Question : 126.All of the following statements regarding recognition of receivables under : 1258899

 

 

126.All of the following statements regarding recognition of receivables under U.S. GAAP and IFRS are true except:    

A. U.S. GAAP and IFRS have similar asset criteria that apply to recognition of receivables.

 

B. Receivables that arise from revenue-generating activities are subject to broadly similar criteria for U.S. GAAP and IFRS.

 

C. The realization principle under GAAP implies an arm’s length transaction occurs.

 

D. GAAP refers to the earnings process and IFRS refers to risk transfer and ownership reward.

 

E. Differences arise mainly from industry-specific guidance under U.S. GAAP.

 

 

 

 

127.All of the following statements regarding valuation of receivables under U.S. GAAP and IFRS are true except:   

A. Both require the allowance method for uncollectibles unless uncollectibles are immaterial.

 

B. Both require that receivables be reported net of estimated collectibles.

 

C. Both require that the expenses for estimated collectibles be recorded in the same period revenues generated from those receivables are recorded.

 

D. Both allow using percent of sales, percent of receivables, or aging of receivables to estimate uncollectibles.

 

E. Both require that the expense related to uncollectibles be recorded when the receivable is determined to be uncollectible.

 

 

 

 

128.Under IFRS, the term provision:   

A. Refers to expense.

 

B. Usually refers to a liability whose amount or timing is uncertain.

 

C. Means establishing a provision for bad debts.

 

D. Means establishing a contra-asset account.

 

E. Means establishing an asset account.

 

 

 

 

129.Winkler Company borrows $85,000 and pledges its receivables as security. The journal entry to record this transaction would be:   

A. Debit Cash of $85,000 and credit Accounts Receivable $85,000.

 

B. Debit Cash of $85,000 and credit Accounts Payable $85,000.

 

C. Debit Note Receivable $85,000 and credit Accounts Receivable $85,000.

 

D. Debit Cash $85,000 and credit Notes Payable $85,000.

 

E. Debit Accounts Receivable $85,000 and credit Notes Payable $85,000.

 

 

 

 

130.Mullis Company sold merchandise on account to a customer for $625, terms n/30. The journal entry to record this sale transaction would be:   

A. Debit Cash of $625 and credit Sales $625.

 

B. Debit Cash of $625 and credit Accounts Receivable $625.

 

C. Debit Accounts Receivable $625 and credit Sales $625.

 

D. Debit Accounts Receivable $625 and credit Cash $625.

 

E. Debit Sales $625 and credit Accounts Receivable $625.

 

 

 

 

131.Mullis Company sold merchandise on account to a customer for $625, terms n/30. The journal entry to record the collection on account would be:   

A. Debit Cash of $625 and credit Sales $625.

 

B. Debit Cash of $625 and credit Accounts Receivable $625.

 

C. Debit Accounts Receivable $625 and credit Sales $625.

 

D. Debit Accounts Receivable $625 and credit Cash $625.

 

E. Debit Sales $625 and credit Accounts Receivable $625.

 

 

 

 

132.MacKenzie Company sold $300 of merchandise to a customer who used a Regional Bank credit card. Regional Bank deducts a 1.5% service charge for sales on its credit cards and credits MacKenzie’s account immediately when sales are made. The journal entry to record this sale transaction would be:   

A. Debit Cash of $300 and credit Sales $300.

 

B. Debit Cash of $300 and credit Accounts Receivable $300.

 

C. Debit Accounts Receivable $300 and credit Sales $300.

 

D. Debit Cash $295.50; debit Credit Card Expense $4.50 and credit Sales $300.

 

E. Debit Cash $295.50 and credit Sales $295.50.

 

 

 

 

133.MacKenzie Company sold $180 of merchandise to a customer who used a Regional Bank credit card. Regional Bank deducts a 4% service charge for sales on its credit cards. MacKenzie electronically remits the credit card sales receipts to the credit card company and receives payment in approximately 5 days. The journal entry to record this sale transaction would be:   

A. Debit Cash of $180 and credit Sales $180.

 

B. Debit Cash of $180 and credit Accounts Receivable—Regional $180.

 

C. Debit Accounts Receivable—Regional $172.80; debit Credit Card Expense $7.20 and credit Sales $180.

 

D. Debit Cash $172.80; debit Credit Card Expense $7.20 and credit Sales $180.

 

E. Debit Cash $172.80 and credit Sales $172.80.

 

 

 

 

134.MacKenzie Company sold $180 of merchandise to a customer who used a Regional Bank credit card. Regional Bank deducts a 4% service charge for sales on its credit cards. MacKenzie electronically remits the credit card sales receipts to the credit card company and receives payment in approximately 5 days. The journal entry to record the collection from the credit card company would be:   

A. Debit Cash of $172.80 and credit Accounts Receivable—Regional $172.80.

 

B. Debit Cash of $180; credit Credit Card Expense $7.20 and credit Accounts Receivable $172.80.

 

C. Debit Accounts Receivable—Regional $172.80; debit Credit Card Expense $7.20 and credit Sales $180.

 

D. Debit Cash $172.80; debit Credit Card Expense $7.20 and credit Sales $180.

 

E. Debit Cash $172.80 and credit Sales $172.80.

 

 

 

 

135.Frederick Company borrows $63,000 from First City Bank and pledges its receivables as security. Which of the following is true regarding this transaction:   

A. First City Bank is the factor in this transaction.

 

B. Frederick Company’s financial statements must disclose the pledging of receivables.

 

C. Frederick Company no longer has the risk of bad debts.

 

D. First City Bank takes ownership of the receivables at the time of the pledge.

 

E. No journal entry is required for this event.

 

 

 

 

136.Majesty Productions accepted a $7,200, 120-day, 6% note from Swartz Studio on March 1. On the date the note matures, Swartz is unable to pay, but Majesty intends to continue collection efforts. What entry should Majesty record on the maturity date for this dishonored note?   

A. Debit Accounts Receivable $7,200; credit Notes Receivable $7,200.

 

B. Debit Accounts Receivable $7,200; credit Allowance for Doubtful Accounts $7,200.

 

C. Debit Bad Debt Expense $7,344; credit Notes Receivable $7,344.

 

D. Debit Accounts Receivable $7,344; credit Interest Revenue $144; credit Notes Receivable $7,200.

 

E. Debit Accounts Receivable $7,056; debit Interest Revenue $144; credit Notes Receivable $7,200.

Interest: $7,200 * .06 * 120/360 = $144