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Exam 9: Accounting for Receivables

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Question 21

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A promissory note received from a customer in exchange for an account receivable:

A) Is a cash equivalent for the recipient.
B) Is an account receivable for the recipient.
C) Is a note receivable for the recipient.
D) Is a short-term investment for the recipient.
E) Is a note payable for the recipient.

F) C) and D)
G) A) and D)

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Question 22

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

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Question 23

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

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

A company factored $35,000 of its accounts receivable and was charged a 2% factoring fee.The journal entry to record this transaction would include a debit to Cash of $35,000,a debit to Factoring Fee Expense of $700,and credit to Accounts Receivable of $35,700.

When the maker of a note honors a note this indicates that the note is:

A maker who dishonors a note is one who does not pay it at maturity.

Explain how to record the receipt of a note receivable.

A company has net sales of $900,000 and average accounts receivable of $300,000.What is its accounts receivable turnover for the period?

Teller purchased merchandise from TechCom on October 17 of the current year and TechCom accepted Teller's $4,800,90-day,10% note.What entry should TechCom make on December 31,to record the accrued interest on the note?

At December 31,Warren Company reports the following results for its calendar year from the adjusted trial balance. a.Prepare the adjusting entry to record Bad Debts Expense assuming uncollectibles are estimated to be 1.1% of credit sales. b.Prepare the adjusting entry to record Bad Debts Expense assuming uncollectibles are estimated to be .8% of total sales. c.Prepare the adjusting entry to record Bad Debts Expense assuming uncollectibles are estimated to be 7.0% of year-end accounts receivable.

_______________ refers to the expected proceeds from converting an asset into cash.

Calculate the amount of interest that would be owed on a $9,000,60-day,9% note receivable at maturity.

Under the allowance method of accounting for uncollectible accounts receivable,no attempt is made to estimate bad debts expense.

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.

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 balance of the Allowance for Doubtful Accounts on January 1 of the current year was $44,000 and that accounts receivable written off during the current year totaled $49,200. 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.

The maturity date of a note receivable:

The following series of transactions occurred during Year 1 and Year 2,when Linwood Co.sold merchandise to John Moore.Linwood's annual accounting period ends on December 31. 10/01/Yr 1 Sold $12,000 of merchandise to John Moore,terms 2/10,n/30. 11/15/Yr 1 Moore reports that he cannot pay the account until early next year.He agrees to exchange the account for a 120-day,12% note receivable. 12/31/Yr 1 Prepared the adjusting journal entry to record accrued interest on the note. 03/15/Yr 2 Linwood receives a check from Moore for the maturity value (with interest)of the note. 03/22/Yr 2 Linwood receives notification that Moore's check is being returned for nonsufficient funds (NSF). 12/31/Yr 2 Linwood writes off Moore's account as uncollectible. Prepare Linwood Co.'s journal entries to record the above transactions.The company uses the allowance method to account for its bad debt expense.

The maturity date of a note refers to the date the note must be repaid.

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