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Exam 7: Reporting and Analyzing Receivables

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Question 101

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On November 1,Orpheum Company accepted a $10,000,90-day,8% note from a customer settle an account.What entry should be made on November 1 to record the acceptance of the note?

A) Debit Note Receivable $10,000; credit Cash $10,000.
B) Debit Note Receivable $10,000; credit Accounts Receivable $10,000.
C) Debit Note Receivable $10,000; credit Sales $10,000.
D) Debit Note Receivable $10,200; credit Accounts Receivable $10,000; credit Interest Revenue $200.
E) Debit Sales $10,000; credit Accounts Receivable $10,000.

F) All of the above
G) None of the above

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Question 102

Multiple Choice

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

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

F) B) and C)
G) A) and E)

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Question 103

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When a note receivable is dishonored,it reverts to an account receivable.

Which of the following is an accounting procedure 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?

BizCom's customer,Redding,paid off an $8,300 balance on its account receivable.BizCom should record the transaction as a debit to Accounts Receivable−Redding and a credit to Cash.

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:

Lemming makes an $18,750,120-day,8% cash loan to Notions Co.on November 1.Lemming's end-of-period adjusting entry on December 31 should be:

The direct write-off method of accounting for bad debts records the loss from an uncollectible account receivable when it is determined to be uncollectible.

Each December 31,Kimura Company ages its accounts receivable to determine the amount of its adjustment for bad debts.At the end of the current year,management estimated that $16,900 of the accounts receivable balances would be uncollectible.The Allowance for Doubtful Accounts account had a debit balance of $1,200 before any year-end adjustment for bad debts.Prepare the adjusting journal entry that Kimura Company should make on December 31,of the current year,to estimate bad debts expense.

A ________ is a signed agreement to pay a specified amount of money either on demand or at a definite future date.

A company ages its accounts receivables to determine its end of period adjustment for bad debts.At the end of the current year,management estimated that $15,750 of the accounts receivable balance would be uncollectible.Prior to any year-end adjustments,the Allowance for Doubtful Accounts had a credit balance of $375.What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

No attempt is made to estimate bad debts expense under the direct write-off method of accounting for uncollectible accounts receivable.

The expense recognition (matching)principle permits the use of the direct write-off method of accounting for uncollectible accounts when bad debts are very large in relation to a company's other financial statement items such as sales and net income.

Jordan Co.uses the allowance method of accounting for uncollectible accounts.Jordan Co.accepted a $5,000,12%,90-day note dated May 16,from Beckam Co.in exchange for its past-due account receivable.Make the necessary general journal entries for Jordan Co.on May 16 and the August 14 maturity date,assuming that the: a.Note is held until maturity and collected in full at that time. b.Note is dishonored; the amount of the note and its interest are written off as uncollectible.

On September 30,Waldon Co.has $540,250 of accounts receivable.Waldon uses the allowance method of accounting for bad debts and has an existing credit balance in the allowance for doubtful accounts of $13,750. 1.Prepare journal entries to record the following selected October transactions.The company uses the perpetual inventory system.2.Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its October 31 balance sheet. a.Sold $305,000 of merchandise (that cost $178,500)to customers on credit. b.Received $395,100 cash in payment of accounts receivable. c.Wrote off $15,700 of uncollectible accounts receivable. d.In adjusting the accounts on October 31,its fiscal year-end,the company estimated that 4.0% of accounts receivable will be uncollectible.

Giorgio Italian Market bought $4,000 worth of merchandise from Food Suppliers and signed a 90-day,6% promissory note for the $4,000.Food Supplier's journal entry to record the sales transaction is:

When using the allowance method of accounting for uncollectible accounts,the entry to write off Jeannie's uncollectible account is a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable−Jeannie.

A 90-day note issued on April 10 matures on:

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

The ________ of a note is the day the principle plus interest of a note must be repaid.