Question 1

The accounts receivable turnover ratio indicates how often account receivables are received and collected during the period.

Accepted Answer

A) True 
 B)False

Question 2

What is the amount of interest that is due on a $36,000 3-month 4% note receivable?

Accepted Answer

The answer of What is the amount of interest that...

Question 3

Temper Company has credit sales of $3.10 million for year 2010. Temper estimates that 2% of accounts receivable will remain uncollectible. Historically, .9% of sales have been uncollectible. On December 31, 2010, the company's Allowance for Doubtful Accounts has an unadjusted debit balance of $2,575. 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:
 Assuming the company uses the percent of accounts receivable method, what is the amount that Temper will enter as the Bad Debt Expense in the December 31 adjusting journal entry?

Accepted Answer

A)  $18,947.20 
B)  $16,372.20 
C)  $23,024.40 
D)  $27,900.00 
E)  $21,522.20

Question 4

The materiality principle permits the use of the direct write-off method of accounting for uncollectible accounts when bad debts are very large in comparison to the company's other financial statement items such as sales and net income.

Accepted Answer

A) True 
 B)False

Question 5

The following series of transactions occurred during 2011 and 2012 when Linwood Co. sold merchandise to John Moore. Linwood's annual accounting period ends on December 31.

Accepted Answer

The answer of The following series of transactions occurred during...

Question 6

The formula for computing interest on a note is principal of the note times the annual interest rate times time expressed in years.

Accepted Answer

A) True 
 B)False

Question 7

Each December 31, Davis Company ages its accounts receivable to determine the amount of its adjustment for bad debts. At the end of the current year, management estimated that $16,900 of the accounts receivable balances would be uncollectible. The Allowance for Doubtful Accounts account had a debit balance of $3,200 before any year-end adjustment for bad debts. Prepare the adjusting journal entry that Davis Company should make on December 31, of the current year, to estimate bad debts expense.

Accepted Answer

The answer of Each December 31, Davis Company ages its...

Question 8

When a company has a high accounts receivable turnover in comparison with competitors suggests that the firm should tighten its credit policy.

Accepted Answer

A) True 
 B)False

Question 9

The maturity date of a note refers to the date the note is signed.

Accepted Answer

A) True 
 B)False

Question 10

A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and their length of time past due is the:

Accepted Answer

A)  Direct write-off method 
B)  Aging of accounts receivable method 
C)  Percentage of sales method 
D)  Aging of investments method 
E)  Percent of accounts receivable method

Question 11

A Company sold $10,000 of its accounts receivable and was charged a 2% factoring fee. How should the company record this transaction in the journal?

Accepted Answer

A) $\begin{array}{|l|r|r|}
\hline \text { Cash } & 9,800 & \
\hline \text { Factoring Fee Expense } & 200 & \
\hline \text { Accounts Receivable } & & 10,000 \
\hline
\end{array}$ 
B) $\begin{array} { | l | r | r | } 
\hline \text { Cash } & 10,000 & \
\hline \text { Accounts Receivable } & & 10,000 \
\hline
\end{array}$ 
C) $\begin{array} { | l | r | r | } 
\hline \text { Cash } & 10,000 & \
\hline \text { Factoring Fee Expense } & & 200 \
\hline \text { Accounts Receivable } & & 9,800 \
\hline
\end{array}$ 
D) $\begin{array} { | l | r | r | } 
\hline \text { Accounts Receivable } & 10,000 & \
\hline \text { Factoring Fee Expense } & & 200 \
\hline \text { Cash } & & 9,800 \
\hline
\end{array}$ 
E) $\begin{array} { | l | r | r | } 
\hline \text { Accounts Receivable } & 9,800 & \
\hline \text { Factoring Fee Expense } & 200 & \
\hline \text { Cash } & & 10,000 \
\hline
\end{array}$

Question 12

The practice of placing dishonored notes receivable into accounts receivable keeps only notes that have not matured in the Notes Receivable account.

Accepted Answer

A) True 
 B)False

Question 13

On December 31 of the current year, a company's unadjusted trial balance included the following: Accounts Receivable, debit balance of $88,790; Allowance for Doubtful Accounts, credit balance of $1,245. What amount should be debited to Bad Debts Expense, assuming 4% of outstanding accounts receivable at the end of the current year are considered uncollectible?

Accepted Answer

A)  $1,245.00 
B)  $3,551.60 
C)  $4,796.60 
D)  $2,306.60 
E)  $87,545.00

Question 14

Prepare general journal entries for the following transactions of this company for the current year:

Accepted Answer

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

Question 15

The accounts receivable turnover is calculated by dividing net sales by average accounts receivable.

Accepted Answer

A) True 
 B)False

Question 16

When the maker of a note is unable or refuses to pay at maturity, the note is said to be ___________________.

Accepted Answer

The answer of When the maker of a note is...

Question 17

A promissory note:

Accepted Answer

A)  Is a short-term investment for the maker 
B)  Is a written promise to pay a specified amount of money at a certain date 
C)  Is a liability to the payee 
D)  Is another name for an installment receivable 
E)  Cannot be used in payment of an account receivable

Question 18

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 debit 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 aging 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)  $55,439.41 
E)  $66,167.80

Question 19

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:

Accepted Answer

A) $\begin{array} { | c | r | r | } 
\hline \text { Accounts Receivable } & 7,800 & \
\hline \text { Sales } & & 7,800 \
\hline
\end{array}$ 
B) $\begin{array} { | c | r | r | } 
\hline \text { Accounts Receivable } & 7,930 & \
\hline \text { Sales } & & 7,930 \
\hline
\end{array}$ 
C) $\begin{array} { | c | r | r | } 
\hline \text { Notes Receivable } & 7,800 & \
\hline \text { Sales } & & 7,800 \
\hline
\end{array}$ 
D) $\begin{array} { | c | r | r | } 
\hline \text { Notes Receivable } & 7,930 & \
\hline \text { Sales } & & 7,930 \
\hline
\end{array}$ 
E) $\begin{array} { | l | r | r | } 
\hline \text { Notes Receivable } & 7,800 & \
\hline \text { Interest Receivable } & 130 & \
\hline \text { Sales } & & 7,930 \
\hline
\end{array}$

Question 20

A ____________________ is a signed promise to pay a specified amount of money either on demand or at a definite future date.

Accepted Answer

The answer of A ____________________ is a signed promise to...

Exam 7: Accounts and Notes Receivable

The accounts receivable turnover ratio indicates how often account receivables are received and collected during the period.

What is the amount of interest that is due on a $36,000 3-month 4% note receivable?

The materiality principle permits the use of the direct write-off method of accounting for uncollectible accounts when bad debts are very large in comparison to the company's other financial statement items such as sales and net income.

The following series of transactions occurred during 2011 and 2012 when Linwood Co. sold merchandise to John Moore. Linwood's annual accounting period ends on December 31.

The formula for computing interest on a note is principal of the note times the annual interest rate times time expressed in years.

When a company has a high accounts receivable turnover in comparison with competitors suggests that the firm should tighten its credit policy.

The maturity date of a note refers to the date the note is signed.

A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and their length of time past due is the:

A Company sold $10,000 of its accounts receivable and was charged a 2% factoring fee. How should the company record this transaction in the journal?

The practice of placing dishonored notes receivable into accounts receivable keeps only notes that have not matured in the Notes Receivable account.

Prepare general journal entries for the following transactions of this company for the current year:

The accounts receivable turnover is calculated by dividing net sales by average accounts receivable.

When the maker of a note is unable or refuses to pay at maturity, the note is said to be ___________________.

A promissory note:

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:

A ____________________ is a signed promise to pay a specified amount of money either on demand or at a definite future date.