Exam 9: Accounting for Receivables

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

The accounts receivable turnover is calculated by dividing average accounts receivable by net sales.

A finance company or bank that purchases and takes ownership of another company's accounts receivable is called a:

Gideon Company uses the direct write-off 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: A) Allowance for Doubtful Accounts 2,000 Accounts Receivable-A. Hopkins 2,000 B) Accounts Receivable-A. Hopkins 2,000 Bad Debts Expense 2,000 C) Cash 2,000 Accounts Receivable-A. Hopkins 2,000 D) Accounts Receivable-A. Hopkins 2,000 Cash 2,000 E) Bad Debts Expense 2,000 Accounts Receivable-A. Hopkins 2,000

Gideon Company uses the direct write-off method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $2,000 uncollectible account of its customer, A. Hopkins. On July 10, Gideon received a check for the full amount of $2,000 from Hopkins. On July 10, the entry or entries Gideon makes to record the recovery of the bad debt is: A) Allowance for Doubtful Accounts 2,000 Accounts Receivable-A. Hopkinse 2,000 Accounts Receivable-A. Hopkins 2,000 Cash 2,000 B) Accounts Receivable-A. Hopkins 2,000 Bad debts expense 2,000 Cash 2,000 Accounts Receivable-A. Hopkins 2,000 C) Accounts Receivable-A. Hopkins 2,000 Allowance for Doubtful Accounts 2,000 Cash 2,000 Accounts Receivable-A. Hopkins 2,000 D) Cash 2,000 Accounts Receivable-A. Hopkins 2,000 E) Cash 2,000 Bad debts expense 2,000

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

The person who signs a note receivable and promises to pay the principal and interest is the:

Explain the difference between honoring and dishonoring a note receivable.

A promissory note is a written promise to pay a specified amount of money either on demand or at a definite future date.

A company using the percentage of sales method for estimating bad debts has sales of $350,000 and estimates that 1.0% of its sales are uncollectible. The unadjusted balance in Allowance for Doubtful Accounts is a $300 credit. The estimated amount of bad debts expense is $3,200

A company borrowed $10,000 by signing a 180-day promissory note at 9%. The maturity value of the note is: (Use 360 days a year.)

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: A) Accounts Receivable-A. Hopkins 2,000 Allowance for Doubtful Accounts 2,000 B) Accounts Receivable-A. Hopkins 2,000 Bad debts expense 2,000 Cash 2,000 Accounts Receivable-A. Hopkins 2,000 C) Cash 2,000 Accounts Receivable-A. Hopkins 2,000 D) Allowance for Doubtful Accounts 2,000 Accounts Receivable-A. Hopkins 2,000 E) Allowance for Doubtful Accounts 2,000 Bad debts expense 2,000

The aging method of determining bad debts expense is based on the knowledge that the longer a receivable is past due, the higher the likelihood of collection.

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

If the credit balance of the Allowance for Doubtful Accounts account exceeds the amount of a bad debt being written off, the entry to record the write-off against the allowance account results in:

The following selected amounts are reported on the year-end unadjusted trial balance report for a company that uses the percent of sales method to determine its bad debts expense. Accounts receivable \ 435,000 Debit Allowance for Doubtful Accounts 1,250 Debit Net Sales 2,100,000 Credit All sales are made on credit. Based on past experience, the company estimates 1% of credit sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

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: Accounts receivable \ 375,000 debit Allowance for unco llectible accounts 500 credit Net Sales 800,000 credit All sales are made on credit. Based on past experience, the company estimates that 0.6% of net credit sales are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

The use of the direct write-off method is allowed under the materiality constraint.

A company receives a 10%, 120-day note for $1,500. The total interest due on the maturity date is: (Use 360 days a year.)

Which of the following is not true about the Allowance for Doubtful Accounts?