Exam 7: Reporting and Analyzing Receivables

Music World sold $7,800 in electronic components to Jax Recording Studio. Jax signed a 60-day, 8% promissory note for $7,800. Music World's journal entry to record the collection on the maturity date is:

Companies can report credit card expense as a discount deducted from sales or as a selling expense.

A company factored $45,000 of its accounts receivable and was charged a 4% factoring fee. The journal entry to record this transaction would include a:

The accounts receivable method to estimate bad debts obtains the estimated balance in the Allowance for Doubtful Accounts in one of two ways: (1) computing the percent uncollectible from the total accounts receivable or (2) aging accounts receivable.

Frederick Company borrows $63,000 from First City Bank and pledges its receivables as security. Which of the following is true regarding this transaction:

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:

A company that uses the percent of sales to account for its bad debts had credit sales of $740,000 in Year 1, including a $720 sale to Marshall Fresh. On December 31, Year 1, the company estimated its bad debts at 1.5% of its credit sales. On June 1, Year 2, the company wrote off, as uncollectible, the $720 account of Marshall Fresh. On December 21, Year 2, Marshall Fresh unexpectedly paid his account in full. Prepare the necessary journal entries: (a) On December 31, Year 1, to reflect the estimate of bad debts expense. (b) On June 1, Year 2, to write off the bad debt. (c) On December 21, Year 2, to record the unexpected collection.

What are some of the considerations management should make when assessing the accounts receivable turnover ratio?

What is the maturity date of a 120-day note receivable dated March 5?

Valley Spa purchased $7,800 in plumbing components from Tubman Co. Valley Spa signed a 60-day, 10% promissory note for $7,800. If the note is dishonored at maturity, what is the amount due on the note?

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

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

Match each of the following terms with the appropriate definitions.

Jervis accepts all major bank credit cards, including those issued by Northern Bank (NB), which assesses a 3% charge on sales for using its card. On June 28, Jervis had $3,500 in NB Card credit sales. What entry should Jervis make on June 28 to record the deposit?

On November 19, Nicholson Company receives a $15,000, 60-day, 8% note from a customer as payment on a past-due account. What adjusting entry should be made on the December 31 year-end?

Flax had net sales of $7,875 and its average accounts receivables is $1,250. Calculate Flax's accounts receivable turnover:

A company received a $15,000, 90-day, 10% note receivable. The journal entry to record receipt of the note in the payee records includes a debit to Notes Receivable.

Amounts owed by customers from credit sales for which payment is required in periodic amounts over an extended time period are referred to as:

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

On July 9, Mifflin Company receives a $8,500, 90-day, 8% note from overdue customer Payton Summers as payment on account. What entry should be made on July 9 to record receipt of the note?