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Exam 7: Reporting and Analyzing Receivables

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Question 71

True/False

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As long as a company accurately records total credit sales information,it is not necessary to have separate accounts for specific customers.

A) True
B) False

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Question 72

Multiple Choice

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Uniform Supply accepted a $4,800,90-day,10% note from Tracy Janitorial on October 17.What entry should Uniform Supply make on December 31,to record the accrued interest on the note?

A) Debit Cash $20; credit Notes Receivable $20.
B) Debit Cash $100; credit Notes Receivable $100.
C) Debit Interest Receivable $20; credit Interest Revenue $20.
D) Debit Interest Receivable $100; credit Interest Revenue $100.
E) Debit Cash $120; credit Interest Revenue $100; credit Interest Receivable $20.

F) None of the above
G) B) and E)

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Question 73

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The following selected amounts are reported on the year-end unadjusted trial balance report for a company that uses the percent of sales method to determine its bad debts expense. All sales are made on credit.Based on past experience,the company estimates 1% of credit sales to be uncollectible.What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

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 debit 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 $6,000.

At December 31,Yarrow Company reports the following results for its calendar year from the adjusted trial balance. $\begin{array} { | l | r | } \hline \text { Credit sales } & \$ 2,300,000 \\\hline \text { Aash sales } & 1,050,000 \\\hline \text { Accounts Receivable } & 295,000 \\\hline \text { Allowance for doubtful accounts (credit balance) } & 750 \\\hline\end{array}$ a.Prepare the adjusting entry to record Bad Debts Expense assuming uncollectibles are estimated to be 1.1% of credit sales. b.Prepare the adjusting entry to record Bad Debts Expense assuming uncollectibles are estimated to be .8% of total sales. c.Prepare the adjusting entry to record Bad Debts Expense assuming uncollectibles are estimated to be 7.0% of year-end accounts receivable.

The allowance method based on the idea that a given percent of a company's credit sales for the period is uncollectible is:

Factoring receivables is beneficial to a seller for all of the following reasons except:

Mullis Company sold merchandise on account to a customer for $625,terms n/30.The journal entry to record the collection on account would be:

The accounts receivable method to estimate bad debts obtains the estimated balance in the Allowance for Doubtful Accounts in one of two ways: (1)computing the percent uncollectible from the total accounts receivable or (2)aging accounts receivable.

The quality of receivables refers to:

If a customer owes interest on accounts receivable,Interest Receivable is debited and Accounts Receivable is credited.

Valley Spa purchased $7,800 in plumbing components from Tubman Co.Valley Spa Studios signed a 60-day,10% promissory note for $7,800.If the note is dishonored,what is the amount due on the note? (Use 360 days a year.)

Explain the options a company may use to convert its receivables to cash before they are due.

Which of the following is not true about the Allowance for Doubtful Accounts?

The account receivable turnover measures:

The expense recognition (matching)principle requires use of the allowance method of accounting for bad debts.

On November 19,Nicholson Company receives a $15,000,60-day,8% note from a customer as payment on account.What adjusting entry should be made on the December 31 year-end? (Use 360 days a year.)

A company borrowed $10,000 by signing a 180-day promissory note at 9%.The total interest due on the maturity date is: (Use 360 days a year.)

A finance company or bank that purchases and takes ownership of another company's accounts receivable is called a:

A company using the percentage of sales method for estimating bad debts has sales of $350,000 and estimates that 1.0% of its sales are uncollectible.The unadjusted balance in Allowance for Doubtful Accounts is a $500 credit.The estimated amount of bad debts expense is $3,000.