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Exam 7: Accounting for Receivables

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Question 101

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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.

A) True
B) False

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Question 102

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The accounts receivable turnover is calculated by:

A) Dividing net sales by average accounts receivable.
B) Dividing net sales by average accounts receivable and multiplying by 365.
C) Dividing average accounts receivable by net sales.
D) Dividing average accounts receivable by net sales and multiplying by 365.
E) Dividing net income by average accounts receivable.

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

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Question 103

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If a credit card sale is made,the seller debits Cash and credits Sales for the same amount.

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

A 90-day note issued on April 10 matures on:

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

Notes receivable are classified as current liabilities regardless of the time to maturity.

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:

Reporting the details of notes is consistent with which accounting principle that requires financial statements (including footnotes) to report all relevant information?

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 $300 credit.The estimated amount of bad debts expense is $3,200

A promissory note:

Sellers generally prefer to receive notes receivable rather than accounts receivable when the credit period is long and the receivable is for a large amount.

A company allows its customers to use bank credit cards to charge purchases.When customers use the credit cards,the net amount is deposited in the company's checking account,less a 2.5% service charge.Assume that on April 13,the company sold $20,000 worth of merchandise to customers who used credit cards.Prepare the company's journal entry to record the credit card sales for April 13 assuming the company deposited the receipts that same day.

The person who signs a note receivable and promises to pay the principal and interest is the:

A ________ is a signed agreement to pay a specified amount of money either on demand or at a definite future date.

Jervis accepts all major bank credit cards,including those issued by Northern Bank (NB) ,which assesses a 3% charge on sales for using its card.On June 28,Jervis had $3,500 in NB Card credit sales.What entry should Jervis make on June 28 to record the deposit?

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: $\begin{array} { l l } \text { Accounts receivable } & \$ 375,000 \text { debit } \\\text { Allowance for uncollectible accounts } & 500 \text { debit } \\\text { Net Sales } & 800,000 \text { credit }\end{array}$ 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?

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.)

The ________ method of computing uncollectible accounts uses income statement relationships to estimate bad debts and is based on the idea that a given percent of a company's credit sales for a period are uncollectible.

On May 31,a company had a balance in its accounts receivable of $103,200.Prepare journal entries to record the following transactions for June.Assume the company uses a perpetual inventory system. June 2 Sold merchandise on account, $\$ 12,000$ . The cost of the merchandise was $\$ 7,200$ . June 8 Sold $15,000 worth of accounts receivable to First Bark. First Bark charged a 4% factoring fee. June 20 Barrowed $\$ 30,000$ cash from Second National Bark, pledging $31,500 worth of accounts receivable as collateral for the loan.