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Exam 7: Accounting for Receivables

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Question 31

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The Branson Company uses the percent of sales method of accounting for uncollectible accounts receivable.During the current year,the following transactions occurred: Prepare the general journal entries to record these transactions.

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Question 32

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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?

A) $1,275
B) $1,775
C) $1,500
D) $1,080
E) $2,500

F) None of the above
G) C) and D)

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Question 33

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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.

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:

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?

Credit sales are recorded by crediting Accounts Receivable.

Axle Co.'s accounts receivable turnover was 9.9 for this year and 11.0 for last year.Betterman's turnover was 9.3 for this year and 9.3 for last year.These results imply that:

The use of the direct write-off method is allowed under the materiality constraint.

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:

Gideon Company uses the direct write-off method of accounting for uncollectible accounts.On May 3,the Gideon Company wrote off the $2,000 uncollectible account of its customer,A.Hopkins.On July 10,Gideon received a check for the full amount of $2,000 from Hopkins.On July 10,the entry or entries Gideon makes to record the recovery of the bad debt is:

A receivable is an amount due from another party.

BizCom's customer,Redding,paid off an $8,300 balance on its account receivable.BizCom should record the transaction as a debit to Accounts Receivable-Redding and a credit to Cash.

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.

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

Explain the difference between honoring and dishonoring a note receivable.

If a 60-day note receivable is dated September 22,what is the maturity date of the note?

MacKenzie Company sold $180 of merchandise to a customer who used a Regional Bank credit card.Regional Bank deducts a 4% service charge for sales on its credit cards.MacKenzie electronically remits the credit card sales receipts to the credit card company and receives payment immediately.The journal entry to record this sale transaction would be:

On July 9,Mifflin Company receives an $8,500,90-day,8% note from customer Payton Summers as payment on account. -What entry should be made on July 9 to record receipt of the note?

The accounts receivable turnover is calculated by dividing ________ by ________.

The following series of transactions occurred during Year 1 and Year 2,when Foxworth Co.sold merchandise to Kevin Lewis.Foxworth's annual accounting period ends on December 31. 10/01/Yr 1 Sold $12,000 of merchandise to K.Lewis,terms n/30. 11/15/Yr 1 Lewis reports that he cannot pay the account until early next year.He agrees to exchange the account for a 120-day,12% note receivable. 12/31/Yr 1 Prepared the adjusting journal entry to record accrued interest on the note. 03/15/Yr 2 Foxworth receives a check from Lewis for the maturity value (with interest)of the note. 03/22/Yr 2 Foxworth receives notification that Lewis' check is being returned for nonsufficient funds (NSF). 12/31/Yr 2 Foxworth writes off Lewis' account as uncollectible. Prepare Foxworth Co.'s journal entries to record the above transactions.The company uses the allowance method to account for its bad debt expense.