Exam 9: Receivables

On January 1, Ajax Corp accepted a one-year note for $5,000 at 4% from one of its customers. When the note matured on December 31, the customer was unable to pay, and the company treated it as a dishonored note. Provide the journal entry for the dishonor of the note in the books of the company.

At the beginning of 2015, Peter Dots has the following ledger balances: During the year, credit sales amounted to $800,000. Cash collected on credit sales amounted to $760,000 and $18,000 has been written off. At the end of the year, company adjusted for bad debts expense using the percent-of-sales method and applied a rate, based on past history, of 2.5%. The ending balance in Bad Debts Expense would be:

Accounts receivable has a balance of $30,000 and the Allowance for Bad Debts has a credit balance of $3,000. The allowance method is used. What is the net realizable value before and after a $2,000 Account Receivable is written off?

A company with significant amounts of accounts receivable, experiences uncollectible accounts from time to time. If the company uses the direct write-off method, the effect of writing off of an uncollectible receivable will be a(n):

On October 1, 2015, Allen Jewelry Company accepted a 4-month, 10% note for $2,400 in settlement of an overdue account receivable. Interest revenue was accrued through December 31, 2015. Allen receives the maturity value of the note on the due date. Give journal entry to record the collection of funds.

Factoring is one of the options available to a business to reduce the risk of uncollectible accounts receivable.

Notes receivable represents an undertaking by a debtor to pay a fixed amount along with interest at a certain future date.

When a business accepts payment through credit cards or debit cards, it has to pay a fee to the credit card or debit card processor.

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 total interest earned on the note.

The maturity value of a note is the sum of the principal minus interest due at maturity.

For a company with significant uncollectible receivables, the direct write-off method is unsuitable because:

On December 1, 2015, Parsons Inc. sold machinery to a customer for $2,000. Parsons regularly sells machinery. 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. Give journal entry to record the revenue at the time of sale. Ignore the entry for cost of goods sold.

The acid-test ratio is a more stringent measure of liquidity than the cash ratio.

What is the acid-test ratio for a merchandiser having the following balances? (Round to two decimal places.)

The following information is from the records of Armadillo Camera Shop: The company uses the direct write-off method for bad debts. What is the amount of bad debts expense?

Which of the following is a disadvantage of accepting credit cards or debit cards for a business?

A company issues a 60-day, 12% note for $15,000. What is the principal amount of the note?

The acid-test ratio is also known as the quick ratio.

The receivables of an organization can be categorized into accounts receivable, notes receivable, and other receivables.

The higher the quick ratio, the lower the business's ability to pay its current liabilities.