Question 1

Match each of the following terms with the appropriate definitions.
-Committing accounts receivable as security for a loan.

Accepted Answer

A) Factoring accounts receivable 
B) Allowance method 
C) Accounts receivable turnover 
D) Principal of a note 
E) Materiality constraint
F)Installment accounts receivable
G)Pledging accounts receivable
H)Direct write-off method
I)Dishonoring a note
J)Full disclosure principle 
A) Factoring accounts receivable 
B) Allowance method 
C) Accounts receivable turnover 
D) Principal of a note 
E) Materiality constraint
F)Installment accounts receivable
G)Pledging accounts receivable
H)Direct write-off method
I)Dishonoring a note
J)Full disclosure principle

Question 2

Calculate the amount of interest that would be owed on a $18,000,60-day,8% note receivable at maturity.

Accepted Answer

$18,000 *

Question 3

Jervis sells $75,000 of its accounts receivable to Northern Bank in order to obtain necessary cash.Northern Bank charges a 5% factoring fee.What entry should Jervis make to record the transaction?

Accepted Answer

A)  Debit Cash $71,250; debit Factoring Fee Expense $3,750; credit Accounts Receivable $75,000 
B)  Debit Accounts Receivable $71,250; debit Factoring Fee Expense $3,750; credit Cash $75,000 
C)  Debit Cash $75,000; credit Factoring Fee Expense $3,750; credit Accounts Receivable $75,000 
D)  Debit Cash $71,250; credit Accounts Receivable $71,250 
E)  Debit Accounts Receivable $75,000; credit Factoring Fee Expense $3,750; credit Cash $71,250 
A)  Debit Cash $71,250; debit Factoring Fee Expense $3,750; credit Accounts Receivable $75,000 
B)  Debit Accounts Receivable $71,250; debit Factoring Fee Expense $3,750; credit Cash $75,000 
C)  Debit Cash $75,000; credit Factoring Fee Expense $3,750; credit Accounts Receivable $75,000 
D)  Debit Cash $71,250; credit Accounts Receivable $71,250 
E)  Debit Accounts Receivable $75,000; credit Factoring Fee Expense $3,750; credit Cash $71,250

Question 4

The allowance method of accounting for bad debts matches the estimated loss from uncollectible accounts receivable against the sales they helped produce.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)  Allows firms to receive cash earlier. 
B)  Passes ownership of the receivables to the factor. 
C)  There are no fees for factoring. 
D)  Seller avoids the cost of billing and accounting for receivables. 
E)  May transfer the risk of bad debts to the factor. 
A)  Allows firms to receive cash earlier. 
B)  Passes ownership of the receivables to the factor. 
C)  There are no fees for factoring. 
D)  Seller avoids the cost of billing and accounting for receivables. 
E)  May transfer the risk of bad debts to the factor.

Question 6

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:

Accepted Answer

A)  Debit Accounts Receivable $7,800; credit Sales $7,800 
B)  Debit Accounts Receivable $7,904; credit Sales $7,904 
C)  Debit Notes Receivable $7,800; credit Sales $7,800 
D)  Debit Notes Receivable $7,904; credit Sales $7,904 
E)  Debit Notes Receivable $7,800; debit Interest Receivable $104; credit Sales $7,904 
A)  Debit Accounts Receivable $7,800; credit Sales $7,800 
B)  Debit Accounts Receivable $7,904; credit Sales $7,904 
C)  Debit Notes Receivable $7,800; credit Sales $7,800 
D)  Debit Notes Receivable $7,904; credit Sales $7,904 
E)  Debit Notes Receivable $7,800; debit Interest Receivable $104; credit Sales $7,904

Question 7

A company has the following unadjusted account balances at December 31,of the current year; Accounts Receivable of $183,400 and Allowance for Doubtful Accounts of $1,600 (credit balance).The company uses the aging of accounts receivable to estimate its bad debts.The following aging schedule reflects its accounts receivable at the current year-end:
 $$\begin{array} { l l l } 
&&\text { Estimated } \
&&\text { Uncollectible } \
\text { Account Age }&\text { Balance }&\text { Percentage }\
\hline \text { Current (not yet due) } &  \$ 106,000& 2.0 \% \
\text { 1-30 days past due } &54 , 0 0 0 & 4.0 \% \
\text { 30-60 days past due } &12,000& 10.0 \% \
61 - 90 \text { days past due } &  8,500  & 25.0 \% \
\text { Over 90 days past due } &2 , 9 0 0 & 75.0 \% \
\text { Total } & \underline { \$183,400 } &
\end{array}$$ 
Calculate the amount of the Allowance for Doubtful Accounts that should appear on the December 31,of the current year,balance sheet.

Accepted Answer

\[\begin{array} { c c } 
\$ 106,000 * .0

Question 8

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.

Accepted Answer

None

Question 9

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.(Use 360 days a year.)

Accepted Answer

A)  $8,628 
B)  $8,192 
C)  $8,613 
D)  $8,500 
E)  $8,670 
A)  $8,628 
B)  $8,192 
C)  $8,613 
D)  $8,500 
E)  $8,670

Question 10

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 11

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.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

March 31 - 5 = 26 days; April

Question 13

On November 19,Nicholson Company receives a $15,000,60-day,8% note from a customer as payment on account.What adjusting entry should be made on the December 31 year-end? (Use 360 days a year.)

Accepted Answer

A)  Debit Interest Receivable $1,200; credit Interest Revenue $1,200. 
B)  Debit Interest Receivable $140; credit Interest Revenue $140. 
C)  Debit Notes Receivable $140; credit Interest Revenue $140. 
D)  Debit Notes Receivable $140; credit Interest Receivable $140. 
E)  Debit Interest Revenue $200; credit Interest Receivable $200. 
A)  Debit Interest Receivable $1,200; credit Interest Revenue $1,200. 
B)  Debit Interest Receivable $140; credit Interest Revenue $140. 
C)  Debit Notes Receivable $140; credit Interest Revenue $140. 
D)  Debit Notes Receivable $140; credit Interest Receivable $140. 
E)  Debit Interest Revenue $200; credit Interest Receivable $200.

Question 14

The aging of accounts receivable involves classifying each account receivable by how long it is past its due date and estimating the percent of each uncollectible class.

Accepted Answer

A) True 
 B)False

Question 15

Installment Accounts Receivable are classified as non-current assets if the installment period is more than one year,even if the seller regularly offers customers such terms.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A)  The percent of sales method. 
B)  The percent of accounts receivable method. 
C)  The aging of accounts receivable method. 
D)  Direct write-off method. 
E)  Factoring method. 
A)  The percent of sales method. 
B)  The percent of accounts receivable method. 
C)  The aging of accounts receivable method. 
D)  Direct write-off method. 
E)  Factoring method.

Question 17

Installment accounts receivable is another name for aging of accounts receivable.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A)  Debit Cash of $85,000 and credit Accounts Receivable $85,000. 
B)  Debit Cash of $85,000 and credit Accounts Payable $85,000. 
C)  Debit Note Receivable $85,000 and credit Accounts Receivable $85,000. 
D)  Debit Cash $85,000 and credit Notes Payable $85,000. 
E)  Debit Accounts Receivable $85,000 and credit Notes Payable $85,000. 
A)  Debit Cash of $85,000 and credit Accounts Receivable $85,000. 
B)  Debit Cash of $85,000 and credit Accounts Payable $85,000. 
C)  Debit Note Receivable $85,000 and credit Accounts Receivable $85,000. 
D)  Debit Cash $85,000 and credit Notes Payable $85,000. 
E)  Debit Accounts Receivable $85,000 and credit Notes Payable $85,000.

Question 19

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.

Accepted Answer

\[\begin{array} { l l l } 
\te

Question 20

A company had net sales of $600,000,total sales of $750,000,and an average accounts receivable of $75,000.Its accounts receivable turnover equals:

Accepted Answer

A)  .13 
B)  .80 
C)  7.75 
D)  8.00 
E)  10.00 
A)  .13 
B)  .80 
C)  7.75 
D)  8.00 
E)  10.00

Match each of the following terms with the appropriate definitions. -Committing accounts receivable as security for a loan.

Calculate the amount of interest that would be owed on a $18,000,60-day,8% note receivable at maturity.

Jervis sells $75,000 of its accounts receivable to Northern Bank in order to obtain necessary cash.Northern Bank charges a 5% factoring fee.What entry should Jervis make to record the transaction?

The allowance method of accounting for bad debts matches the estimated loss from uncollectible accounts receivable against the sales they helped produce.

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

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:

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.(Use 360 days a year.)

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

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.

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

On November 19,Nicholson Company receives a $15,000,60-day,8% note from a customer as payment on account.What adjusting entry should be made on the December 31 year-end? (Use 360 days a year.)

The aging of accounts receivable involves classifying each account receivable by how long it is past its due date and estimating the percent of each uncollectible class.

Installment Accounts Receivable are classified as non-current assets if the installment period is more than one year,even if the seller regularly offers customers such terms.

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

Installment accounts receivable is another name for aging of accounts receivable.

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

A company had net sales of $600,000,total sales of $750,000,and an average accounts receivable of $75,000.Its accounts receivable turnover equals:

Accounting in Business

Analyzing 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

Time Value of Money

Investments

Partnership Accounting

Filters

Exam 7: Accounting for Receivables

Match each of the following terms with the appropriate definitions. -Committing accounts receivable as security for a loan.

Calculate the amount of interest that would be owed on a $18,000,60-day,8% note receivable at maturity.

Jervis sells $75,000 of its accounts receivable to Northern Bank in order to obtain necessary cash.Northern Bank charges a 5% factoring fee.What entry should Jervis make to record the transaction?

The allowance method of accounting for bad debts matches the estimated loss from uncollectible accounts receivable against the sales they helped produce.

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

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:

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.(Use 360 days a year.)

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

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.

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

On November 19,Nicholson Company receives a $15,000,60-day,8% note from a customer as payment on account.What adjusting entry should be made on the December 31 year-end? (Use 360 days a year.)

The aging of accounts receivable involves classifying each account receivable by how long it is past its due date and estimating the percent of each uncollectible class.

Installment Accounts Receivable are classified as non-current assets if the installment period is more than one year,even if the seller regularly offers customers such terms.

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

Installment accounts receivable is another name for aging of accounts receivable.

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

A company had net sales of $600,000,total sales of $750,000,and an average accounts receivable of $75,000.Its accounts receivable turnover equals:

Accounting in Business

Analyzing 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

Time Value of Money

Investments

Partnership Accounting

Filters