FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 9: Accounting for Receivables

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 41

True/False

Review LaterAdd Note

Review Later

Credit sales are recorded by crediting Accounts Receivable.

A) True
B) False

Correct Answer

verified

Show Answer

Question 42

Multiple Choice

Review LaterAdd Note

Review Later

Which of the following is not true regarding a credit card expense?

A) Credit card expense is not recorded by the seller.
B) Credit card expense may be classified as a selling expense.
C) Credit card expense is a fee the seller pays for services provided by the card company.
D) Credit card expense may be classified as a "discount" deducted from sales to get net sales.
E) Credit card expense may be classified as an administrative expense.

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

Correct Answer

verified

Show Answer

Question 43

Essay

Review LaterAdd Note

Explain the difference between honoring and dishonoring a note receivable.

A Company had net sales of $23,000, and its average account receivables were $5,700. Its accounts receivable turnover is 0.24.

A company borrowed $10,000 by signing a 180-day promissory note at 9%. The maturity value of the note is: (Use 360 days a year.)

On September 30, Waldon Co. has $540,250 of accounts receivable. Waldon uses the allowance method of accounting for bad debts and has an existing credit balance in the allowance for doubtful accounts of $13,750. 1. Prepare journal entries to record the following selected October transactions. The company uses the perpetual inventory system. 2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its October 31 balance sheet. a. Sold $305,000 of merchandise (that cost $178,500) to customers on credit. b. Received $395,100 cash in payment of accounts receivable. c. Wrote off $15,700 of uncollectible accounts receivable. d. In adjusting the accounts on October 31, its fiscal year-end, the company estimated that 4.0% of accounts receivable will be uncollectible.

The accounts receivable turnover is calculated by:

Bonita Company estimates uncollectible accounts using the allowance method at December 31. It prepared the following aging of receivables analysis. $\begin{array} { | l | r | r | r | r | r | r | } \hline & & & { \text { Days } } & { \text { Past } } & \text { Due } & \\\hline & \text { Total } & \text { Current } & 1 \text { to 30 } & \text { 31 to 60 } & 61 \text { to 90 } & \text { Over 90 } \\\hline \text { Accounts receivable } & \$ 110,000 & 68,000 & 17,000 & 10,000 & 8,000 & 7,000 \\\hline \text { Percent uncollectible } & & 1 \% & 2 \% & 5 \% & 8 \% & 13 \% \\\hline\end{array}$ a. Estimate the balance of the Allowance for Doubtful Accounts using the aging of accounts receivable method. b. Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $550 credit. c. Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $300 debit.

A company reports the following results in its financial statements: Year 3 Year 2 Year 1 $\begin{array} { l l l l } \text { Net Sales } & \$ 2,500,000 & \$ 2,100,000 & \$ 1,900,000 \\\text { Accounts receivable, Ending Balance } & 172,000 & 167,000 & 165,000\end{array}$ Calculate the company accounts receivable turnover for Year 2 and Year 3. Compare these two results and give a possible explanation for any significant change.

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

The accounts receivable turnover is calculated by dividing average accounts receivable by net sales.

Jax Recording Studio purchased $7,800 in electronic components from Music World. Jax signed a 60-day, 8% promissory note for $7,800. -Music World's journal entry to record the collection on the maturity date is:

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. $\begin{array} { | l | r | l | } \hline \text { Accounts receivable } & \$ 435,000 & \text { Debit } \\\hline \text { Allowance for Doubtful Accounts } & 1,250 & \text { Debit } \\\hline \text { Net Sales } & 2,100,000 & \text { Credit } \\\hline\end{array}$ 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?

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

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

On October 12 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?

What is the maturity date of a 120-day note receivable dated March 5?

Owens Company uses the direct write-off method of accounting for uncollectible accounts receivable. On December 6, Year 1, Owens sold $6,300 of merchandise to the Valley Company. On August 8, Year 2, after numerous attempts to collect the account, Owens determined that the account of the Valley Company was uncollectible. a. Prepare the journal entry required to record the transactions on August 8. b. Assuming that the $6,300 is material, explain how the direct write-off method violates the expense recognition (matching) principle in this case.

Prudence Co. receives a $26,000, 90-day, 4% note receivable. What is the amount of interest that is due at maturity?

The percent of sales method of estimating bad debts focuses more on the realizable value of accounts receivable than on expense recognition.