Chapter 5 - Receivables & Sales
This term refers to amounts owed to a company by customers for credit sales.
Accounts Receivable
Under a perpetual inventory system, this account is debited when a company purchases inventory
Inventory
Which depreciation method distributes depreciation evenly throughout its useful life?
Straight-Line
What do we debit when a bond is issued at a discount?
Cash & Discount on Bonds Payable
When a company sells goods on account with credit terms 2/10, n/30, what is the journal entry?
Debit: Accounts Receivable
Credit: Sales Revenue
What is the journal entry when recording a return of inventory previously purchased in a perpetual inventory system?
Debit: Accounts Payable
Credit: Inventory
Research and Development costs go on what financial statement
Income Statement.
When a company pays interest on a bond issued at a discount, which account(s) is credited?
Cash & Discount on Bonds Payable
The journal entry to write off accounts receivable is:
Debit: Allowance for uncollectible accounts
Credit: Accounts Receivable
When does the lower-of-cost-and-net-realizable-value (LCNRV) rule require a company to recognize a loss on inventory?
When the value of inventory is below cost
DeltaTech Inc. purchased a piece of equipment at a cost of $80,000. The estimated useful life is 8 years, and the estimated residual value is $8,000. Assuming the company uses the double-declining-balance method, what is the depreciation expense for the second year? (Round to the nearest dollar.)
$15,000
A bond issue with a face amount of $600,000 bears interest at the rate of 8%. The current market rate of interest is 7%. These bonds will sell at a price that is:
(over/under face)
Over $600,000
Hazelbaker took out a 1-year, 6%, $80,000 loan on May 31, 2025. Interest is due upon maturity of the loan. As of December 31st, 2025, what amount, if any, should Hazelbaker report for interest payable?
80,000 x .06 = 4,800 / 12 = 400 x 7 = $2,800
Hazelbaker Inc.'s sales equal $90,000 and cost of goods sold equals $50,000. Its beginning inventory was $2,400 and its ending inventory is $3,600. Hazelbaker's inventory turnover ratio equals:
16.7 times
Creston Solutions purchased office equipment for $25,000. The equipment has an estimated useful life of 5 years and no residual value. The company uses the straight-line method of depreciation. At the end of the fourth year, the equipment is sold for $10,000 cash. How much gain or loss should Creston Solutions record on the sale?
$5,000 gain
What is the formula for calculating interest expense on a bond?
Interest Expense = Market Rate x Carrying Value x 0.5
Joe reports net credit sales of $390,000 for the year. The company's accounts receivable balance at the beginning of the year was $50,000, and at the end of the year, it was $70,000. What is Joe's receivables turnover ratio?
6.5
A customer buys $2,000 of inventory on account with terms 2/10, n/30 on January 1st.
The customer pays on January 9.
What is the journal entry to record the receipt of payment?
Debit: Cash 1,960
Debit: Sales Discount 40
Credit: Accounts Receivable 2,000
A company purchased land for $120,000 cash. They also incurred commissions of $7,500, property taxes of $8,000, and title insurance of $1,200. The $8,000 in property taxes includes $6,500 in back taxes paid by the company on behalf of the seller and $1,500 due for the current year after the purchase date. For what amount should the company record the land?
$135,200
Safe Industries retires a $10 million bond issue when the carrying value of the bonds is $11 million, but the market value of the bonds is $9 million. The entry to record the retirement will be:
Debit: Bonds Payable $11 Million
Credit: Cash $9 Million
Credit: Gain $2 Million