Exam 7: Accounting for Receivables

When using the allowance method of accounting for uncollectible accounts,the entry to record the estimated bad debts expense is a debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts.

Companies follow both the expense recognition principle and the materiality constraint when applying the direct write-off method.

Notes receivable are classified as current liabilities regardless of the time to maturity.

The allowance method that assumes a given percent of a company's credit sales for the period is uncollectible is:

A Company had net sales of $23,000,and its average account receivables were $5,700.Its accounts receivable turnover is 0.24.

The account receivable turnover measures:

Which of the following is an accounting method that (1)estimates and reports bad debts expense from credit sales during the period the sales are recorded,and (2)reports accounts receivable at the estimated amount of cash to be collected?

If a customer owes interest on accounts receivable,Interest Receivable is debited and Accounts Receivable is credited.

A company factored $45,000 of its accounts receivable and was charged a 4% factoring fee.The journal entry to record this transaction would include a:

________ is the charge for using borrowed money until its due date.

The maturity date of a note receivable:

Felton Corporation purchased $4,000 in merchandise from Marita Co.Felton signed a 60-day,10%,$4,000 promissory note.Marita should record the sale with a journal entry debiting ________ for $ ________ and crediting ________ for $ ________.

A company reports the following results in its financial statements: Calculate the company accounts receivable turnover for Year 2 and Year 3.Compare these two results and give a possible explanation for any significant change.

A company that uses the percent of sales to account for its bad debts had credit sales of $740,000 in Year 1,including a $720 sale to Marshall Fresh.On December 31,Year 1,the company estimated its bad debts at 1.5% of its credit sales.On June 1,Year 2,the company wrote off,as uncollectible,the $720 account of Marshall Fresh.On December 21,Year 2,Marshall Fresh unexpectedly paid his account in full.Prepare the necessary journal entries: (a)On December 31,Year 1,to reflect the estimate of bad debts expense. (b)On June 1,Year 2,to write off the bad debt. (c)On December 21,Year 2,to record the unexpected collection.

Factoring receivables is beneficial to a seller for all of the following reasons except:

A company using the percentage of sales method for estimating bad debts has sales of $350,000 and estimates that 1.0% of its sales are uncollectible.The unadjusted balance in Allowance for Doubtful Accounts is a $300 credit.The estimated amount of bad debts expense is $3,200

Which of the following is not true about the Allowance for Doubtful Accounts?

Kenai Company sold $600 of merchandise to a customer who used a National Bank credit card.National Bank deducts a 3% service charge for sales on its credit cards.Kenai electronically remits the credit card sales receipts to the credit card company and receives payment immediately.The journal entry to record the collection from the credit card company would be:

Duerr Company makes a $60,000,60-day,12% cash loan to Ryan Co.The note and interest to be collected at maturity is: $\bold{\text{(Use 360 days a year.)}}$

Jax Recording Studio purchased $7,800 in electronic components from Music World.Jax signed a 60-day,8% promissory note for $7,800.Music World's journal entry to record the sales transaction is: