Accounting Analysis Essay

2941 WordsNov 24, 201212 Pages
1.When a specific account receivable is written off, the entry A) increases net income. B) decreases net income. C) can either decrease or increase net income. D) has no effect on net income.2.Echo Company's 2011 beginning and ending accounts receivable balances were $72,500 and $41,250 respectively. During 2011, the company's sales (all on credit) amounted to $857,250. Per Echo's 2011 cash flow statement, $873,500 was collected from customers while $18,750 related to uncollectible accounts was listed among the "non-cash expenses." If Echo's beginning balance in the allowance for uncollectibles was , the ending balance in this account must be A) $15,000 B) 21,350 C) $36,350 D) $17,6003.An analyst notes that ABC Inc.'s allowance for…show more content…
B) makes it difficult to assess the degree to which a company's overall earnings are due to profitable credit sales versus profitable customer financing. C) achieves a clear separation between income from credit sales and interest earned. D) is controversial because it necessitates use of an assumed interest rate.11.The Fair value adjustment—accounts receivable account is an asset valuation account A) that would be adjusted upward or downward as fair values change and as the receivables are collected. B) that is created when fair value accounting is adopted but is not subsequently adjusted. C) that can only be adjusted downward. D) that is unaffected by the subsequent collection of receivables.12.On August 1, 2011, Jones discounted the note under the arrangement with National Bank. How much were the proceeds of the discounted note? A) $38,267 B) $39,867 C) $40,000 D) $41,60013.Ambiguity can arise as to whether receivables have been sold or instead are being used as collateral for a loan whenever certain obligations, duties, or rights regarding the transferred receivables are retained by the transferor. In distinguishing between sales and collateralized borrowings using receivables, the critical issue A) is whether the terms regarding the transfer were initiated by the transferor or transferee. B) is whether the transferor surrenders control over the
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