Question 1

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.

Accepted Answer

A) True 
 B)False

Question 2

Felton Corporation purchased $4,000 in merchandise from Marita Co. Felton signed a 60-day, 10%, $4,000 promissory note. Marita should record the sale with a journal entry debiting ________ for $ ________ and crediting ________ for $ ________.

Accepted Answer

notes receivable; $4,000; sales; $4,000

Question 3

The interest accrued on $7,500 at 6% for 90 days is: (Use 360 days a year.)

Accepted Answer

A)   $37.50.
B)   $450.00.
C)   $11.25.
D)   $112.50.
E)   $1,800.00.F) A) and D)
G) A) and C)

Question 4

A credit sale of $5,275 to a customer would result in which of the following?

Accepted Answer

A)   A credit to the Accounts Receivable account in the general ledger and a credit to the customer's account in the accounts receivable subsidiary ledger.
B)   A debit to the Accounts Receivable account in the general ledger and a credit to the customer's account in the accounts receivable subsidiary ledger.
C)   A credit to Sales and a credit to the customer's account in the accounts receivable subsidiary ledger.
D)   A credit to the Accounts Receivable account in the general ledger and a debit to the customer's account in the accounts receivable subsidiary ledger.
E)   A debit to the Accounts Receivable account in the general ledger and a debit to the customer's account in the accounts receivable subsidiary ledger.F) A) and C)
G) B) and D)

Question 5

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.)

Accepted Answer

A)   $60,000.
B)   $58,800.
C)   $1,200.
D)   $61,200.
E)   $67,200.F) D) and E)
G) A) and B)

Question 6

Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. The amount of interest that Jasper will collect on the loan is: (Use 360 days a year.)

Accepted Answer

A)   $437.50.
B)   $875.00.
C)   $145.83.
D)   $19.44.
E)   $1,750.F) B) and C)
G) All of the above

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Companies follow both the expense recognition (matching) principle and the materiality constraint when applying the direct write-off method.

Accepted Answer

A) True 
 B)False

Question 9

Sellers allow customers to use credit cards for all of the following reasons except:

Accepted Answer

A)   To speed up receipt of cash from the credit sale.
B)   To lessen the risk of extending credit to customers who cannot pay.
C)   To avoid having to evaluate a customer's credit standing for each sale.
D)   To be able to charge more due to fees and interest.
E)   To increase total sales volume.F) C) and D)
G) D) and E)

Question 10

Prudence Co. receives a $26,000, 90-day, 4% note receivable. What is maturity value of the note?

Accepted Answer

$26,000 * .04 * 90/3...

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Companies can report credit card expense as a reduction in net sales or as a selling expense.

Accepted Answer

A) True 
 B)False

Question 13

Allowance for Doubtful Accounts is a contra asset; its balance is added to Accounts receivable.

Accepted Answer

A) True 
 B)False  False

Question 14

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?

Accepted Answer

A)   Debit Accounts Receivable $7,200; credit Allowance for Doubtful Accounts $7,200.
B)   Debit Accounts Receivable $7,200; credit Notes Receivable $7,200.
C)   Debit Bad Debt Expense $7,344; credit Notes Receivable $7,344.
D)   Debit Accounts Receivable $7,344; credit Interest Revenue $144; credit Notes Receivable $7,200.
E)   Debit Accounts Receivable $7,056; debit Interest Revenue $144; credit Notes Receivable $7,200.F) B) and E)
G) A) and B)

Question 15

All of the following statements regarding valuation of receivables under U.S. GAAP and IFRS are true except:

Accepted Answer

A)   Both allow using percent of sales, percent of receivables, or aging of receivables to estimate uncollectibles.
B)   Both require that the expenses for estimated collectibles be recorded in the same period revenues generated from those receivables are recorded.
C)   Both require the allowance method for uncollectibles unless uncollectibles are immaterial.
D)   Both require that receivables be reported net of estimated collectibles.
E)   Both require that the expense related to uncollectibles be recorded when the receivable is determined to be uncollectible.F) C) and D)
G) A) and E)

Question 16

The unadjusted trial balance at year-end for a company that uses the percent of receivables method to determine its bad debts expense reports the following selected amounts:   Accounts receivable $435,000 Debit  Allowance for Doubtful Accounts 1,250 Credit  Net Sales 2,100,000 Credit \begin{array} { | l | r | l | } \hline 	ext { Accounts receivable } & \$ 435,000 & 	ext { Debit } \\hline 	ext { Allowance for Doubtful Accounts } & 1,250 & 	ext { Credit } \\hline 	ext { Net Sales } & 2,100,000 & 	ext { Credit } \\hline\end{array} Accounts receivable  Allowance for Doubtful Accounts  Net Sales ​$435,0001,2502,100,000​ Debit  Credit  Credit ​​  All sales are made on credit. Based on past experience, the company estimates 3.5% of ending account receivable to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Accepted Answer

A)   Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225.
B)   Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350.
C)   Debit Bad Debts Expense $16,475; credit Allowance for Doubtful Accounts $16,475.
D)   Debit Bad Debts Expense $17,350; credit Allowance for Doubtful Accounts $17,350.
E)   Debit Bad Debts Expense $13,975; credit Allowance for Doubtful Accounts $13,975. F) B) and E)
G) B) and D) E

Question 17

A promissory note:

Accepted Answer

A)   Is another name for an installment receivable.
B)   Is a short-term investment for the maker.
C)   Is a written promise to pay a specified amount of money at a certain date.
D)   Is a liability to the payee.
E)   Cannot be used in payment of an account receivable.F) A) and B)
G) None of the above

Question 18

To write off an uncollectible account receivable when the allowance method of accounting for uncollectible accounts is used, a company should debit ________ and credit accounts receivable.

Accepted Answer

allowance ...

Question 19

A company ages its accounts receivables to determine its end of period adjustment for bad debts. At the end of the current year, management estimated that $15,750 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a debit balance of $375. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Accepted Answer

A)     Accounts Receivable 16,125 Allowance for Doubtful Accounts 16,125\begin{array} { | l | l | l | } \hline 	ext { Accounts Receivable } & 16,125 & \\hline 	ext { Allowance for Doubtful Accounts } & & 16,125 \\hline\end{array} Accounts Receivable  Allowance for Doubtful Accounts ​16,125​16,125​​ 
B)     Accounts Receivable 15,750 Bad Debts Expense 375 Sales 16,125\begin{array} { | l | r | r | } \hline 	ext { Accounts Receivable } & 15,750 & \\hline 	ext { Bad Debts Expense } & 375 & \\hline 	ext { Sales } & & 16,125 \\hline\end{array} Accounts Receivable  Bad Debts Expense  Sales ​15,750375​16,125​​ 
C)     Bad Debts Expense 16,125 Allowance for Doubtful Accounts 16,125\begin{array} { | l | l | l | } \hline 	ext { Bad Debts Expense } & 16,125 & \\hline 	ext { Allowance for Doubtful Accounts } & & 16,125 \\hline\end{array} Bad Debts Expense  Allowance for Doubtful Accounts ​16,125​16,125​​ 
D)     Bad Debts Expense 15,375 Allowance for Doubtful Accounts 15,375\begin{array} { | l | l | l | } \hline 	ext { Bad Debts Expense } & 15,375 & \\hline 	ext { Allowance for Doubtful Accounts } & & 15,375 \\hline\end{array} Bad Debts Expense  Allowance for Doubtful Accounts ​15,375​15,375​​ 
E)     Bad Debts Expense 15,750 Allowance for Doubtful Accounts 15,750\begin{array} { | l | l | l | } \hline 	ext { Bad Debts Expense } & 15,750 & \\hline 	ext { Allowance for Doubtful Accounts } & & 15,750 \\hline\end{array} Bad Debts Expense  Allowance for Doubtful Accounts ​15,750​15,750​​F) A) and E)
G) C) and E)

Question 20

Jordan Co. uses the allowance method of accounting for uncollectible accounts. Jordan Co. accepted a $5,000, 12%, 90-day note dated May 16, from Beckam Co. in exchange for its past-due account receivable. Make the necessary general journal entries for Jordan Co. on May 16 and the August 14 maturity date, assuming that the:
a. Note is held until maturity and collected in full at that time.
b. Note is dishonored; the amount of the note and its interest are written off as uncollectible.

Accepted Answer

The answer of Jordan Co. uses the allowance method of...

Exam 9: Accounting for Receivables

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.

Correct Answer
verified

Felton Corporation purchased $4,000 in merchandise from Marita Co. Felton signed a 60-day, 10%, $4,000 promissory note. Marita should record the sale with a journal entry debiting for $ and crediting for $ .

Correct Answer
verified
notes receivable; $4,000; sales; $4,000

The interest accrued on $7,500 at 6% for 90 days is: (Use 360 days a year.)

Correct Answer
verified

A credit sale of $5,275 to a customer would result in which of the following?

Correct Answer
verified

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.)

Correct Answer
verified

Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. The amount of interest that Jasper will collect on the loan is: (Use 360 days a year.)

Correct Answer
verified

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

Correct Answer
verified

Companies follow both the expense recognition (matching) principle and the materiality constraint when applying the direct write-off method.

Correct Answer
verified

Sellers allow customers to use credit cards for all of the following reasons except:

Correct Answer
verified

Prudence Co. receives a $26,000, 90-day, 4% note receivable. What is maturity value of the note?

Correct Answer
verified
$26,000 * .04 * 90/3...
View Answer

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

Correct Answer
verified

Companies can report credit card expense as a reduction in net sales or as a selling expense.

Correct Answer
verified

Allowance for Doubtful Accounts is a contra asset; its balance is added to Accounts receivable.

Correct Answer
verified
False

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?

Correct Answer
verified

All of the following statements regarding valuation of receivables under U.S. GAAP and IFRS are true except:

Correct Answer
verified

Correct Answer
verified
E

A promissory note:

Correct Answer
verified

To write off an uncollectible account receivable when the allowance method of accounting for uncollectible accounts is used, a company should debit ________ and credit accounts receivable.

Correct Answer
verified
allowance ...
View Answer

Correct Answer
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Correct Answer
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Exam 9: Accounting for Receivables

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.

Correct AnswerverifiedShow Answer

Felton Corporation purchased $4,000 in merchandise from Marita Co. Felton signed a 60-day, 10%, $4,000 promissory note. Marita should record the sale with a journal entry debiting ________ for $ ________ and crediting ________ for $ ________.

Correct Answerverifiednotes receivable; $4,000; sales; $4,000

The interest accrued on $7,500 at 6% for 90 days is: (Use 360 days a year.)

Correct AnswerverifiedShow Answer

A credit sale of $5,275 to a customer would result in which of the following?

Correct AnswerverifiedShow Answer

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.)

Correct AnswerverifiedShow Answer

Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. The amount of interest that Jasper will collect on the loan is: (Use 360 days a year.)

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Companies follow both the expense recognition (matching) principle and the materiality constraint when applying the direct write-off method.

Correct AnswerverifiedShow Answer

Sellers allow customers to use credit cards for all of the following reasons except:

Correct AnswerverifiedShow Answer

Prudence Co. receives a $26,000, 90-day, 4% note receivable. What is maturity value of the note?

Correct Answerverified$26,000 * .04 * 90/3...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Companies can report credit card expense as a reduction in net sales or as a selling expense.

Correct AnswerverifiedShow Answer

Allowance for Doubtful Accounts is a contra asset; its balance is added to Accounts receivable.

Correct AnswerverifiedFalse

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?

Correct AnswerverifiedShow Answer

All of the following statements regarding valuation of receivables under U.S. GAAP and IFRS are true except:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedE

A promissory note:

Correct AnswerverifiedShow Answer

To write off an uncollectible account receivable when the allowance method of accounting for uncollectible accounts is used, a company should debit ________ and credit accounts receivable.

Correct Answerverifiedallowance ...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Felton Corporation purchased $4,000 in merchandise from Marita Co. Felton signed a 60-day, 10%, $4,000 promissory note. Marita should record the sale with a journal entry debiting for $ and crediting for $ .

Correct Answer
verified
notes receivable; $4,000; sales; $4,000

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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$26,000 * .04 * 90/3...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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False

Correct Answer
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Correct Answer
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Correct Answer
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E

Correct Answer
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Correct Answer
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allowance ...
View Answer

Correct Answer
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Correct Answer
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