Exam 9: Accounting for Receivables

The accounting principle that requires financial statements (including notes) to report all relevant information about the operations and financial condition of a company is called:

At December 31, Warren Company reports the following results for its calendar year from the adjusted trial balance.

The following series of transactions occurred during Year 1 and Year 2, when Linwood Co. sold merchandise to John Moore. Linwood's annual accounting period ends on December 31. 10/01/Yr 1 Sold $12,000 of merchandise to John Moore, terms 2/10, n/30. 11/15/Yr 1 Moore reports that he cannot pay the account until early next year. He agrees to exchange the account for a 120-day, 12% note receivable. 12/31/Yr 1 Prepared the adjusting journal entry to record accrued interest on the note. 03/15/Yr 2 Linwood receives a check from Moore for the maturity value (with interest) of the note. 03/22/Yr 2 Linwood receives notification that Moore's check is being returned for nonsufficient funds (NSF). 12/31/Yr 2 Linwood writes off Moore's account as uncollectible. Prepare Linwood Co.'s journal entries to record the above transactions. The company uses the allowance method to account for its bad debt expense.

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 _______.

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

The following data are taken from the comparative balance sheets of Gayle Company. Compute and interpret its accounts receivable turnover for Year 2. Competitors average a turnover of 7.5. How is the company doing in relation to its competitors?

A company factored $35,000 of its accounts receivable and was charged a 2% factoring fee. The journal entry to record this transaction would include a debit to Cash of $35,000, a debit to Factoring Fee Expense of $700, and credit to Accounts Receivable of $35,700.

A company reports the following results in its financial statements: Calculate the company accounts receivable turnover for Year 2 and Year 3. Compare these two results and give a possible explanation for any significant change.

The ________________________ methods use balance sheet relations to estimate bad debts - mainly the relation between accounts receivable and the allowance amount.

MixRecording Studios purchased $7,800 in electronic components from TechCom. MixRecording Studios signed a 60-day, 10% promissory note for $7,800. TechCom's journal entry to record the sales portion of the transaction is:

On August 9, Pierce Company receives a $8,500, 90-day, 8% note from customer Eric Simms as payment on his account. What entry should be made on the maturity date assuming the maker pays in full?

A company uses the percent of receivables 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: All sales are made on credit. Based on past experience, the company estimates 3.5% 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 borrowed $1,000 by signing a six month promissory note at 5% interest. The total amount of interest is $25. $1,000 x .05 x 6/12 = $25

Since pledged accounts receivables only serve as collateral for a loan and are not sold, it is not necessary to disclose the pledging.

When the maker of a note honors a note this indicates that the note is:

A company borrowed $10,000 by signing a 180-day promissory note at 11%. The total interest due on the maturity date is.

The maturity date of a note receivable:

Sellers generally prefer to receive notes receivable rather than accounts receivable when the credit period is long and the receivable is for a large amount.

The percent of sales method of estimating bad debts is focused more on realizable value of accounts receivable than matching.

Outdoors Unlimited accepts the Explorer credit card from its customers. Explorer charges a 3.5% service fee and pays Outdoors Unlimited the amount net of Explorer charges once a month. During February, Outdoors Unlimited sold $27,000 worth of merchandise to customers using the Explorer charge card. On February 28, Outdoor Unlimited sent the $27,000 worth of credit card receipts to Explorer. On March 4, Outdoors Unlimited received cash proceeds from Explorer for the February credit sales less the service charge. Prepare the journal entries to record February sales and the March 4 cash receipt.