7.1 Identify the different types of sales and receivables and discuss related internal controls for accounts receivable
1) MasterCard and Visa sales are treated like cash sales.
2) Most financial institutions charge the retailer a service fee that enables the retailer to accept the credit cards as payment on merchandise.
3) From the retailer's perspective, debit cards are nearly identical to credit cards and have the same benefits and drawbacks.
4) Accounts receivable are more formal and usually longer in terms than notes receivable.
5) Notes receivable generally include a charge for interest.
6) A retailer has 4% credit/debit card service fees deducted from the proceeds from each sale. The retailer has $1,200 in sales for the day. The journal entry to record these sales would be:
A) debit Cash for $1,200 and credit Sales for $1,200.
B) debit Sales for $1,200 and credit Cash for $1,200.
C) debit Cash for $1,152, debit Credit Card Expense for $48, and credit Sales for $1,200.
D) debit Cash for $1,152 and credit Sales for $1,152.
E) debit Accounts Receivable for $1,200 and credit Sales for $1,200.
7) When a customer fails to pay on their account, it creates a(n):
A) Bad Debt Expense.
B) Uncollectible Account.
C) Account Receivable.
D) decrease in revenue.
E) decrease in expenses.
8) When companies extend credit to customers,:
A) losing sales generally increases.
B) not collecting money from customers decreases.
C) not collecting money from customers increases.
D) the business stays the same.
E) sales decrease.
9) A customer's written promise to pay an amount of money to a business with interest is a(n) ________ of
the business.
A) account receivable
B) account payable
C) note receivable
D) note payable
E) revenue
10) Toy Company has 4% credit/debit card service fees deducted monthly by the bank from Toy Company's bank account. Toy Company has $75,000 in sales for the month. At what amount will Toy Company record this month's sales?