146.Major advantages of credit cards to the retailer include all of the following
except
the
a.issuer does the credit investigation of customers.
b.issuer undertakes the collection process.
c.retailer receives more cash from the credit card issuer.
d.All of these answer choices are correct.
147.The sale of receivables by a business
a.indicates that the business is in financial difficulty.
b.is generally the major revenue item on its income statement.
c.is an indication that the business is owned by a factor.
d.can be a quick way to generate cash for operating needs.
148.If a retailer regularly sells its receivables to a factor, the service charge of the factor should be classified as a(n)
a.selling expense.
b.interest expense.
c.other expense.
d.contra asset.
149.If a company sells its accounts receivables to a factor,
a.the seller pays a commission to the factor.
b.the factor pays a commission to the seller.
c.there is a gain on the sale of the receivables.
d.the seller defers recognition of sales revenue until the account is collected.
150.Retailers generally consider sales from the use of national credit card sales as a
a.credit sale.
b.collection of an accounts receivable.
c.cash sale.
d.collection of a note receivable.
151.Receivables might be sold to
a.lengthen the cash-to-cash operating cycle.
b.take advantage of deep discounts on the cash realizable value of receivables.
c.generate cash quickly.
d.finance companies at an amount greater than cash realizable value.
152.A company regularly sells its receivables to a factor who assesses a 2% service charge on the amount of receivables purchased. Which of the following statements is true for the seller of the receivables?
a.The loss section of the income statement will increase each time receivables are sold.
b.The credit to Accounts Receivable is less than the debit to Cash when the accounts are sold.
c.Selling expenses will increase each time accounts are sold.
d.The other income and expense section of the income statement will increase each time accounts are sold.
153.Oliver Furniture factors $800,000 of receivables to Kwik Factors, Inc. Kwik Factors assesses a 2% service charge on the amount of receivables sold. Oliver Furniture factors its receivables regularly with Kwik Factors. What journal entry does Oliver make when factoring these receivables?
a.Cash.........................................784,000
Loss on Sale of Receivables.................................16,000
Accounts Receivable......................................800,000
b.Cash.........................................784,000
Accounts Receivable......................................784,000
c.Cash.........................................800,000
Accounts Receivable......................................784,000
Gain on Sale of Receivables.................................16,000
d.Cash.........................................784,000
Service Charge Expense....................................16,000
Accounts Receivable......................................800,000
154.When customers make purchases with a national credit card, the retailer
a.is responsible for maintaining customer accounts.
b.is not involved in the collection process.
c.absorbs any losses from uncollectible accounts.
d.receives cash equal to the full price of the merchandise sold from the credit card company.
155.The retailer considers Visa and MasterCard sales as
a.cash sales.
b.promissory sales.
c.credit sales.
d.contingent sales.