objective: 07-P3
Topic: Estimate uncollectible accounts receivable – based on receivables
Feedback:
D
103. A company ages its accounts receivables to determine its end of period adjustment for
bad debts. At the end of the current year, management estimated that $15,750 of the accounts
receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance
for Doubtful Accounts had a credit balance of $375. What adjusting entry should the
company make at the end of the current year to record its estimated bad debts expense?
Answer: C
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
y
AICPA FN: Measurement
Difficulty: 3 Hard
Learning Objective: 07-P3
nl
Topic: Estimate uncollectible accounts receivable – based on receivables
Feedback:
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Desired balance in allowance account: 15,750 credit
Current balance: 375 credit
Required: adjustment to allowance $15,375 credit
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D
7-40
All sales are made on credit. Based on past experience, the company estimates that 0.6% of
net credit sales are uncollectible. What amount should be debited to Bad Debts Expense when
the year-end adjusting entry is prepared?
A. $1,275
B. $1,775
C. $4,500
D. $4,800
E. $5,500
y
Answer: D
Blooms: Apply
AACSB: Analytic
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AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 3 Hard
Learning Objective: 07-P3
Topic: Estimate uncollectible accounts receivable – based on sales
105. A company uses the percent of sales method to determine its bad debts expense. At the
end of the current year, the company's unadjusted trial balance reported the following
selected amounts:
D
7-41
Answer: D
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 3 Hard
Learning Objective: 07-P3
Topic: Estimate uncollectible accounts receivable – based on sales
y
Feedback: $800,000 * 0.006 = $4,800
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D
7-42
All sales are made on credit. Based on past experience, the company estimates 0.6% of net
credit sales to be uncollectible. What adjusting entry should the company make at the end of
the current year to record its estimated bad debts expense?
A. Debit Bad Debts Expense $2,130; credit Allowance for Doubtful Accounts $2,130.
B. Debit Bad Debts Expense $2,630; credit Allowance for Doubtful Accounts $2,630.
C. Debit Bad Debts Expense $4,300; credit Allowance for Doubtful Accounts $4,300.
D. Debit Bad Debts Expense $4,800; credit Allowance for Doubtful Accounts $4,800.
E. Debit Bad Debts Expense $5,300; credit Allowance for Doubtful Accounts $5,300
y
Answer: D
Blooms: Apply
AACSB: Analytic
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AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 3 Hard
Learning Objective: 07-P3
Topic: Estimate uncollectible accounts receivable – based on sales
7-43
Answer: E
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 3 Hard
Learning Objective: 07-P3
y
Topic: Estimate uncollectible accounts receivable – based on receivables
nl
Feedback:
Desired balance in allowance account: $90,000 x .04 = $3,600 credit
Current balance in allowance account: + 800 debit
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Adjustment to allowance: $4,400 credit
108. A company has $90,000 in outstanding accounts receivable and it uses the allowance
method to account for uncollectible accounts. Experience suggests that 4% of outstanding
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receivables are uncollectible. The current balance (before adjustments) in the allowance for
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doubtful accounts is an $800 credit. The journal entry to record the adjustment to the
allowance account includes a debit to Bad Debts Expense for:
A. $2,800
D
B. $3,568
C. $3,632
D. $3,600
E. $4,400
Answer: A
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 3 Hard
Learning Objective: 07-P3
Topic: Estimate uncollectible accounts receivable – based on receivables
Feedback:
Desired balance in allowance account: $90,000 x .04 = $3,600 credit
Current balance in allowance account: - 800 credit
7-44
109. Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. Jasper’s entry to record
the transaction should be:
A. Debit Notes Receivable for $25,000; credit Cash $25,000.
B. Debit Accounts Receivable $25,000; credit Notes Receivable $25,000.
C. Debit Cash $25,000; credit Notes Receivable for $25,000.
D. Debit Notes Payable $25,000; credit Accounts Payable $25,000.
E. Debit Notes Receivable $25,000; credit Sales $25,000.
Answer: A
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
y
Learning Objective: 07-C2
Topic: Notes Receivable
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110. Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. The amount of interest
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that Jasper will collect on the loan is:
A. $1,750.
B. $145.83.
C. $437.50.
D. $19.44.
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E. $875.00.
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Answer: C
D
7-45
Jos itse teet syntiä ja olet murheissasi aina kuolemaan asti tai jos
murehdit odottamatonta syntiäsi, niin riemuitse toisen puolesta,
riemuitse nuhteettoman puolesta, riemuitse siitä, että jos sinä olet
tehnyt syntiä, niin hän sen sijaan on hurskas eikä ole tehnyt syntiä.
*****
KOLMAS OSA
Seitsemäs kirja
Aljoša
1.
Ruumiin haju
Pappismunkki isä Zosima vainajan ruumis valmisteltiin kuntoon
haudattavaksi säädettyjen menojen mukaisesti. Kuten tunnettua ei
kuolleita munkkeja ja lihansakiduttajia pestä. »Kun joku munkeista
menee Jumalan tykö (sanotaan Suuressa Kirkkokäsikirjassa), niin
asianomainen munkki (t.s. tämän toimekseen saanut) pyyhkii hänen
ruumiinsa lämpimällä vedellä, tehtyään sitä ennen sienellä (s.o.
pesusienellä) ristin vainajan otsalle, rintaan, käsiin, jalkoihin ja
polviin, mutta ei mitään muuta.» Kaiken tämä tekikin vainajalle itse
isä Paísi. Pyyhkimisen jälkeen hän puki hänet munkin pukuun ja
kääri hänen ympärilleen viitan, jota varten hän säännön mukaisesti
jonkin verran leikkasi viittaa halki saadakseen sen kiedotuksi ristin
muotoon. Kuolleen päähän hän pani päähineen, jossa oli
kahdeksankärkinen risti. Päähine oli jätetty avoimeksi, mutta
vainajan kasvot peitettiin mustalla ehtoolliskalkkiliinalla. Hänen
käsiinsä pantiin Vapahtajan kuva. Tässä asussa hänet asetettiin
ruumisarkkuun (joka oli varattu jo paljon aikaisemmin). Arkku aiottiin
jättää kammioon (etumaiseen isoon huoneeseen, samaan, jossa
luostarinvanhin-vainaja oli ottanut vastaan veljeskunnan jäseniä ja
maallikoita) koko päiväksi. Koska vainaja oli arvoltaan pappismunkki,
niin hänen ruumiinsa ääressä oli pappismunkkien ja pappisdiakonien
luettava evankeliumia eikä psalttaria. Lukemisen aloitti heti
kuolinmessun jälkeen isä Josef; isä Paísi taas, joka oli itse tahtonut
sen jälkeen lukea koko päivän ja koko yön, oli vielä toistaiseksi kiinni
monissa puuhissa ja huolissa yhdessä erakkomajaston esimiehen
kanssa, sillä äkkiä oli alkanut tulla näkyviin, ja tuli sitä enemmän kuta
pitemmälle päivä kului, sekä veljeskunnan että luostarin majataloista
ja kaupungista suurin joukoin saapuneitten maallikkojen
keskuudessa jotakin tavatonta, ennenkuulumatonta ja
»sopimatontakin» kuohuntaa ja kärsimätöntä odotusta. Sekä esimies
että isä Paísi tekivät voitavansa rauhoittaakseen mikäli mahdollista
noita turhan tähden kiihtyneitä. Kun päivä jo oli valjennut, niin
kaupungista alkoi saapua muutamia sellaisiakin, jotka olivat ottaneet
mukaansa sairaita, varsinkin lapsia, — aivan kuin olisivat sitä varten
odottaneet nimenomaan tätä hetkeä, nähtävästi luottaen heti
vaikuttavaan parantavaan voimaan, joka, kuten he uskoivat, aivan
kohta oli ilmenevä. Ja nyt vasta kävi selville, miten suuressa määrin
meillä kaikki olivat tottuneet pitämään luostarinvanhin-vainajaa jo
hänen eläessään ehdottomasti suurena pyhimyksensä. Eikä tulijain
joukossa ollut ainoastaan rahvasta. Tämä uskovaisten suuri odotus,
joka oli niin nopeasti ja avoimesti saanut ilmaisunsa, vieläpä
kärsimättömässä ja miltei vaativassa muodossa, oli isä Paísin
mielestä selvää pahennusta, ja vaikka hän oli sitä jo kauan sitten
aavistanut, niin se oli suurempi kuin hän oli odottanut. Kohdatessaan
kiihtymyksen valtaan joutuneita munkkeja isä Paísi alkoi suorastaan
nuhdella heitä: »Jonkin suuren asian odottaminen tuolla tavoin ja
näin heti», puhui hän, »on kevytmielisyyttä, jommoinen on
mahdollinen vain maailmanlasten keskuudessa, mutta ei sovi
meille». Mutta hänen puhettaan ei sanottavasti otettu huomioon, ja
isä Paísi huomasi tämän levottomuudekseen, siitä huolimatta, että
hän itsekin (mainitaksemme kaikki totuudenmukaisesti), vaikka
häntä huolestuttivatkin liian kärsimättömät odotukset ja hän piti niitä
kevytmielisyytenä ja turhuutena, salaa sisimmässään odotti melkein
samaa, mitä nuo kiihtyneetkin, eikä voinut olla sitä itselleen
tunnustamatta. Kuitenkin eräät kohtaamiset olivat hänestä erittäin
epämiellyttäviä ja herättivät hänessä, jonkinmoisen aavistuksen
vaikutuksesta, suuria epäilyksiä. Vainajan kammiossa tungeksivassa
joukossa hän näki, tuntien henkistä inhoa (josta hän samassa
soimasi itseään), esimerkiksi Rakitinin tai kaukaa saapuneen
obdorskilaisen vieraan, munkin, joka yhä viipyi luostarissa, ja heitä
kumpaakin isä Paísi äkkiä jostakin syystä alkoi pitää epäilyttävinä, —
vaikka he eivät olleet ainoat, jotka olisi voinut tässä mielessä panna
merkille. Kaikista kiihtymyksen tilassa olevista touhusi obdorskilainen
munkki kaikkein enimmän; hänet saattoi nähdä kaikkialla ja joka
paikassa: kaikkialla hän kyseli, kaikkialla kuunteli toisten puheita,
kaikkialla kuiskutteli omituisen salaperäisen näköisenä. Hänen
kasvojensa ilme oli mitä kärsimättömin ja ikäänkuin ärtynyt. Mitä taas
Rakitiniin tulee, niin tämä oli, kuten myöhemmin kävi selville,
ilmestynyt niin aikaisin erakkomajaan rouva Hohlakovin erityiselle
asialle. Heti kun tämä hyväntahtoinen, mutta löperöluonteinen
nainen, jota itseään ei voitu päästää erakkomajaan, oli herännyt ja
saanut kuulla vainajasta, hänet äkkiä valtasi niin kiihkeä uteliaisuus,
että hän paikalla toimitti sijastaan erakkomajaan Rakitinin, jotta tämä
pitäisi silmällä kaikkea ja heti ilmoittaisi hänelle kirjeellisesti,
esimerkiksi aina puolen tunnin kuluttua, kaikesta mitä tapahtuu.
Rakitinia hän piti hyvin hurskaana ja uskovaisena nuorukaisena, —
siinä määrin osasi tämä asettua sopivaan suhteeseen jokaiseen ja
esiintyä jokaiselle mieluisassa valossa, jos vain katsoi siitä olevan
vähänkin etua itselleen. Päivä oli kirkas ja valoisa, ja saapuneista
rukoilijoista olivat monet erakkomajaston hautojen luona, joita oli
tiheämmässä kirkon ympärillä, mutta siellä täällä muuallakin koko
alueella. Kulkiessaan erakkomajoissa isä Paísi äkkiä muisti Aljošan
ja ettei ollut nähnyt tätä pitkään aikaan, ei sen koommin kuin yöllä.
Mutta juuri kun hän oli muistanut Aljošan, hän näkikin hänet alueen
kaukaisimmassa nurkassa aidan luona istumassa erään jo kauan
sitten kuolleen sankariteoistaan kuulun munkin hautakivellä. Hän
istui selin erakkomajaan, kasvot aitaan päin ja ikäänkuin piilossa
muistomerkin takana. Isä Paísi astui hänen luokseen ja näki, että
hän kasvot käsiin peitettyinä äänettömästi mutta katkerasti itki ja että
koko hänen ruumiinsa värisi nyyhkytyksistä. Isä Paísi seisoi jonkin
aikaa hänen luonaan.
— Riittää, rakas poikani, riittää, ystävä, — lausui hän viimein
tunteikkaasti, — mitä sinä nyt? Riemuitse, äläkä itke. Vai etkö tiedä,
että tämä päivä on suurin hänen päivistään? Missä hän on nyt, tällä
hetkellä, muistapa vain sitä!