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Exam 7: Reporting and Analyzing Receivables

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Question 91

Multiple Choice

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A credit sale of $5,275 to a customer would result in which of the following?

A) A debit to the Accounts Receivable account in the general ledger and a debit to the customer's account in the accounts receivable subsidiary ledger.
B) A credit to the Accounts Receivable account in the general ledger and a credit to the customer's account in the accounts receivable subsidiary ledger.
C) A debit to the Accounts Receivable account in the general ledger and a credit to the customer's account in the accounts receivable subsidiary ledger.
D) A credit to the Accounts Receivable account in the general ledger and a debit to the customer's account in the accounts receivable subsidiary ledger.
E) A credit to Sales and a credit to the customer's account in the accounts receivable subsidiary ledger.

F) All of the above
G) C) and E)

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Question 92

Multiple Choice

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Clayborn Company expects that $12,600 of its $420,000 Accounts Receivable balance is uncollectible. The Allowance for Doubtful Accounts before adjustment has a credit balance of $1,400. The amount of the adjusting entry needed by Clayborn is:

A) $14,000
B) $12,600
C) $11,200
D) $406,000
E) $408,800

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

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Question 93

Short Answer

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To write off an uncollectible account receivable when the allowance method of accounting for uncollectible accounts is used, a company should debit _______________________ and credit accounts receivable.

Calculate the amount of interest that would be owed on a $18,000, 60-day, 8% note receivable at maturity.

If a 60-day note receivable is dated September 22, what is the maturity date of the note?

Prepare general journal entries for the following transactions for the current year:

When using the allowance method of accounting for uncollectible accounts, the entry to record the estimated bad debts expense is a debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts.

Craigmont uses the allowance method to account for uncollectible accounts. Its year-end unadjusted trial balance shows Accounts Receivable of $104,500, allowance for doubtful accounts of $665 (credit) and sales of $925,000. If uncollectible accounts are estimated to be 4% of accounts receivable, what is the amount of the bad debts expense adjusting entry?

A finance company or bank that purchases and takes ownership of another company's accounts receivable is called a:

The allowance method of accounting for bad debts requires an estimate of bad debt expense at the end of each accounting period. The two common methods to determine the estimate amount are the percent of sales method and the percent of receivables method. Explain the basic differences between the two methods.

The formula for computing interest on a note is: Principal of the note × Annual interest rate × Time expressed in fraction of year.

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 journal entry to record the dishonored note?

Which of the following is not true regarding a credit card expense?

On February 1, a customer's account balance of $2,300 was deemed to be uncollectible. What entry should be recorded on February 1 to record the write-off assuming the company uses the allowance method?

Federal laws prohibit the selling of accounts receivables to factors.

Failure by a promissory notes' maker to pay the amount due at maturity is known as:

Thatcher Company had a January 1, credit balance in its Allowance for Doubtful Accounts of $4,000 for the current year. The following transactions and events affected the Allowance for Doubtful Accounts during the current year: What amount should appear in the allowance for doubtful accounts in the December 31, balance sheet for the current year?

A promissory note is a written promise to pay a specified amount of money either on demand or at a definite future date.

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

What is the accounts receivable turnover ratio? How is it calculated and how is it used to assess financial condition?