What Does the Term Credit Means in Business Mcq

LO 9.1If a client has been paid with a credit card and the service has been provided, which of the following accounts will be used to record the revenue record of that transaction? If a customer buys $10,000 from Company A on 2/10 net 30 terms and pays within 10 days, the customer only needs to pay $10,000 x 0.98 = $9,800. On the other hand, if the customer pays after 10 days, he will have to pay the total amount of $10,000. LO 9.3Ancient Grains Unlimited has a debit income ratio of 3.34 times. Net loan sales for the year were $567,920. What is the daily turnover rate for 2018 (rounded to the nearest integer)? LO 9.4Michelle Company reports loan sales of $345,000 and receivables of $267,500 at the end of 2019. Michelle currently uses the income statement to enter the estimate of bad debts at 4%. To manage profits more efficiently, Michelle changes the bed debt estimate to the 4% balance sheet method. What is the difference in net income between the income statement and the balance sheet method? A customer of Company A who realizes that the company offers credit terms of 2/10 net 30 decides to make a purchase of $1,000. The net method and gross method log entries are listed below: The CEO of CEOCEOA, short for Chief Executive Officer, is the highest-ranked person in a company or organization. The CEO is responsible for the overall success of an organization and for making high-level management decisions.

Read a job description of company A facing a drop in sales due to fierce competition in the market. The CEO believes that the reason why sales are declining is due to the fact that the company does not offer trade credits. In fact, Company A is the only company in the industry that does not offer trade credits to its customers. Then, Company A sets up a new commercial credit term for customers – 2/10 net 30. Customers who buy on credit have 30 days to fulfill their obligationCreditsCredit payable is a liability that arises when an organization receives goods or services from its suppliers on credit. Commercial debts are expected to be repaid within one year or during an operating cycle (whichever is longer). PA is considered one of the most liquid forms of short-term liabilities. However, if you pay within 10 days, customers will receive a 2% discount on purchased goods. The LO 9.6A client takes out a loan of $130,000 on January 1 with a term of 36 months and an annual interest rate of 11%. If 6 months have passed since the banknote was set up, what would be the interest rate recorded at that time? 2/10 Net 30 refers to trade creditTrade creditTrade credit is an agreement or arrangement between agents who do business with each other and that allows the exchange of goods and services offered to a customer for the sale of goodsCost of goods sold (COGS)The cost of goods sold (COGS) measures the «direct costs» incurred in the production of goods or services. It includes material, direct or service costs.

2/10 net 30 means that if the amount due is paid within 10 days, the customer will receive a 2% discount. Otherwise, the amount is due in full within 30 days. From a supplier`s perspective, trade credits are offered to allow for more frequent and bulky purchases. Flexibility in payment time attracts more customers and generates more revenue for the company. LO 9.2Tines Commerce calculates bad debts on the basis of the value adjustment method. They determine that their credit estimate for the current year is a credit of $45,000. The previous period had a balance of $12,000 in provision for doubtful accounts. What should be the number indicated in the adjustment entry for the current period? LO 9.2Doer Company reports year-end loan sales of $390,000 and receivables of $85,500. Doer uses the income statement method to report the estimate of bad debts.

The estimated percentage is 3.5%. What is the estimated sunk balance according to the income statement? The biggest risk to a supplier when offering trade credit is the potential for bad debts. Since cash doesn`t immediately change hands when making a purchase, the buyer may not end up paying for the purchases. When companies offer trade credit, a value adjustment is put in place for bad accounts to anticipate the amount of bad debts from loan purchases. LO 9.3South Rims has an accounts receivable balance of $357,470 at the end of 2018. Net loan sales for the year were $769,346. The balance was $325,300 at the end of 2017. What is the accounts receivable sales rate for 2018 (rounded to the second decimal place)? The net method recognises receivables at the selling price minus the discount. The company should make an adjustment to account for the interest earned if the customer does not take advantage of the discount. From the buyer`s perspective, trade credit allows buyers to make purchases without immediately parting with their money. Therefore, it also offers flexibility, as buyers can make purchases when the money is not available. LO 9.4What statement is most directly affected by a change in net income? LO 9.1Which of the following criteria is not a criterion for accounting for GAAP revenues? With CFI courses, it`s easy to build confidence in your accounting skills! Register now for FREE to advance your career! The LO 9.1A dealership sells a car to a customer for $35,000.

The customer pays a 10% deposit and the dealer finances the remaining 90% internally. How much will the dealer account for accounts receivable for that customer? Note: The discount is paid into the income statement to reduce sales. . LO 9.3What information is best extracted from a debt ratio? LO 9.6Mark Industries issues a $45,000 note on August 1, 2018 in exchange for the sale of goods. Which of the following points is the correct newspaper entry for this sale? Learn the basics of accounting and how to read degrees with CFI`s free online accounting courses. These courses give you the confidence you need to do top-notch financial analyst work. Get started now! Note: $1,000 x 0.98 = $980. The net method recognises receivables at the selling price minus the discount. .

LO 9.4Which of the following is not a way to manage revenue? If the customer pays within 10 days and takes advantage of the 2% discount: LO 9.6Orion Rentals is unable to collect a $25,000 note and has accumulated $250 in interest. He converts this obligation and interest into receivables. After some time, Orion is still unable to collect the debt and decides to sell the converted ticket to a collection agency. The collection agency pays only 20% of the value of the receivables to Orion. How much money is paid to Orion by the debt collection agency? Note: In the gross method, receivables are recorded at face value. LO 9.2What method delays the registration of bad debts until the customer`s specific claims are identified? LO 9.1 Which of the following criteria best represents the matching principle criteria? There are two methods of accounting for discounts: the net method and the gross method. The gross method accounts for the nominal value of receivables. When the customer takes advantage of the discount, the company reduces its turnover in the income statement. LO 9.6A receives an award-winning note with a maturity date of 24 months from its inception, an interest rate of 10% and an initial loan amount of $30,000. What accounts are used to capture the collection of notes honored on the due date? LO 9.2Who of the following estimation methods takes into account late payment in the calculation of bad debts?.

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