Exam 8: Cash and Receivables

When an account receivable that was previously written off is collected,it is necessary to reverse the entry for the write-off before recording the collection.

The general ledger account for Accounts Receivable shows a debit balance of $50,000.Allowance for Uncollectible Accounts has a credit balance of $3,000.Net sales for the year were $500,000.In the past,3 percent of sales have proved uncollectible,and an aging of accounts receivable resulted in an estimate of $20,000 of uncollectible accounts receivable. Using the accounts receivable aging method,the entry to record the Uncollectible Accounts Expense is: a.Uncollectible Accounts Expense 21,500 Allowance for Uncollectible Accounts 21,500 b.Uncollectible Accounts Expense 17,000 Allowance for Uncollectible Accounts 17,000 c.Uncollectible Accounts Expense 20,000 Allowance for Uncollectible Accounts 20,000 d.Uncollectible Accounts Expense 23,000 Allowance for Uncollectible Accounts 23,000

Match each definition with the correct term below. -Percentage of net sales method

A dishonored note means the payee's entry includes a

Purchasing receivables with recourse is riskier than purchasing them without recourse.

Match each definition with the correct term below. -Accounts receivable

A promissory note is executed in June.When the note is paid the following January,the payee's entry includes (assuming a calendar-year accounting period and no reversing entries)a

The balance in Allowance for Uncollectible Accounts must be considered prior to end-of-period adjustment when using which of the following methods?

Following a stringent credit-granting policy will probably result in fewer defaults by customers.

A compensating balance restricts cash; in effect,it increases the interest on the loan and reduces a company's liquidity.

You have just received notice that Agnes Fisher,a customer of yours with an Accounts Receivable balance of $200,has gone bankrupt and will not be making any future payments.Assuming you use the allowance method,the journal entry you make is to

A company that uses the allowance method writes off a specific account as uncollectible,but then the customer pays.The entries made upon receiving payment will

If the amount of uncollectible accounts expense is overstated at year end,

Determine the interest on the following notes payable: Round answers to two decimal places. a.$3,000 at 10 percent for 60 days b.$600 at 16 percent for 4 months c.$5,000 at 12 percent for 45 days d.$900 at 14 percent for 30 days

Assuming that the allowance method is being used,prepare journal entries to record the following transactions.Omit explanations.

The general ledger account for Accounts Receivable shows a debit balance of $37,500.The Allowance for Uncollectible Accounts has a debit balance of $1,000.Net sales for the year were $375,000.In the past,2 percent of net sales have proved uncollectible.An aging of accounts receivable accounts results in an estimate of $6,250 of uncollectible accounts receivable.Calculate (a)Uncollectible Accounts Expense and (b)the ending balance of the Allowance for Uncollectible Accounts using (i)the percentage of net sales method and (ii)the accounts receivable aging method.

Under what specific circumstance will application of the direct charge-off method be in accordance with the matching principle?

Assume that part of accounts and other receivables on Thompson Toys' balance sheet is $16 million and that Thompson estimates its uncollectible accounts as 2 percent of all accounts receivable.Record the adjusting entry assuming that the company uses the accounts receivable aging method to recognize uncollectible accounts if the Allowance for Uncollectible Accounts has a balance of: a.$104,000 credit b.$46,000 debit

Assume that on March 15,a customer who owes Chisago sales company $3,000 is declared bankrupt by a federal court.The entry that would be made to write off this account is:

The allowance method of recognizing uncollectible accounts is not in accordance with good accounting practice.