A common rule of thumb is that a company’s acid-test ratio should have a value near or higher than 1 to conclude that a company is unlikely to face near-term liquidity problems.

Under a periodic inventory system, purchases, purchases returns and allowances, purchase discounts, and transportation in transactions are recorded in the Merchandise Inventory account.

A company records the following journal entry: debit Cash $1,470, debit Sales Discounts $30, and credit Accounts Receivable $1,500. This means that a customer has taken what percentage cash discount for early payment?

The allowance method of accounting for bad debts matches the estimated loss from uncollectible accounts receivable against the sales they helped produce.

Under a perpetual inventory system, when a credit customer returns non-defective merchandise to the seller, the seller debits Sales Returns and Allowances and credits Accounts Receivable and also debits Merchandise Inventory and credits Cost of Goods Sold.

A company has $80,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 6% of outstanding receivables are uncollectible. The current credit balance (before adjustments) in the allowance for doubtful accounts is $1,200. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for $4,800.

The principles of internal control include:

A company has $90,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 4% of outstanding receivables are uncollectible. The current balance (before adjustments) in the allowance for doubtful accounts is an $800 credit. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for:

Outstanding checks refer to checks that have been:

Cash sales shorten the operating cycle for a merchandiser; credit sales lengthen operating cycles.