Exam 8: Receivables

At January 1,Everbright Sales has the following balances: During the year,Everbright has $150,000 of credit sales,collections of $140,000,and write-offs of $3,000.Everbright records Uncollectible accounts expense at the end of the year using the aging method.At the end of the year,the aging analysis produces a figure of $1,900,being the estimate of uncollectible accounts at end of year. - After the year-end entry to adjust the Uncollectible accounts expense is made,what is the final balance in the Allowance for uncollectible accounts?

On December 1,2014,Parsons Sales sold machinery to a customer for $2,000.The customer could not pay at the time of sale,but agreed to pay 9 months later,and signed a 9-month note at 12% interest.What was the total amount of cash collected by Parsons when the note matured?

The acid-test ratio is computed as current assets divided by current liabilities.

A business is holding a note receivable and wishes to cash it in before its maturity date by selling it to a bank.If the business receives less than the maturity value of the note,the difference is treated as:

The two major types of receivables are accounts receivable and notes receivable.

Which of the following is a disadvantage of selling on credit?

The Allowance for uncollectible accounts currently has a credit balance of $200.The company's management estimates that 2.5% of net credit sales will be uncollectible.Net credit sales are $115,000.What will be the amount of Uncollectible account expense reported on the income statement?

Days' sales in receivables is the ratio of average net accounts receivable to one day's sales.

Which of the following entries would be used to account for uncollectible receivables using the allowance method?

Zorro Company has significant amounts of accounts receivable,and experiences uncollectible accounts from time to time.Zorro uses the direct write-off method.When Zorro Company writes off an uncollectible receivable,what is the effect of that single transaction?

The allowance method is a method of recording collection losses by estimating uncollectible amounts.

On March 1,2012,Bayonne Services made a loan to one of its officers.The officer signed a 6-month note for $4,000 at 8%.Bayonne generally accrues interest at year-end only,so at the time the note matured,Bayonne had not accrued any interest revenue.On September 1,when the note matured,the officer settled in full with the company.Please provide the journal entry made by Bayonne when the note was settled.

What is the total interest on a 3-month,9% note for $32,000?

A credit card processing company generally uses one of two methods of payment-the net and the gross method.

A newly created design business called Smart Art is just finishing up its first year of operations.During the year,there were credit sales of $40,000 and collections of $36,000.One account for $650 was written off.Smart Art uses the percent-of-sales method to account for uncollectible account expense,and has decided to use a factor of 2% for their year-end adjustment of uncollectible account expense. -At the end of the year,what is the ending balance in Accounts receivable?

On December 1,2013,Parsons Sales sold machinery to a customer for $2,000.The customer could not pay at the time of sale,but agreed to pay 9 months later,and signed a 9-month note at 12% interest.Parsons accrues interest only at year-end.On September 1,Parsons collected the whole amount due.Please provide the journal entry needed to record the settlement of the note.

On September 1,2013,Adirondac Marine Supplies made a loan to one of its customers.The customer signed a 6-month note for $1,500 at 10%.How much interest revenue did Adirondac record in the year 2013?

The direct write-off method would be considered acceptable if uncollectible receivables are very low.

At January 1,Davidson Services has the following balances: During the year,Davidson has $104,000 of credit sales,collections of $100,000,and write-offs of $1,400. Davidson records Uncollectible account expense at the end of the year using the percent-of-sales method,and applies a rate of 1.1%,based on past history. - Prior to the year-end entry to adjust the Uncollectible accounts expense,what is the balance in the Allowance for uncollectible accounts?

A company has the following account balances.What is the acid-test ratio? (Please round to two decimal places.) Cash \ 50,000 Short-terminvestments 85,000 Net current receivables 120,000 Inventory 145,000 Total current liabilities 275,000