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Exam 8: Receivables

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Question 41

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If a promissory note is dishonored, the payee should still record interest revenue.

A) True
B) False

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Question 42

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Journalize the following transactions for the Scott Company: November 4 Received a $6,500, 90-day, 6% note from Michael Tim's in payment of his account. December 31 Accrued interest on the Tim's note. February 2 Received the amount due from Tim's on his note.

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$6,500 × 6% × 57/36...

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Question 43

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Match each description to the appropriate term a-i) . -Operating expense recorded as a result of receivables becoming uncollectible

An aging of a company's accounts receivable indicates that the estimate of the uncollectible accounts totals $4,000. If Allowance for Doubtful Accounts has a $800 credit balance, the adjustment to record the bad debt expense for the period will require a

The balance in Allowance for Doubtful Accounts at the end of the year includes the total of all accounts written off since the beginning of the year.

The accounts receivable turnover measures

Under the allowance method, when a year-end adjustment is made for estimated uncollectible accounts

An aging of a company's accounts receivable indicates that the estimate of uncollectible accounts totals $6,400. If Allowance for Doubtful Accounts has a $1,300 debit balance, the adjustment to record the bad debt expense for the period will require a

Trade receivables occur when two companies trade or exchange notes receivables.

The difference between the balance in Accounts Receivable and the balance in the Allowance for Doubtful Accounts is called the net realizable value of the receivables.

Using the allowance method of accounting for uncollectible receivables, the entry to reinstate a specific receivable previously written off would include a

The accounts receivable turnover measures the length of time in days it takes to collect a receivable.

When an account receivable that has been written off is subsequently collected, the account receivable must first be reinstated before recording the receipt of payment.

The interest on a 6%, 60-day note for $5,000 is $300.

Fellows Corporation has determined that the $2,700 accounts receivable due from Andrew Stevens is uncollectible. Compare the journal entry that is required under the direct write-off method to the journal entry that is required using the allowance method.

Discuss the two methods for recording bad debt expense. What type of company uses each method?

Indications that an account may be uncollectible include all of the following except

Fill in the blanks related to the characteristics of a promissory note. 1. The party promising to pay the note is called the . 2. The amount for which the note is written is called the amount. 3. The date the note is to be paid is the date. 4. The time between the date when a note is written and the time it must be paid is called the of the note

Allowance for Doubtful Accounts is classified as an) and has a normal balance.

Match each description to the appropriate term a-d) . Each term may be used more than once. -This method is most often used by small companies with few receivables.