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Exam 9: Accounting for Receivables

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Question 71

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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.

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Question 72

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Paoli Pizza bought $5,000 worth of merchandise from TechCom and signed a 90-day,10% promissory note for the $5,000.TechCom's journal entry to record the sales portion of the transaction is:

A) Debit Accounts Receivable $5,000; credit Sales $5,000
B) Debit Notes Receivable $5,000; credit Sales $5,000
C) Debit Accounts Receivable $5,125; credit Sales $5,125
D) Debit Notes Receivable $5,125; credit Sales $5,125
E) Debit Notes Receivable $5,000; debit Interest Receivable $125; credit Sales $5,125

F) A) and E)
G) A) and D)

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Question 73

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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 January 15 of the next year when the note is paid?

MixRecording Studios purchased $7,800 in electronic components from TechCom.MixRecording Studios signed a 60-day,10% promissory note for $7,800.If the note is dishonored,what is the amount due on the note?

The matching principle requires that accrued interest on outstanding notes receivable be recorded at the end of each accounting period.

Loma Company estimates uncollectible accounts using the allowance method at December 31.It prepared the following aging of receivables analysis. a.Estimate the balance of the Allowance for Doubtful Accounts using the aging of accounts receivable method. b.Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a.Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $550 credit. c.Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a.Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $300 debit.

At December 31 of the current year,a company reported the following: Total sales for the current year: $780,000 includes $160,000 in cash sales Accounts receivable balance at Dec.31,end of current year: $190,000 Allowance for Doubtful Accounts balance at January 1,beginning of current year: $8,300 Bad debts written off during the current year: $6,800. Prepare the necessary adjusting entries to record bad debts expense assuming this company's bad debts are estimated to equal: (a)1.5% of credit sales. (b)5% of accounts receivable.

Bardo Company allows customers to make purchases on credit.The terms of all credit sales are 2/10,n/30,and all sales are recorded at the gross price.Other customers can use a bank credit card where the bank deducts a 4% service charge for credit card sales and credits the bank account of Bardo immediately when credit card receipts are deposited.Bardo uses the perpetual inventory method.Prepare journal entries to record the following selected transactions and events.

Crystal Products allows customers to use bank credit cards to charge purchases.The bank used by Crystal Products processes all bank credit cards in exchange for a 3% processing fee.All credit card receipts deposited are credited to the company account on the day of deposit.Assume that on January 18,Crystal Products sold and deposited $19,000 worth of bank credit card receipts.Prepare the general journal entry to record this transaction.

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.

A Company had net sales of $23,000 million,and its average account receivables were $5,860 million.Its accounts receivable turnover is 0.92.

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:

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?

The materiality constraint:

The person that borrows money and signs a promissory note is called the payee.

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

The quality of receivables refers to:

On October 29 of the current year,a company concluded that a customer's $4,400 account receivable was uncollectible and that the account should be written off.What effect will this write-off have on this company's net income and total assets assuming the allowance method is used to account for bad debts?

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

Pledging receivables: