1. Horizontal analysis of accounts receivable:
a. calculates accounts receivable as a percentage of total assets.
b. highlights the change in accounts receivable as a percentage of the prior year's receivables balance.
c. calculates accounts receivable as a percentage of net sales.
d. both "a" and "b" are correct.
2. Vertical analysis of accounts receivable:
a. calculates accounts receivable as a percentage of total assets.
b. highlights the change in accounts receivable as a percentage of the prior year's receivables balance.
c. calculates accounts receivable as a percentage of net sales.
d. both "a" and "b" are correct.
3. Which of the following statements is correct?
i. The receivables turnover ratio is indicative of a company's ability to collect its receivables
ii. Companies normally strive to maintain a high receivables turnover ratio.
a. i only
b. ii only
c. Both i and ii
d. Neither i nor ii
4. The allowance ratio:
a. is calculated by dividing Bad Debt Expense by Gross Accounts Receivable.
b. is normally a ratio that companies try to keep as high as possible.
c. indicates how much of a company's receivables is estimated to be uncollectible.
d. is calculated using income statement accounts.
5. Which of the following is not true of a note receivable:
a. A note receivable can be reported as a current asset or a non-current asset depending on the maturity date of the receivable
b. A note receivable is normally acquired through the acceptance of a promissory note in settlement of a debt
c. When a note receivable is received for services rendered, the revenue is not reported until the maturity date of the note
d. The entity borrowing the money is considered the maker of the note
6. When accounting for a note receivable:
a. interest revenue is never recorded until payment is received.
b. interest receivable is normally reported as a current asset.
c. interest rates are normally stated at semi-annual rates.
d. the note receivable is recorded at issuance with a credit entry.