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Exam 7: Accounting for Receivables

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Question 81

Multiple Choice

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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 0.6% of net 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) Debit Bad Debts Expense $2,130; credit Allowance for Doubtful Accounts $2,130.
B) Debit Bad Debts Expense $2,630; credit Allowance for Doubtful Accounts $2,630.
C) Debit Bad Debts Expense $4,300; credit Allowance for Doubtful Accounts $4,300.
D) Debit Bad Debts Expense $4,800; credit Allowance for Doubtful Accounts $4,800.
E) Debit Bad Debts Expense $5,300; credit Allowance for Doubtful Accounts $5,300.

F) C) and E)
G) A) and E)

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Question 82

Multiple Choice

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

A) Debit Cash of $625 and credit Sales $625.
B) Debit Cash of $625 and credit Accounts Receivable $625.
C) Debit Accounts Receivable $625 and credit Sales $625.
D) Debit Accounts Receivable $625 and credit Cash $625.
E) Debit Sales $625 and credit Accounts Receivable $625.

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

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Question 83

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

A company received a $15,000,90-day,10% note receivable.The journal entry to record receipt of the note includes a debit to Notes Receivable.

The aging of accounts receivable method involves classifying each account receivable by how long it is past its due date and estimating the percent of each uncollectible class.

The expense recognition principle permits the use of the direct write-off method of accounting for uncollectible accounts when bad debts are very large in relation to a company's other financial statement items such as sales and net income.

Craigmont uses the allowance method to account for uncollectible accounts.Its year-end unadjusted trial balance shows Accounts Receivable of $104,500,allowance for doubtful accounts of $665 (credit) and sales of $925,000.If uncollectible accounts are estimated to be 4% of accounts receivable,what is the amount of the bad debts expense adjusting entry?

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?

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.

Giorgio Italian Market bought $4,000 worth of merchandise from Food Suppliers and signed a 90-day,6% promissory note for the $4,000.Food Supplier's journal entry to record the sales transaction is:

The allowance method estimates bad debts expense at the end of each accounting period.

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?

The person to whom a note is payable is known as the ________.

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

Calculate the amount of interest that would be owed on a $18,000,60-day,8% note receivable at maturity.

An Installment Accounts Receivable is classified as a non-current asset if the installment period is six months.

The quality of receivables refers to the likelihood of collection without loss.

A maker who dishonors a note is one pays at maturity.

MacKenzie Company sold $300 of merchandise to a customer who used a Regional Bank credit card.Regional Bank deducts a 1.5% service charge for sales on its credit cards and credits MacKenzie's account immediately when sales are made.The journal entry to record this sale transaction would be:

The ________ methods of computing uncollectible accounts use balance sheet relations to estimate bad debts-mainly the relation between accounts receivable and the allowance amount.