Pages: 3 (459 words) / Published: Jun 13th, 2014
Module 5 Homework + Answers Total Points: 40
Chapter 6
1) Credit terms of "2/10, n/30" mean that if payment is made in two days, a 10% discount will be given; if not paid within two days, the full invoice price will be due in thirty days.
True or False
Answer: The "2/10" means that a 2% discount is given if the payment is made within 10 days.
2) Flyer Company has provided the following information:
 Cash sales, \$150,000
 Credit sales, \$450,000
 Selling and administrative expenses, \$110,000
 Sales returns and allowances, \$30,000
 Gross profit, \$490,000
 Accounts receivable, \$110,000
 Sales discounts, \$14,000
 Allowance for doubtful accounts credit balance, \$1,200
How much is bad debt expense assuming that 5% of accounts receivable is estimated to be uncollectible?
A. \$5,500
B. \$6,700
C. \$4,240
D. \$4,300
Answer: Bad debt expense (\$4,300) = 5% of accounts of accounts receivable (5%  \$110,000) - allowance for doubtful accounts credit balance (\$1,200).
3) Which of the following journal entries correctly records bad debt expense? A. Option A
B. Option B
C. Option C
D. Option D
Answer: The journal entry to record bad debt expense involves a debit to bad debt expense and a credit to allowance for doubtful accounts
4) A company had the following partial list of account balances at year-end: How much is net sales revenue?
A. \$91,900
B. \$90,700
C. \$89,900
D. \$88,600
Answer: Net sales revenue (\$91,900) equals sales revenue (\$95,000) minus both sales discounts (\$2,100) and sales returns and allowances (\$1,000).
5) When credit terms for a sale are 2/15, n/40, the customer saves by paying early. What percent (rounded) would this savings amount to on an annual basis?
A. 18%.
B. 20%.
C. 30%.
D. 37%.
Answer: 25-day interest rate (.02) = Amount saved (\$2)  Amount paid (\$98)
6) Which of the following is the most likely cause of a decrease in a company's gross profit percentage?
A. The