Exam 7: Accounting for Receivables

The________ method of accounting for bad debts records the loss from an uncollectible account receivable at the time it is determined to be uncollectible (and not before).

Allowance for Doubtful Accounts is a contra asset; its balance is added to Accounts receivable.

A company borrowed $16,000 by signing a 4-month promissory note at 12%.The amount of interest to be paid at maturity is $640.

The formula for computing interest on a note is: Principal of the note × Annual interest rate × Time expressed in fraction of year.

On July 9,Mifflin Company receives an $8,500,90-day,8% note from customer Payton Summers as payment on account. -Compute the amount due at maturity for the note and interest.(Use 360 days a year.)

A company had total sales of $600,000,net sales of $550,000,and an average accounts receivable of $90,000.Its accounts receivable turnover equals:

As long as a company accurately records total credit sales information,it is not necessary to have separate accounts for specific customers.

Flax had net sales of $7,875 and its average accounts receivables is $1,250.Calculate Flax's accounts receivable turnover:

Gideon Company uses the allowance method of accounting for uncollectible accounts.On May 3,the Gideon Company wrote off the $2,000 uncollectible account of its customer,A.Hopkins.The entry or entries Gideon makes to record the write off of the account on May 3 is:

When the maker of a note is unable or refuses to pay at maturity,the note is said to be ________.

Gemstone Products allows customers to use bank credit cards to charge purchases.The bank used by Gemstone Products processes all bank credit cards in exchange for a 3% processing fee and all credit card receipts deposited are credited to the company account on the day of deposit.Assume that on January 18,Gemstone Products sold and deposited $18,000 worth of bank credit card receipts.Prepare the general journal entry to record this transaction.

The ________ method uses both past and current receivables to estimate the allowance amount,and assumes that the longer an amount is past due,the more likely it is to be uncollectible.

Jasper makes a $25,000,90-day,7% cash loan to Clayborn Co. -The amount of interest that Jasper will collect on the loan is: $\bold{\text{(Use 360 days a year.)}}$

Companies can report credit card expense as a reduction in net sales or as a selling expense.

A company allows its customers to use bank credit cards to charge purchases.When customers use the credit cards,the net amount is deposited in the company's checking account,less a 2.5% service charge.Assume that on April 13,the company sold $20,000 worth of merchandise to customers who used credit cards.Prepare the company's journal entry to record the credit card sales for April 13 assuming the company deposited the receipts that same day.

If a 90-day note receivable is dated July 12,what is the maturity date of the note?

What is the maturity date of a 120-day note receivable dated March 5?

The unadjusted trial balance at year-end for a company that uses the percent of receivables method to determine its bad debts expense reports the following selected amounts: All sales are made on credit.Based on past experience,the company estimates 3.5% of ending account receivable to be uncollectible.What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Winkler Company borrows $85,000 and pledges its receivables as security.The journal entry to record this transaction would be:

It is not advisable to accept a note receivable in exchange for an overdue account receivable.