Exam 9: Receivables

The accounts receivable turnover ratio of a merchandiser is 9.8 times. Calculate the days' sales in receivables for the merchandiser. (Round to the nearest day.)

On October 1, 2015, Android Inc. made a loan to one of its customers. The customer signed a 4-month note for $100,000 at 15%. Calculate the maturity value of the note.

The expense associated with the cost of uncollectible accounts receivable is known as bad debts expense.

Under both the allowance method and the direct-write off method of accounting for uncollectible accounts, the amount of bad debts expense is to be estimated at the end of each accounting period.

On January 1st, 2015, Everlight Corp. has the following balances: During the year, Everlight has $150,000 of credit sales, collections of credit sales of $140,000, and write-offs of $3,000. It records bad debts expense at the end of the year using the aging-of-receivables method. At the end of the year, aging analysis produces a figure of $1,900, being the estimate of uncollectible accounts. Before the year-end entry to adjust the bad debts expense is made, the balance in the Allowance for Bad Debts expense would be:

The days' sales in receivables ratio indicates the number of days it takes to collect the average level of accounts receivable.

The entity that signs the promissory note and promises to pay the required amount is the:

Tom's Fit Inc. a readymade garment seller accepts payment through credit cards. During the month of August, the card sales amounted to $12,000. The processor charges a 3% fee. Assuming that the credit card processor uses the gross method, provide the journal entries for the receipt of funds and the collection of fees at the end of the period.

On January 16, Whole Circle sold goods worth $5,000 to Smith on account. It could not collect cash from the customer, and finally decided to write off the account. Give journal entry to record the write-off assuming that the company uses the allowance method.

Which of the following is true of days' sales in receivables?

When a business pledges its accounts receivable, it transfers the right to collect cash from customers to the bank.

The Allowance for Bad Debts has a credit balance of $9,000 before the adjusting entry for bad debt expense. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging method, the company's management estimates that uncollectible accounts will be $15,000. What will be the amount of bad debts expense reported on the income statement?

The direct write-off method of accounting for uncollectible receivables is primarily used by small, non-public companies.

The maturity date for a six-month note issued on January 15 would be:

On October 1, 2015, Android Inc. made a loan to one of its customers. The customer signed a 4-month note for $100,000 at 15%. How much interest revenue did the company record in the year 2015?

The collection period of accounts receivable is usually long therefore it is classified as a long-term asset in the balance sheet.

Barker Sales has a days' sales in receivables figure of 35 and Xanadu Company has a days' sales in receivables of 25. This would suggest that Xanadu is having greater difficulty collecting their accounts receivable than Barker.

Which of the following would be included in the entry by the payee to record a dishonored note receivable?

The Allowance for Bad Debts can be calculated as a specific percentage of credit sales and is a contra account to Accounts Receivable.

Which of the following describes the key significance of the acid-test ratio?