Question 1

The buyer who pays cash for an account receivable referred to as a:

Accepted Answer

A)  Payor 
B)  Pledgor 
C)  Factor 
D)  Payee 
E)  Pledgee 
A)  Payor 
B)  Pledgor 
C)  Factor 
D)  Payee 
E)  Pledgee

Question 2

Failure by a promissory note's maker to pay the amount due at maturity is known as:

Accepted Answer

A)  Protesting a note 
B)  Closing a note 
C)  Dishonoring a note 
D)  Discounting a note 
E)  Depreciating a note 
A)  Protesting a note 
B)  Closing a note 
C)  Dishonoring a note 
D)  Discounting a note 
E)  Depreciating a note

Question 3

The _______________________ method uses both past and current receivables to estimate the allowance amount and assumes that the longer an amount is past due, the more likely it is to be uncollectible.

Accepted Answer

Aging of a

Question 4

A company received a $1,000, 90-day, 10% note receivable. The journal entry to record receipt of the note would include a debit to Notes Receivable.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

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 
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

Question 6

Notes receivable are classified as current liabilities.

Accepted Answer

A) True 
 B)False

Question 7

A company borrowed $1,000 by signing a six month promissory note at 5% interest. The total amount of interest on this promissory note is $25.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

The aging of accounts receivable involves classifying each account receivable by how long it is past its due date and estimating the amount that is uncollectible.

Accepted Answer

A) True 
 B)False

Question 10

On November 15, 2010, Betty Corporation accepted a note receivable in place of an outstanding accounts receivable in the amount of $138,460. The note is due in 90 days and has an interest rate of 7.5%. What is the appropriate journal entry to record at maturity?

Accepted Answer

A) $\begin{array} { | l | r | r | } 
\hline \text { Cash } & 138,460.00 & \
\hline \text { Notes Receivable } & & 138,460.00 \
\hline
\end{array}$ 
B) $\begin{array} { | c | r | r | } 
\hline \text { Notes Receivable } & 138,460.00 & \
\hline \text { Accounts Receivable } & & 138,460.00 \
\hline
\end{array}$ 
C) $\begin{array} { | l | r | r | } 
\hline \text { Notes Receivable } & 138,460.00 & \
\hline \text { Interest Revenue } & 2,596.13 & \
\hline \text { Cash } & & 141,056.13 \
\hline
\end{array}$ 
D) $\begin{array} { | l | r | r | } 
\hline \text { Cash } & 138,460.00 & \
\hline \text { Interest Receivable } & 1,298.06 & \
\hline \text { Notes Receivable } & & 139,758.06 \
\hline
\end{array}$ 
E) $\begin{array} { | l | r | r | } 
\hline \text { Cash } & 141,056.13 & \
\hline \text { Interest Revenue } & & 1,298.07 \
\hline \text { Interest Receivable } & & 1,298.06 \
\hline \text { Notes Receivable } & & 138,460.00 \
\hline
\end{array}$ 
A) $\begin{array} { | l | r | r | } 
\hline \text { Cash } & 138,460.00 & \
\hline \text { Notes Receivable } & & 138,460.00 \
\hline
\end{array}$ 
B) $\begin{array} { | c | r | r | } 
\hline \text { Notes Receivable } & 138,460.00 & \
\hline \text { Accounts Receivable } & & 138,460.00 \
\hline
\end{array}$ 
C) $\begin{array} { | l | r | r | } 
\hline \text { Notes Receivable } & 138,460.00 & \
\hline \text { Interest Revenue } & 2,596.13 & \
\hline \text { Cash } & & 141,056.13 \
\hline
\end{array}$ 
D) $\begin{array} { | l | r | r | } 
\hline \text { Cash } & 138,460.00 & \
\hline \text { Interest Receivable } & 1,298.06 & \
\hline \text { Notes Receivable } & & 139,758.06 \
\hline
\end{array}$ 
E) $\begin{array} { | l | r | r | } 
\hline \text { Cash } & 141,056.13 & \
\hline \text { Interest Revenue } & & 1,298.07 \
\hline \text { Interest Receivable } & & 1,298.06 \
\hline \text { Notes Receivable } & & 138,460.00 \
\hline
\end{array}$

Question 11

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

Accepted Answer

The answer of The ____________________ of a note is the...

Question 12

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

Accepted Answer

$9,000 x .

Question 13

The matching principle requires that accrued interest on outstanding notes receivable be recorded at the end of each accounting period.

Accepted Answer

A) True 
 B)False

Question 14

When a company holds a large number of notes receivable it sometimes sets up a controlling account and a subsidiary ledger for notes.

Accepted Answer

A) True 
 B)False

Question 15

Chiller Company has credit sales of $5.60 million for year 2010. Chiller estimates that 1.32% of the credit sales will not be collected. Historically, 4% of outstanding accounts receivable is uncollectible. On December 31, 2010, the company's Allowance for Doubtful Accounts has an unadjusted credit balance of $3,561. Chiller prepares a schedule of its December 31, 2010, accounts receivable by age. Based on past experience, it estimates the percent of receivables in each age category that will become uncollectible. This information is summarized here:
$\begin{array}{rlr}\text { December } 31,2010 & \text { Age of Accounts } & \text { Expected Percent } \
\text { Accounts Receivable } & \text { Receivable } & \text { Uncollectible }\\hline
\$ 1,095,000 & \text { Not yet due } & 0.85 \% \
322,550 & 1 \text { to } 30 \text { days past due } & 1.42 \
84,700 & 31 \text { to } 60 \text { days past due } & 7.60 \
50,420 & 61 \text { to } 90 \text { days past due } & 42.50 \
12,500 & \text { Over } 90 \text { days past due } & 81.00
\end{array}$
Assuming the company uses the percent of accounts receivable method, what is the amount that Chiller will enter as the Bad Debt Expense in the December 31 adjusting journal entry?

Accepted Answer

A)  $59,045.80 
B)  $51,878.41 
C)  $48,317.41 
D)  $70,359.00 
E)  $66,167.80 
A)  $59,045.80 
B)  $51,878.41 
C)  $48,317.41 
D)  $70,359.00 
E)  $66,167.80

Question 16

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

Accepted Answer

A)  Maker 
B)  Payee 
C)  Holder 
D)  Receiver 
E)  Owner 
A)  Maker 
B)  Payee 
C)  Holder 
D)  Receiver 
E)  Owner

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Temper Company has credit sales of $3.10 million for year 2010. Temper estimates that .9% of the credit sales will not be collected. On December 31, 2010, the company's Allowance for Doubtful Accounts has an unadjusted credit balance of $2,222. Temper prepares a schedule of its December 31, 2010, accounts receivable by age. Based on past experience, it estimates the percent of receivables in each age category that will become uncollectible. This information is summarized here:
$\begin{array}{rlr}\text { December } 31,2010 & \text { Age of Accounts } & \text { Expected Percent } \
\text { Accounts Receivable } & \text { Receivable } & \text { Uncollectible }\
\$ 620,000 & \text { Not yet due } & 1.05 \% \
248,000 & 1 \text { to } 30 \text { days past due } & 1.80 \
49,600 & 31 \text { to } 60 \text { days past due } & 6.30 \
24,800 & 61 \text { to } 90 \text { days past due } & 31.75 \
4,960 & \text { Over } 90 \text { days past due } & 66.00
\end{array}$

Assuming the company uses the percent of sales method, what is the amount that Temper will enter as the Bad Debt Expense in the December 31 adjusting journal entry?

Accepted Answer

A)  $25,246.40 
B)  $27,468.40 
C)  $23,024.40 
D)  $27,900.00 
E)  $24,420.40 
A)  $25,246.40 
B)  $27,468.40 
C)  $23,024.40 
D)  $27,900.00 
E)  $24,420.40

Question 20

Prepare general journal entries for the following transactions of this company for the current year:
 $$\begin{array} { | l | l | } 
\hline \text { Apr. } 25 & \begin{array} { l } 
\text { Sold } \$ 4,500 \text { of merchandise to CBC Corp., receiving a } 10 \% , 60 \text {-day, } \$ 4,500 \text { note } \
\text { receivable. }
\end{array} \
\hline \text { June } 24 & \text { The note of CBC Corp., received on April } 25 \text { was dishonored. } \
\hline
\end{array}$$

Accepted Answer

The answer of Prepare general journal entries for the following...

Exam 7: Accounts and Notes Receivable

The buyer who pays cash for an account receivable referred to as a:

Failure by a promissory note's maker to pay the amount due at maturity is known as:

The _______________________ method uses both past and current receivables to estimate the allowance amount and assumes that the longer an amount is past due, the more likely it is to be uncollectible.

A company received a $1,000, 90-day, 10% note receivable. The journal entry to record receipt of the note would include a debit to Notes Receivable.

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

Notes receivable are classified as current liabilities.

A company borrowed $1,000 by signing a six month promissory note at 5% interest. The total amount of interest on this promissory note is $25.

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

The aging of accounts receivable involves classifying each account receivable by how long it is past its due date and estimating the amount that is uncollectible.

On November 15, 2010, Betty Corporation accepted a note receivable in place of an outstanding accounts receivable in the amount of $138,460. The note is due in 90 days and has an interest rate of 7.5%. What is the appropriate journal entry to record at maturity?

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

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

The matching principle requires that accrued interest on outstanding notes receivable be recorded at the end of each accounting period.

When a company holds a large number of notes receivable it sometimes sets up a controlling account and a subsidiary ledger for notes.

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

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

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

Prepare general journal entries for the following transactions of this company for the current year: Apr. 25 Sold \ 4,500 of merchandise to CBC Corp., receiving a 10\%,60 -day, \ 4,500 note receivable. June 24 The note of CBC Corp., received on April 25 was dishonored.

Introducing Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash and Internal Controls

Long-Term Assets

Current Liabilities

Long-Term Liabilities

Corporate Reporting and Analysis

Reporting and Analyzing Cash Flows

Analyzing Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Performance Reporting

Master Budgets and Performance Planning

Flexible Budgets and Standard Costing

Decentralization and Performance Evaluation

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Investments and International Operations

Accounting for Partnerships

Appendix : Accounting With Special Journals

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