Question 1

Explain how to record the receipt of a note receivable.

Accepted Answer

The receipt of a note receivable is reco

Question 2

When using the allowance method of accounting for uncollectible accounts, the entry to record the bad debts expense is a debit to Bad Debts Expense and a credit to Accounts Receivable.

Accepted Answer

A) True 
 B)False

Question 3

A company borrowed $5,000 by signing a 3-month promissory note at 10%. The total interest on the note is $500.

Accepted Answer

A) True 
 B)False

Question 4

The amount due on the date of maturity for a $6,000, 60-day 8%, note receivable is:

Accepted Answer

A)  $6,000 
B)  $6,480 
C)  $5,520 
D)  $6,080 
E)  $5,920 
A)  $6,000 
B)  $6,480 
C)  $5,520 
D)  $6,080 
E)  $5,920

Question 5

Wallah Company agreed to accept $5,000 in cash along with an $8,000, 90-day, 13.5% note from customer Judith Klemper to settle her $13,000 past-due account. How should Wallah record this transaction?

Accepted Answer

A) $\begin{array} { | l | r | r | } 
\hline \text { Accounts Receivable - J. Klemper } & 13,000 & \
\hline \text { Note Receivable } & & 8,000 \
\hline \text { Cash } & & 5,000 \
\hline
\end{array}$ 
B) $\begin{array} { | c | r | r | } 
\hline \text { Note Receivable } & 8,000 & \
\hline \text { Sales } & & 8,000 \
\hline
\end{array}$ 
C) $\begin{array} { | l | r | r | } 
\hline \text { Cash } & 5,000 & \
\hline \text { Note Receivable } & 8,000 & \
\hline \text { Sales } & & 13,000 \
\hline
\end{array}$ 
D) $\begin{array} { | l | r | r | } 
\hline \text { Cash } & 5,000 & \
\hline \text { Note Receivable } & 8,000 & \
\hline \multicolumn{1}{|c|} { \text { Account Receivable - J. Klemper } } & & 13,000 \
\hline
\end{array}$ 
E) $\begin{array} { | l | r | r | } 
\hline \text { Sales } & 13,000 & \
\hline \text { Note Receivable } & & 8,000 \
\hline \text { Cash } & & 5,000 \
\hline
\end{array}$ 
A) $\begin{array} { | l | r | r | } 
\hline \text { Accounts Receivable - J. Klemper } & 13,000 & \
\hline \text { Note Receivable } & & 8,000 \
\hline \text { Cash } & & 5,000 \
\hline
\end{array}$ 
B) $\begin{array} { | c | r | r | } 
\hline \text { Note Receivable } & 8,000 & \
\hline \text { Sales } & & 8,000 \
\hline
\end{array}$ 
C) $\begin{array} { | l | r | r | } 
\hline \text { Cash } & 5,000 & \
\hline \text { Note Receivable } & 8,000 & \
\hline \text { Sales } & & 13,000 \
\hline
\end{array}$ 
D) $\begin{array} { | l | r | r | } 
\hline \text { Cash } & 5,000 & \
\hline \text { Note Receivable } & 8,000 & \
\hline \multicolumn{1}{|c|} { \text { Account Receivable - J. Klemper } } & & 13,000 \
\hline
\end{array}$ 
E) $\begin{array} { | l | r | r | } 
\hline \text { Sales } & 13,000 & \
\hline \text { Note Receivable } & & 8,000 \
\hline \text { Cash } & & 5,000 \
\hline
\end{array}$

Question 6

A dishonored note receivable is usually reclassified as an account receivable.

Accepted Answer

A) True 
 B)False

Question 7

A payee of a note will always honor a note and pay it in full.

Accepted Answer

A) True 
 B)False

Question 8

A company ages its accounts receivables to determine its end of period adjustment for bad debts. At the end of the current year, management estimated that $39,375 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a credit balance of $3,285. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Accepted Answer

A) $\begin{array} { | l | r | r | } 
\hline \text { Bad Debt Expense } & 36,090 & \
\hline \text { Allowance for Doubtful Accounts } & & 36,090 \
\hline
\end{array}$ 
B) $\begin{array}{|c|c|c|}
\hline \text { Bad Debt Expense } & 42,660 & \
\hline \text { Allowance for Doubtful Accounts } & & 42,660 \
\hline
\end{array}$ 
C) $\begin{array}{|c|r|r|}
\hline \text { Bad Debt Expense } & 39,375 & \
\hline \text { Allowance for Doubtful Accounts } & & 39,375 \
\hline
\end{array}$ 
D) $\begin{array} { | l | r | r | } 
\hline \text { Accounts Receivable } & 39,375 & \
\hline \text { Bad Debt Expense } & 3,285 & \
\hline \text { Sales } & & 42,660 \
\hline
\end{array}$ 
E)   
A) $\begin{array} { | l | r | r | } 
\hline \text { Bad Debt Expense } & 36,090 & \
\hline \text { Allowance for Doubtful Accounts } & & 36,090 \
\hline
\end{array}$ 
B) $\begin{array}{|c|c|c|}
\hline \text { Bad Debt Expense } & 42,660 & \
\hline \text { Allowance for Doubtful Accounts } & & 42,660 \
\hline
\end{array}$ 
C) $\begin{array}{|c|r|r|}
\hline \text { Bad Debt Expense } & 39,375 & \
\hline \text { Allowance for Doubtful Accounts } & & 39,375 \
\hline
\end{array}$ 
D) $\begin{array} { | l | r | r | } 
\hline \text { Accounts Receivable } & 39,375 & \
\hline \text { Bad Debt Expense } & 3,285 & \
\hline \text { Sales } & & 42,660 \
\hline
\end{array}$ 
E)

Question 9

A company used 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:
$$\begin{array} { | l | r | } 
\hline \text { Accounts receivable } & \$ 245,000 \text { debit } \
\hline \text { Allowance for uncollectible accounts } & 300 \text { credit } \
\hline \text { Net Sales } & 900,000 \text { credit } \
\hline
\end{array}$$
 All sales are made on credit. Based on past experience, the company estimates 0.5% of credit sales to be uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

Accepted Answer

A)  $925 
B)  $1,225 
C)  $4,200 
D)  $4,500 
E)  $45,000 
A)  $925 
B)  $1,225 
C)  $4,200 
D)  $4,500 
E)  $45,000

Question 10

A company has sales of $350,000 and estimates that 0.5% of its sales are uncollectible. The company's reported amount of bad debts expense is $1,750.

Accepted Answer

A) True 
 B)False

Question 11

The _________________________ method uses income statement relationships to estimate bad debts and is based on the idea that a given percent of a company's credit sales for a period are uncollectible.

Accepted Answer

The answer of The _________________________ method uses income statement relationships...

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Pepsi's accounts receivable turnover was 9.9 for this year and 11.0 for last year. Coke's turnover was 9.3 for this year and 9.3 for last year. These results imply that:

Accepted Answer

A)  Coke has the better turnover for both years 
B)  Pepsi has the better turnover for both years 
C)  Coke's turnover is improving 
D)  Coke's credit policies are too loose 
E)  Coke is collecting its receivables more quickly than Pepsi in both years 
A)  Coke has the better turnover for both years 
B)  Pepsi has the better turnover for both years 
C)  Coke's turnover is improving 
D)  Coke's credit policies are too loose 
E)  Coke is collecting its receivables more quickly than Pepsi in both years

Question 14

An accounting procedure that (1) estimates and reports bad debts expense from credit sales during the period of the sales and (2) reports accounts receivable at the amount of cash to be collected is the:

Accepted Answer

A)  Allowance method of accounting for bad debts 
B)  Aging of notes receivable 
C)  Adjustment method for uncollectible debts 
D)  Direct write-off method of accounting for bad debts 
E)  Cash basis method of accounting for bad debts 
A)  Allowance method of accounting for bad debts 
B)  Aging of notes receivable 
C)  Adjustment method for uncollectible debts 
D)  Direct write-off method of accounting for bad debts 
E)  Cash basis method of accounting for bad debts

Question 15

Companies use two methods to account for uncollectible accounts: the direct write-off method and the allowance method.

Accepted Answer

A) True 
 B)False

Question 16

The matching principle requires use of the direct write-off method of accounting for bad debts.

Accepted Answer

A) True 
 B)False

Question 17

The quality of receivables refers to:

Accepted Answer

A)  The creditworthiness of sellers 
B)  The speed of collection 
C)  The likelihood of collection without loss 
D)  Sales turnover 
E)  The interest rate 
A)  The creditworthiness of sellers 
B)  The speed of collection 
C)  The likelihood of collection without loss 
D)  Sales turnover 
E)  The interest rate

Question 18

Ace Credit Card Company agrees to transfer cash to Seller Company immediately upon deposit of that company's credit card sales receipts. Ace charges a 2% fee for all credit card sales. If Seller Company deposits $57,300 credit card sales receipts, which of the following statements are true?

Accepted Answer

A)  Ace will receive $56,154 cash from Seller Company 
B)  Seller Company will receive cash $56,154 from Ace 
C)  Ace will receive $57,300 cash from Seller Company 
D)  Seller Company will receive $57,300 cash from Ace 
E)  Ace will pay Seller Company a $1,146 credit card fee 
A)  Ace will receive $56,154 cash from Seller Company 
B)  Seller Company will receive cash $56,154 from Ace 
C)  Ace will receive $57,300 cash from Seller Company 
D)  Seller Company will receive $57,300 cash from Ace 
E)  Ace will pay Seller Company a $1,146 credit card fee

Question 19

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.

Accepted Answer

A) True 
 B)False

Question 20

If a 90-day note receivable is dated June 12, what is the maturity date of the note?

Accepted Answer

The answer of If a 90-day note receivable is dated...

Exam 7: Accounts and Notes Receivable

Explain how to record the receipt of a note receivable.

When using the allowance method of accounting for uncollectible accounts, the entry to record the bad debts expense is a debit to Bad Debts Expense and a credit to Accounts Receivable.

A company borrowed $5,000 by signing a 3-month promissory note at 10%. The total interest on the note is $500.

The amount due on the date of maturity for a $6,000, 60-day 8%, note receivable is:

Wallah Company agreed to accept $5,000 in cash along with an $8,000, 90-day, 13.5% note from customer Judith Klemper to settle her $13,000 past-due account. How should Wallah record this transaction?

A dishonored note receivable is usually reclassified as an account receivable.

A payee of a note will always honor a note and pay it in full.

A company has sales of $350,000 and estimates that 0.5% of its sales are uncollectible. The company's reported amount of bad debts expense is $1,750.

The _________________________ method uses income statement relationships to estimate bad debts and is based on the idea that a given percent of a company's credit sales for a period are uncollectible.

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

Pepsi's accounts receivable turnover was 9.9 for this year and 11.0 for last year. Coke's turnover was 9.3 for this year and 9.3 for last year. These results imply that:

An accounting procedure that (1) estimates and reports bad debts expense from credit sales during the period of the sales and (2) reports accounts receivable at the amount of cash to be collected is the:

Companies use two methods to account for uncollectible accounts: the direct write-off method and the allowance method.

The matching principle requires use of the direct write-off method of accounting for bad debts.

The quality of receivables refers to:

Ace Credit Card Company agrees to transfer cash to Seller Company immediately upon deposit of that company's credit card sales receipts. Ace charges a 2% fee for all credit card sales. If Seller Company deposits $57,300 credit card sales receipts, which of the following statements are true?

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.

If a 90-day note receivable is dated June 12, what is the maturity date of the note?

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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