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Exam 9: Accounting for Receivables

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Question 61

True/False

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After adjustment,the balance in the Allowance for Doubtful Accounts has the effect of reducing accounts receivable to its estimated realizable value.

A) True
B) False

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Question 62

Multiple Choice

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Hankco accepts all major bank credit cards,including Omni Bank's,which assesses a 4% charge on sales for using its card.On June 28,Hankco had $3,500 in Omni Card credit sales.What entry should Hankco make on June 28 to record the deposit?

A) Debit Cash $3,500; credit Sales $3,500
B) Debit Accounts Receivable $3,500; credit Sales $3,500
C) Debit Cash $3,640; credit Credit Card Expense $140; credit Sales $3,500
D) Debit Cash $3,360; debit Credit Card Expense $140; credit Sales $3,500
E) Debit Accounts Receivable $3,360; debit Credit Card Expense $140; credit Sales $3,500

F) A) and E)
G) A) and D)

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Question 63

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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.

A company borrowed $10,000 by signing a 180-day promissory note at 11%.The total interest due on the maturity date is.

For legal reasons,it is always a good business practice to accept a note receivable in exchange for an overdue account receivable.

The Allowance for Doubtful Accounts:

A company uses the percent of sales method to determine its bad debts expense.At the end of the current year,the company's unadjusted trial balance reported the following selected amounts: All sales are made on credit.Based on past experience,the company estimates 0.6% of credit sales to be uncollectible.What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

Griggs Company uses the direct write-off method of accounting for uncollectible accounts receivable.On December 6,Year 1,Griggs sold $6,300 of merchandise to the Hillman Company.On August 8,Year 2,after numerous attempts to collect the account,Griggs determined that the $6,300 account of the Hillman Company was uncollectible. a.Prepare the journal entry required to record the transactions on August 8. b.Assuming that the $6,300 is material,explain how the direct write-off method violates the matching principle in this case.

The accounting principle that requires financial statements (including notes) to report all relevant information about the operations and financial condition of a company is called:

The quality of receivables refers to the likelihood of collection without loss.

To write off an uncollectible account receivable when the allowance method of accounting for uncollectible accounts is used,a company should debit _______________________ and credit accounts receivable.

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

How are the direct write-off method and the allowance method applied in accounting for uncollectible accounts receivables?

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

All of the following are true regarding credit card expense except:

The use of an allowance for bad debts is required under the materiality constraint.

Cairo Co.uses the allowance method of accounting for uncollectible accounts.Cairo Co.accepted a $5,000,12%,90-day note dated May 16,from Alexandria Co.in exchange for its past-due account receivable.Make the necessary general journal entries for Cairo 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 August 9,Pierce Company receives a $8,500,90-day,8% note from customer Eric Simms as payment on his account.What entry should be made on August 9 to record receipt of the note?

Sellers generally prefer to receive notes receivable rather than accounts receivable when the credit period is long and the receivable is for a large amount.

Hasbro had net sales of $7,875 and its average accounts receivables is $1,350.Calculate Hasbro's accounts receivable turnover: