Professional Documents
Culture Documents
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
y
2. Credit sales are recorded by crediting Accounts Receivable.
nl
tO
Answer: False
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Measurement
f
Difficulty: 1 Easy
Learning Objective: 07-C1
ra
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
y
Blooms: Understand
AACSB: Analytic
AICPA BB: Industry
nl
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 07-C1
Topic: Accounts Receivable
tO
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
f
Answer: False
ra
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
y
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Decision Making
Difficulty: 1 Easy
Learning Objective: 07-C2
nl
tO
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.
f
Answer: True
ra
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
y
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 07-C2
Topic: Notes Receivable
Answer: True
ra
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
y
AICPA BB: Industry
AICPA FN: Decision Making
nl
Difficulty: 2 Medium
Learning Objective: 07-C3
Topic: Disposal of Receivables
tO
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
f
ra
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
y
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
nl
AICPA FN: Risk Analysis
Difficulty: 1 Easy
Learning Objective: 07-A1
Topic: Accounts Receivable Turnover
tO
22. A high accounts receivable turnover in comparison with competitors suggests that the firm
should tighten its credit policy.
f
Answer: False
ra
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