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Exam 9: Accounting for Receivables

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Question 21

True/False

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A payee of a note usually honors a note and pays it in full.

A) True
B) False

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Question 22

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If a credit card sale is made, the seller can either debit Cash or debit Accounts receivable at the time of the sale depending on the type of credit card.

A) True
B) False

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Question 23

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

Tecom had net sales of $315,000 and average accounts receivable of $75,600. Its competitor, ZCom, had net sales of $299,000 and average accounts receivables of $81,350. Calculate the accounts receivable turnover for both companies. Which company is doing a better job of managing its accounts receivables?

Companies follow both the matching principle and the materiality constraint when applying the direct write-off method.

The advantage of the allowance method of accounting for bad debts is that it identifies the specific customers who will not pay their bills.

The use of an allowance for bad debts is required under the materiality constraint.

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

Teller purchased merchandise from TechCom on October 17 of the current year and TechCom accepted Teller's $4,800, 90-day, 10% note. What entry should TechCom make on December 31, to record the accrued interest on the note?

What is the amount of interest that is due on a $36,000, 90-day, 4% note receivable at maturity?

A company factored $45,000 of its accounts receivable and was charged a 3% factoring fee. The journal entry to record this transaction would include a:

The accounts receivable turnover is calculated by dividing _________________ by ___________________.

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?

The process of using accounts receivable as security for a loan is known as factoring accounts receivable.

Sellers allow customers to use credit cards:

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

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

The interest accrued on $6,500 at 6% for 60 days is:

Teller purchased merchandise from TechCom on October 17 of the current year and TechCom accepted Teller's $4,800, 90-day, 10% note. If the note is dishonored, what entry should TechCom make on January 15 of the next year?

A company uses the aging of accounts receivable method to estimate its bad debts expense. On December 31 of the current year an aging analysis of accounts receivable revealed the following: Required: a. Calculate the amount of the Allowance for Doubtful Accounts that should be reported on the current year-end balance sheet. b. Calculate the amount of the Bad Debts Expense that should be reported on the current year's income statement, assuming that the balance of the Allowance for Doubtful Accounts on January 1 of the current year was $44,000 and that accounts receivable written off during the current year totaled $49,200. c. Prepare the adjusting entry to record bad debts expense on December 31 of the current year. d. Show how Accounts Receivable will appear on the current year-end balance sheet as of December 31.