Financial Management: Theory & Practice
15th Edition
ISBN: 9781337248006
Author: Eugene F. Brigham; Michael C. Ehrhardt
Publisher: Cengage Learning US
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 16, Problem 3Q
Summary Introduction
To discuss: Whether the given statement is true or false regarding to record a credit transaction.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Is it true that, when one firm sells to another on credit, the seller recordsthe transaction as an account receivable while the buyer records it as anaccount payable and that, disregarding discounts, the receivable typicallyexceeds the payable by the amount of profit on the sale?
What are the reasons that a company gives trade discounts?Why are trade discounts not recorded in theaccounts like cash discounts?
What do firms use to record the sales value of a transaction when a note receivable has either an unreasonable rate of interest or no interest rate stated?
O A. Firms uses the face value of the note to record the sales value of a transaction when a note receivable has either an unreasonable rate of interest or no interest stated.
O B. Firms uses the cost of the goods or services provided plus a mark-up to record the sales value of a transaction when a note receivable has either an unreasonable rate of interest or no interest rate stated.
O C. An observed market price is the most reliable evidence of an asset's fair value. Fair value estimates are based on the market value of the goods or services provided, or the note. If a company cannot obtain the fair value of the goods or services, the present value of the
note is found using the stated rate of interest.
O D. An observed market price is the most reliable evidence of an asset's fair value. If a company receives a note in exchange…
Chapter 16 Solutions
Financial Management: Theory & Practice
Ch. 16 - Define each of the following terms:
Working...Ch. 16 - What are the two principal reasons for holding...Ch. 16 - Prob. 3QCh. 16 - Prob. 4QCh. 16 - Prob. 5QCh. 16 - Prob. 6QCh. 16 - Prob. 7QCh. 16 - Prob. 8QCh. 16 - What kinds of firms use commercial paper?
Ch. 16 - Prob. 1P
Ch. 16 - Medwig Corporation has a DSO of 17 days. The...Ch. 16 - What are the nominal and effective costs of trade...Ch. 16 - Prob. 4PCh. 16 - Prob. 5PCh. 16 - Snider Industries sells on terms of 2/10, net 45....Ch. 16 - Prob. 7PCh. 16 - Prob. 8PCh. 16 - Grunewald Industries sells on terms of 2/10, net...Ch. 16 - The D.J. Masson Corporation needs to raise...Ch. 16 - Negus Enterprises has an inventory conversion...Ch. 16 - Prob. 12PCh. 16 - Dorothy Koehl recently leased space in the...Ch. 16 - Prob. 15PCh. 16 - Prob. 16PCh. 16 - The Raattama Corporation had sales of 3.5 million...Ch. 16 - Prob. 1MCCh. 16 - Prob. 2MCCh. 16 - Prob. 3MCCh. 16 - Is there any reason to think that RR may be...Ch. 16 - Prob. 5MCCh. 16 - Johnson knows that RR sells on the same credit...Ch. 16 - Prob. 7MCCh. 16 - Prob. 8MCCh. 16 - What is the impact of higher levels of accruals,...Ch. 16 - Assume that RR purchases $200,000 (net of...Ch. 16 - Prob. 11MCCh. 16 - Prob. 12MCCh. 16 - Prob. 13MCCh. 16 - Prob. 14MCCh. 16 - Prob. 15MCCh. 16 - In an attempt to better understand RR’s cash...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- What is the difference between a credit sale (with a higher price as compared to the cash sale) and an interest based loan transaction? Explain it with an example.arrow_forward19.Which of the following statements is incorrect? a. Trade receivables are recognized simultaneously with the recognition of related revenue when the criteria for revenue recognition are met. b. Under the gross price method, sales discounts are reported as a deduction from sales revenue. c. When accounts receivable are pledged against borrowing, the amount of accounts receivable pledged shall be included in the total receivables with disclosures. d. When discounting notes, the term discount period refers to the period of time that the note has been held by the endorser or payee; i.e. the period from the date of the note up to the date of discounting.arrow_forwardWhich of the following would not result in a reduction of the amount invoiced to a customer when a credit sale is made? A. Quantity discount B. Cash-free discount C. Sales discountD. Two-for-one specialarrow_forward
- The following relate to trade discounts: 1. Trade discounts are given to customers to induce them to pay promptly. II. Trade discounts are not taken up in the books because they are merely adjustments to establish the final selling price A. false, true B. true, true C. true, false D. false, falsearrow_forwardWhich of the following refers to the ability of a firm to buy repeatedly from a supplier on trade credit without re-applying for credit? Select one: a. Net terms b. Cash discount c. Open account d. Present value of delayed paymentarrow_forward18. If a company employs the net method of recording accounts receivable from customers, then sales discounts taken should be reported as O a. a deduction from sales in the income statement. O b. an item of "other income and expense" in the income statement. O c. a deduction from accounts receivable in determining the net realizable value of accounts receivable. O d. should not be used.arrow_forward
- Which of the following accounts is not a contra-revenue? Group of answer choices A)Sales discounts B)Credit card discounts C)Sales returns and allowances D)Allowance for doubtful accounts E)All the above are contra-revenuesarrow_forwardIf the transferor of receivables surrenders control over them, the transaction involving receivables is treated as a sale, and any gain or loss is recognized in earnings. Select one: O True Falsearrow_forwardWhich of the following is an advantage of using the net price method for recording cash discounts on credit sales? a. It eases communication with customers at balances. b. It properly reflects current per revenue. c. It simplifies recording of sales returns and allowances. d. It requires less recording keeping than the gross method.arrow_forward
- How does the cost of costly trade credit generally compare with the cost of shorttermbank loans?arrow_forwardIf a fictitious sale has been recorded, this affects the a) existence of sales. b) valuation of accounts receivable. c) occurrence of sales and existence of accounts receivable. d) occurrence of accounts receivable.arrow_forward44.Which is a valid statement regarding the gross price, net price and allowance methods of recording accounts receivable from customers? a. Under the gross method, sales discount is recorded when taken and this account is reported as an item of other expense in the statement of comprehensive income. b. Under the net method, sales discount is recorded when not taken and this is reported as an item of other income in the statement of comprehensive income. c. When accounts receivable have not yet been collected at the end of the year and the discount period has already lapsed, after appropriate adjusting entry(ies), the amount of net accounts receivable reported under the gross method is greater than the amount reported under the net method. d. When accounts receivable have not yet been collected at the end of the year and the discount period has already lapsed, no adjusting entry is required under the net method.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage LearningFinancial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage LearningCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
- College Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College Pub
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
College Accounting (Book Only): A Career Approach
Accounting
ISBN:9781337280570
Author:Scott, Cathy J.
Publisher:South-Western College Pub
The accounting cycle; Author: Alanis Business academy;https://www.youtube.com/watch?v=XTspj8CtzPk;License: Standard YouTube License, CC-BY