Exam 7: Accounts and Notes Receivable

Teller purchased merchandise from TechCom on October 17 of the current year. TechCom accepted Teller's $4,800, 90-day, 10% note as payment. What entry should TechCom make on January 15 of the next year when the note is paid?

At December 31 of the current year, a company reported the following: Total sales for the current year: $780,000, includes $160,000 in cash sales. Accounts receivable balance at Dec. 31, current year: $190,000. Bad debts written off during the current year: $6,800. Balance of Allowance for Doubtful Accounts at January 1, current year: $8,300 credit. Prepare the necessary adjusting entries to record bad debts expense assuming this company's bad debts are estimated to equal: (a) 1.5% of credit sales. (b) 5% of accounts receivable.

What is the accounts receivable turnover ratio? How is it calculated? How is it used to assess financial condition?

The person that borrows money and signs a promissory note is referred to as the payee.

On December 31 of the current year, a company's unadjusted trial balance included the following: Accounts Receivable, debit balance of $97,250; Allowance for Doubtful Accounts, credit balance of $951. What amount should be debited to Bad Debts Expense, assuming 6% of outstanding accounts receivable at the end of the current year will be uncollectible?

____________________________ are amounts owed by customers from credit sales where payment is required in periodic amounts over an extended time period.

If the seller regularly offers customers such terms, installment accounts receivable are classified as current assets, even though the installment period is more than one year.

Timmons Company had a January 1, credit balance in its Allowance for Doubtful Accounts of $7,000 for the current year. The following transactions and events affected the Allowance for Doubtful Accounts during the current year: What amount should appear in the allowance for doubtful accounts in the December 31, balance sheet for the current year?

After adjustment, the allowance for doubtful accounts has the effect of reducing accounts receivable to its estimated realizable value.

During a given year, Compaq had net sales of $32,000 million and average account receivables were $6,850 million. Its accounts receivable turnover is equal to 0.21.

Electron borrowed $75,000 cash from TechCom by signing a promissory note. TechCom's entry to record the transaction should include a:

Tecom accepts the NOVA credit card for credit card sales. Tecom sends credit card receipts to NOVA on a weekly basis. NOVA charges Tecom a 2% fee. Tecom usually receives payment from NOVA within a week. Prepare entries in general journal form to record the following transactions of Tecom involving the NOVA credit card.

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

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

Paoli Pizza bought $5,000 worth of merchandise from TechCom and signed a 90-day, 10% promissory note for the $5,000. TechCom's journal entry to record the sales portion of the transaction is:

Myrex Corporation purchased $4,000 in merchandise from TechCom. Myrex signed a 60-day, 10%, $4,000 promissory note. TechCom should record the sale with a journal entry debiting ____________________ for $________ and crediting __________________ for $________.

Newton Company uses the allowance method of accounting for uncollectible accounts. On May 3, the Newton Company wrote off the $3,000 uncollectible account of its customer, P. Best. On July 10, Newton received a check for the full amount of $3,000 from Best. On July 10, the entry or entries Newton makes to record the recovery of the bad debt is:

____________________ is the charge for using (not paying) money until a later date.

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

On August 1, 2010, Ace Corporation accepted a note receivable in place of an outstanding accounts receivable in the amount of $123,965. The note is due in 90 days and has an interest rate of 8%. What would be the appropriate journal entry to record the receipt of cash at the maturity date?