Exam 7: Receivables and Investments

Utah Co.sold merchandise to Big Sky Corp.on December 1, 2014, for $9,000, and accepted a promissory note for payment in the same amount.The note has a term of 90 days and a stated interest rate of 8%.Utah's accounting period ends on December 31.What amount should Utah recognize as interest revenue on the maturity date of the note?

A high accounts receivable turnover ratio could mean that the company's credit policies may be too stringent.

Utah Co.sold merchandise to Big Sky Corp.on December 1, 2014, for $9,000, and accepted a promissory note for payment in the same amount.The note has a term of 90 days and a stated interest rate of 8%.Utah's accounting period ends on December 31.What amount should Utah recognize as interest revenue on December 31, 2014 if a 360 day year is assumed)?

On July 1, 2014, Falcon Company received a $20,000 promissory note from Jordyn Company.The annual interest rate is 5%.Principal and interest are paid in cash at the maturity date of June 30, 2015. If Falcon's fiscal year ends September 30, 2014, an adjusting entry is needed to:

If a company uses the allowance method of accounting for bad debts, which one of the following statements is true?

An) categorizes the various accounts receivable amounts by the length of time outstanding.

-Refer to the data for Benton Corporation. If the aging approach is used to estimate bad debts, what amount should be recorded as bad debt expense for 2015?

Meta Inc.pays $18,000 to buy stock in another company and an additional $350 in commissions.Three months later, Meta sells the stock for $19,000.At the time of sale, Meta will recognize a:

The amount of money received, or the fair value of the products or services received by the maker when a promissory note is issued is called the .

The amount of cash the maker is to pay the payee on the maturity date of the note is called the ____________________.

The company that makes or gives a promissory note to another company has a liability, called an) ____________________.

Mellon Corporation The data presented below is for Mellon Corporation for the year ended December 31, 2015: -Refer to the data for Mellon Corporation. If Mellon estimates its bad debts at 2% of net credit sales, what amount will be reported as bad debt expense for 2015?

A company is referred to as a parent if it owns

An) is a written promise to repay a definite sum of money either upon demand, or at a fixed or determinable date in the future.

A subsidiary is a separate legal entity that is owned or controlled by another entity.

Changes in accounts and notes receivable are reported in the Activities section of a statement of cash flows prepared using the indirect method.

The comparative balance sheets of Midnite Corp.for 2015 and 2014 indicate that short-term trade notes receivable increased from $5,000 in 2014 to $75,000 in 2015.How will this change be reported on Midnite's statement of cash flows, if Midnite uses the indirect method?

Discounting a note receivable

Mellon Corporation The data presented below is for Mellon Corporation for the year ended December 31, 2015: -Refer to information for Mellon Corporation. If Mellon uses 2% of net credit sales to estimate its bad debts, what will be the balance in the Allowance for Doubtful Accounts account after the adjustment for bad debts?

The data presented below is for Craft, Inc.for 2015. What is the effect on liquidity when Craft records its estimate for bad debt expense using the allowance method?