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Exam 7: Reporting and Analyzing Receivables

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Question 111

Multiple Choice

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A company uses the percent of receivables method to determine its bad debts expense.At the end of the current year,the company's unadjusted trial balance reported the following selected amounts: All sales are made on credit.Based on past experience,the company estimates that 6% of receivables are uncollectible.What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

A) $22,500
B) $23,000
C) $22,000
D) $4,800
E) $5,500

F) B) and D)
G) A) and D)

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Question 112

Multiple Choice

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A company factored $45,000 of its accounts receivable and was charged a 4% factoring fee.The journal entry to record this transaction would include a:

A) Debit to Cash of $45,000,a debit to Factoring Fee Expense of $1,800,and a credit to Accounts Receivable of $46,800.
B) Debit to Cash of $45,000 and a credit to Accounts Receivable of $45,000.
C) Debit to Cash of $43,200,a debit to Factoring Fee Expense of $1,800,and a credit to Accounts Receivable of $45,000.
D) Debit to Cash of $46,800 and a credit to Accounts Receivable of $46,800.
E) Debit to Cash of $45,000 and a credit to Notes Payable of $45,000.

F) B) and D)
G) A) and C)

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Question 113

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At December 31 of the current year,a company reported the following: Total sales for the current year: $980,000 includes $160,000 in cash sales Accounts receivable balance at Dec.31,end of current year: $160,000 Allowance for Doubtful Accounts balance at January 1,beginning of current year: $7,300 Bad debts written off during the current year: $5,800. Prepare the necessary adjusting entries to record bad debts expense assuming this company's bad debts are estimated to equal 1.5% of credit sales:

Companies use two methods to account for uncollectible accounts,the direct write-off method and the allowance method.

The process of using accounts receivable as security for a loan is known as pledging accounts receivable.

When posting a dishonored note to a customer's account,an explanation is included so as not to misinterpret the debit as a sale on account.

Installment accounts receivable is another name for aging of accounts receivable.

The notes receivable account of a business should include both the notes that have not yet matured and the dishonored notes.

Duerr company makes a $60,000,60-day,12% cash loan to Ryan Co.The maturity value of the loan is: (Use 360 days a year.)

Uniform Supply accepted a $4,800,90-day,10% note from Tracy Janitorial on October 17.If the note is dishonored,but Uniform Supply intends to continue collection efforts,what entry should Uniform Supply make on January 15 of the next year? (Assume no reversing entries are made.) (Use 360 days a year.)

The accounts receivable turnover is calculated by:

The aging method of determining bad debts expense is based on the knowledge that the longer a receivable is past due,the higher the likelihood of collection.

All of the following statements regarding valuation of receivables under U.S.GAAP and IFRS are true except:

Brinker accepts all major bank credit cards,including First Savings Bank's,which assesses a 2.5% charge on sales for using its card.On May 26,Brinker had $4,800 in First Savings Bank Card credit sales.What entry should Brinker make on May 26 to record the deposit?

A promissory note is a written promise to pay a specified amount of money either on demand or at a definite future date.

The ________ method uses both past and current receivables to estimate the allowance amount,and assumes that the longer an amount is past due,the more likely it is to be uncollectible.

A company uses the percent of sales method to determine its bad debts expense.At the end of the current year,the company's unadjusted trial balance reported the following selected amounts: All sales are made on credit.Based on past experience,the company estimates that 0.6% of net credit sales are uncollectible.What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

The realizable value refers to the expected proceeds from converting an asset into cash.