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Exam 7: Accounting for Receivables

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Question 61

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On July 9, Mifflin Company receives a $8,500, 90-day, 8% note from customer Payton Summers as payment on account. Compute the maturity date for the note.

A) October 8
B) October 7
C) November 8
D) November 7
E) November 6

F) D) and E)
G) B) and C)

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Question 62

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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:

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Question 63

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The maturity date of a note refers to the date the note must be repaid.

Separate accounts receivable information for each customer is important because it reveals all of the following except:

Explain how to record the receipt (acceptance) of a note receivable.

A company factored $30,000 of its accounts receivable and was charged a 2% factoring fee. The journal entry to record this transaction would include a debit to Cash of $30,000, a debit to Factoring Fee Expense of $600, and credit to Accounts Receivable of $30,600.

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?

A promissory note received from a customer in exchange for an account receivable is recorded by the payee as:

Winkler Company borrows $85,000 and pledges its receivables as security. The journal entry to record this transaction would be:

Woods Co. accepts the World Express credit card from its customers. World Express charges a 3.5% service fee and pays Woods the amount net of World Express charges once a month. During February, Woods sold $24,000 worth of merchandise to customers using the World Express charge card. On February 28, Woods sent the $24,000 worth of credit card receipts to World Express. On March 4, Woods received cash proceeds from World Express for the February credit sales less the service charge. Prepare the journal entries to record February sales and the March 4 cash receipt.

Majesty Productions accepted a $7,200, 120-day, 6% note from Swartz Studio on March 1. On the date the note matures, Swartz is unable to pay, but Majesty intends to continue collection efforts. What entry should Majesty record on the maturity date for this dishonored note?

The matching principle requires that accrued interest on outstanding notes receivable be recorded at the end of each accounting period.

A company borrowed $10,000 by signing a six month promissory note at 5% interest. The total amount of interest is $25.

The advantage of the allowance method of accounting for bad debts is that it identifies the specific customers who will not pay their bills.

On December 31 of the current year, the unadjusted trial balance of a company using the percent of receivables method to estimate bad debt included the following: Accounts Receivable, debit balance of $95,250; Allowance for Doubtful Accounts, credit balance of $921. What amount should be debited to Bad Debts Expense, assuming 6% of outstanding accounts receivable at the end of the current year will be uncollectible?

On December 31, of the current year, Spectrum Company's unadjusted trial balance revealed the following: Accounts receivable of $185,600; Sales Revenue of $1,280,000; (75% were on credit), and Allowance for Doubtful Accounts of $1,600 (credit balance). Prepare the adjusting journal entry to record Spectrum's estimate for bad debts assuming: 1. 6.0% of the accounts receivable balance is assumed to be uncollectible. 2. Bad debts expense is estimated to be 1.5% of credit sales. 3. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the balance sheet after adjustment assuming the percentage of sales method is used. 4. Prepare the entry to write off a $1,500 account receivable on January 1 of the next year. 5. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the balance sheet immediately after writing off the account in part 4 assuming the percentage of sales method is used.

Orman Co. sold $80,000 of accounts receivable to First Savings and incurred a 3% factoring fee. Prepare the journal entry for Orman Co. to record the sale.

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 credit 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 5% of accounts receivable.

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 estimated amount of bad debts expense is $3,500.

On October 17 of the current year, a company determined that a customer's account receivable was uncollectible and that the account should be written off. Assuming the allowance method is used to account for bad debts, what effect will this write-off have on the company's net income and total assets?