Question 1

Prudence Co.receives a $26,000,90-day,4% note receivable.What is the amount of interest that is due at maturity?

Accepted Answer

$26,000 *

Question 2

Jasper makes a $25,000,90-day,7% cash loan to Clayborn Co.
-Jasper's entry to record the collection of the note and interest at maturity should be: $\bold{\text{(Use 360 days a year.)}}$

Accepted Answer

A) Debit Cash for $25,000; credit Notes Receivable $25,000. 
B) Debit Cash $25,437.50; credit Interest Revenue $437.50; credit Notes Receivable $25,000. 
C) Debit Cash $25,437.50; credit Notes Receivable for $25,437.50. 
D) Debit Notes Payable $25,000; Debit Interest Expense $1,750; credit Cash $26,750. 
E) Debit Cash $26,750; credit Interest Revenue $1,750,credit Notes Receivable $25,000. 
A) Debit Cash for $25,000; credit Notes Receivable $25,000. 
B) Debit Cash $25,437.50; credit Interest Revenue $437.50; credit Notes Receivable $25,000. 
C) Debit Cash $25,437.50; credit Notes Receivable for $25,437.50. 
D) Debit Notes Payable $25,000; Debit Interest Expense $1,750; credit Cash $26,750. 
E) Debit Cash $26,750; credit Interest Revenue $1,750,credit Notes Receivable $25,000.

Question 3

When using the allowance method of accounting for uncollectible accounts,the recovery of a bad debt would be recorded as a debit to Cash and a credit to Bad Debts Expense.

Accepted Answer

A) True 
 B)False

Question 4

All of the following statements regarding the allowance method are true except:

Accepted Answer

A) The allowance method estimates bad debts expense at the end of each accounting period and records it with an adjusting entry. 
B) The Allowance for Doubtful Accounts is a contra asset account. 
C) The Allowance for Doubtful Accounts is subtracted from Accounts Receivable to report receivables at realizable value. 
D) The allowance method does not record bad debt expense until a customer's account receivable is determined to be uncollectible. 
E) The write-off an uncollectible account does not impact the income statement. 
A) The allowance method estimates bad debts expense at the end of each accounting period and records it with an adjusting entry. 
B) The Allowance for Doubtful Accounts is a contra asset account. 
C) The Allowance for Doubtful Accounts is subtracted from Accounts Receivable to report receivables at realizable value. 
D) The allowance method does not record bad debt expense until a customer's account receivable is determined to be uncollectible. 
E) The write-off an uncollectible account does not impact the income statement.

Question 5

Define a note receivable and explain how to calculate the interest due on a short-term note receivable.

Accepted Answer

A note receivable is a promissory note,w

Question 6

Honoring a note receivable indicates that the maker has:

Accepted Answer

A) Signed. 
B) Paid in full. 
C) Guaranteed. 
D) Notarized. 
E) Cosigned. 
A) Signed. 
B) Paid in full. 
C) Guaranteed. 
D) Notarized. 
E) Cosigned.

Question 7

On May 31,Cray has $375,800 of accounts receivable.Cray uses the allowance method of accounting for bad debts and has an existing credit balance in the allowance for doubtful accounts of $14,250.
1.Prepare journal entries to record the following selected May transactions.The company uses the perpetual inventory system.
a.Sold $415,200 of merchandise (that cost $249,000)to customers on credit.
b.Received $465,800 cash in payment of accounts receivable.
c.Wrote off $15,800 of uncollectible accounts receivable.
d.In adjusting the accounts on May 31,its fiscal year-end,the company estimated that 4.0% of accounts receivable will be uncollectible.
2.Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its May 31 balance sheet.

Accepted Answer

The answer of On May 31,Cray has $375,800 of accounts...

Question 8

Federal laws prohibit the selling of accounts receivable to factors.

Accepted Answer

A) True 
 B)False

Question 9

Companies use two methods to account for uncollectible accounts,the direct write-off method and the allowance method.

Accepted Answer

A) True 
 B)False

Question 10

A company has $90,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts.Experience suggests that 4% of outstanding receivables are uncollectible.The current balance (before adjustments)in the allowance for doubtful accounts is an $800 debit.The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for:

Accepted Answer

A) $3,600 
B) $3,568 
C) $3,632 
D) $2,800 
E) $4,400 
A) $3,600 
B) $3,568 
C) $3,632 
D) $2,800 
E) $4,400

Question 11

The accounts receivable method to estimate bad debts obtains the estimated balance in the Allowance for Doubtful Accounts in one of two ways: (1)computing the percent uncollectible from the total accounts receivable or (2)aging accounts receivable.

Accepted Answer

A) True 
 B)False

Question 12

The advantage of the allowance method of accounting for bad debts is that it identifies the specific customers who will not pay their bills.

Accepted Answer

A) True 
 B)False

Question 13

A promissory note received from a customer in exchange for an account receivable is recorded by the payee as:

Accepted Answer

A) A cash equivalent. 
B) An account receivable. 
C) A note receivable. 
D) A short-term investment. 
E) A note payable. 
A) A cash equivalent. 
B) An account receivable. 
C) A note receivable. 
D) A short-term investment. 
E) A note payable.

Question 14

On May 31,a company had a balance in its accounts receivable of $103,200.Prepare journal entries to record the following transactions for June.Assume the company uses a perpetual inventory system.

Accepted Answer

The answer of On May 31,a company had a balance...

Question 15

A company uses the aging of accounts receivable method to estimate its bad debts expense.On December 31 of the current year an aging analysis of accounts receivable revealed the following:
 
Required:
a.Calculate the amount of the Allowance for Doubtful Accounts that should be reported on the current year-end balance sheet.
b.Calculate the amount of the Bad Debts Expense that should be reported on the current year's income statement,assuming that the credit balance of the Allowance for Doubtful Accounts on January 1 of the current year was $41,000 and that accounts receivable written off during the current year totaled $43,200.
c.Prepare the adjusting entry to record bad debts expense on December 31 of the current year.
d.Show how Accounts Receivable will appear on the current year-end balance sheet as of December 31.

Accepted Answer

The answer of A company uses the aging of accounts...

Question 16

The expense recognition principle,as applied to bad debts,requires:

Accepted Answer

A) That expenses be ignored if their effect on the financial statements is unimportant to users' business decisions. 
B) The use of the direct write-off method for bad debts. 
C) The use of the allowance method of accounting for bad debts. 
D) That bad debts be disclosed in the financial statements. 
E) That bad debts not be written off. 
A) That expenses be ignored if their effect on the financial statements is unimportant to users' business decisions. 
B) The use of the direct write-off method for bad debts. 
C) The use of the allowance method of accounting for bad debts. 
D) That bad debts be disclosed in the financial statements. 
E) That bad debts not be written off.

Question 17

Brinker accepts all major bank credit cards,including First Savings Bank's,which assesses a 2.5% charge on sales for using its card.On May 26,Brinker had $4,800 in First Savings Bank Card credit sales.What entry should Brinker make on May 26 to record the deposit?

Accepted Answer

A) Debit Accounts Receivable $4,800; credit Sales $4,800. 
B) Debit Cash $4,680; debit Credit Card Expense $120; credit Sales $4,800. 
C) Debit Cash $4,800; credit Sales $4,800. 
D) Debit Cash $4,920; credit Credit Card Expense $120; credit Sales $4,800. 
E) Debit Accounts Receivable $4,680; debit Credit Card Expense $120; credit Sales $4,800. 
A) Debit Accounts Receivable $4,800; credit Sales $4,800. 
B) Debit Cash $4,680; debit Credit Card Expense $120; credit Sales $4,800. 
C) Debit Cash $4,800; credit Sales $4,800. 
D) Debit Cash $4,920; credit Credit Card Expense $120; credit Sales $4,800. 
E) Debit Accounts Receivable $4,680; debit Credit Card Expense $120; credit Sales $4,800.

Question 18

If a sale is made with a bank credit card,the seller debits Cash and credits Sales for the same amount.

Accepted Answer

A) True 
 B)False

Question 19

Jervis accepts all major bank credit cards,including those issued by Northern Bank (NB),which assesses a 3% charge on sales for using its card.On June 28,Jervis had $3,500 in NB Card credit sales.What entry should Jervis make on June 28 to record the deposit?

Accepted Answer

A) Debit Cash $3,500; credit Sales $3,500 
B) Debit Accounts Receivable $3,500; credit Sales $3,500 
C) Debit Cash $3,605; credit Credit Card Expense $105; credit Sales $3,500 
D) Debit Cash $3,395; debit Credit Card Expense $105; credit Sales $3,500 
E) Debit Accounts Receivable $3,395; debit Credit Card Expense $105; credit Sales $3,500 
A) Debit Cash $3,500; credit Sales $3,500 
B) Debit Accounts Receivable $3,500; credit Sales $3,500 
C) Debit Cash $3,605; credit Credit Card Expense $105; credit Sales $3,500 
D) Debit Cash $3,395; debit Credit Card Expense $105; credit Sales $3,500 
E) Debit Accounts Receivable $3,395; debit Credit Card Expense $105; credit Sales $3,500

Question 20

A company borrowed $10,000 by signing a 180-day promissory note at 9%.The total interest due on the maturity date is: (Use 360 days a year.)

Accepted Answer

A) $900 
B) $75 
C) $450 
D) $300 
E) $1,800 
A) $900 
B) $75 
C) $450 
D) $300 
E) $1,800

Exam 7: Accounting for Receivables

Prudence Co.receives a $26,000,90-day,4% note receivable.What is the amount of interest that is due at maturity?

Jasper makes a $25,000,90-day,7% cash loan to Clayborn Co. -Jasper's entry to record the collection of the note and interest at maturity should be: (Use 360 days a year.)\bold{\text{(Use 360 days a year.)}}(Use 360 days a year.)

When using the allowance method of accounting for uncollectible accounts,the recovery of a bad debt would be recorded as a debit to Cash and a credit to Bad Debts Expense.

All of the following statements regarding the allowance method are true except:

Define a note receivable and explain how to calculate the interest due on a short-term note receivable.

Honoring a note receivable indicates that the maker has:

Federal laws prohibit the selling of accounts receivable to factors.

Companies use two methods to account for uncollectible accounts,the direct write-off method and the allowance method.

The accounts receivable method to estimate bad debts obtains the estimated balance in the Allowance for Doubtful Accounts in one of two ways: (1)computing the percent uncollectible from the total accounts receivable or (2)aging accounts receivable.

The advantage of the allowance method of accounting for bad debts is that it identifies the specific customers who will not pay their bills.

A promissory note received from a customer in exchange for an account receivable is recorded by the payee as:

On May 31,a company had a balance in its accounts receivable of $103,200.Prepare journal entries to record the following transactions for June.Assume the company uses a perpetual inventory system.

The expense recognition principle,as applied to bad debts,requires:

Brinker accepts all major bank credit cards,including First Savings Bank's,which assesses a 2.5% charge on sales for using its card.On May 26,Brinker had $4,800 in First Savings Bank Card credit sales.What entry should Brinker make on May 26 to record the deposit?

If a sale is made with a bank credit card,the seller debits Cash and credits Sales for the same amount.

Jervis accepts all major bank credit cards,including those issued by Northern Bank (NB),which assesses a 3% charge on sales for using its card.On June 28,Jervis had $3,500 in NB Card credit sales.What entry should Jervis make on June 28 to record the deposit?

A company borrowed $10,000 by signing a 180-day promissory note at 9%.The total interest due on the maturity date is: (Use 360 days a year.)

Accounting in Business

Accounting for Business Transactions

Adjusting Accounts for Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash,fraud,and Internal Controls

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Time Value of Money

Investments

Lean Principles and Accounting

Filters

Jasper makes a $25,000,90-day,7% cash loan to Clayborn Co. -Jasper's entry to record the collection of the note and interest at maturity should be: $\bold{\text{(Use 360 days a year.)}}$