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Exam 9: Receivables

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Question 101

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A 60-day, 12% note for $7,000, dated April 15, is received from a customer on account. The face value of the note is

A) $6,860
B) $7,140
C) $7,840
D) $7,000

E) A) and D)
F) B) and D)

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Question 102

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Under the direct write-off method of accounting for uncollectible accounts, Bad Debt Expense is recorded

A) at the end of each accounting period
B) when a credit sale is past due
C) whenever a predetermined amount of credit sales has been made
D) when an account is determined to be worthless

E) A) and B)
F) All of the above

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Question 103

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A partially completed aging of receivables schedule for Lindy Designs is shown below. Calculate the amount that is estimated to be uncollectible.? (a) Determine the amount estimated to be uncollectible by completing the aging of receivables schedule. Round calculations to the nearest dollar.? $\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad { \text { Estimated Uncollectible } } \\\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad { \text { Accounts } }$ $\begin{array}{|l|r|c|c|}\hline \text { Age Interval } & \text { Balance } & \text { Percentage } & \text { Amount } \\\hline \text { Not past due } & 5550,000 & 2.50 \% & \\\hline 1-30 \text { days past due } & 96,500 & 4.00 & \\\hline 31-60 \text { days past due } & 43,750 & 9.50 & \\\hline 61-90 \text { days past due } & 22,250 & 16.00 & \\\hline 91-180 \text { days past due } & 5,600 & 31.00 & \\\hline 181-365 \text { days past due } & 3,100 & 60.00 & \\\hline \text { Over } 365 \text { days past due } & 1,250 & 95.00 & \\\hline \text { Total } & \underline{\mathbf{\$ 7 2 2 , 4 5 0}} & & \\\hline\end{array}$ (b) If Allowance for Doubtful Accounts has a credit balance of $9,700, record the adjusting entry for bad debt expense for the year. (c) If Allowance for Doubtful Accounts has a debit balance of $9,700, record the adjusting entry for bad debt expense for the year.

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.

On October 1, Black Company receives a 9% interest-bearing note from Reese Company to settle a $20,000 account receivable. The note is due in six months. At December 31, Black should record interest revenue of

The collection of an account that had been previously written off under the allowance method of accounting for uncollectibles

Match each description to the appropriate term (a-h) . -The party promising to pay a note

Allowance for Doubtful Accounts has a credit balance of $800 at the end of the year (before adjustment) , and an analysis of accounts in the customer ledger indicates that the estimated amount of uncollectible accounts should be $16,000. Based on the estimate above, which of the following adjusting entries should be made?

Discuss the similarities and differences between accounts receivable, notes receivable, and other receivables.

Receivables that are expected to be collected in cash in 18 months or less are reported in the Current assets section of the balance sheet.

The direct write-off method of accounting for uncollectible accounts

Receivables not currently collectible are reported in the Investments section of the balance sheet.

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.

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

Morry Company wrote off the following accounts receivable as uncollectible for the first year of its operations ending December 31:? $\begin{array} { | c | r | } \hline { \text { Customer } } & { \text { Amount } } \\\hline \text { J. Jackson } & \$ 10,000 \\\hline \text { L. Stanton } & 9,500 \\\hline \text { C. Barton } & 13,100 \\\hline \text { S. Fenton } & \underline{2,400} \\\hline \text { Total } & \underline { \mathbf { \$ 3 5 , 0 0 0 } } \\\hline\end{array}$ Required (a)Journalize the write-offs for the current year under the direct write-off method. (b)Journalize the write-offs for the current year under the allowance method. Also, journalize the adjusting entry for uncollectible receivables assuming the company made $2,400,000 of credit sales during the year and the industry average for uncollectible receivables is 1.5% of credit sales. (c)How much higher or lower would Morry Company's net income have been under the direct write-off method than under the allowance method?

Watson Co. issued a 60-day, 8% note for $18,000, dated April 5, to Laker Company on account. (Assume a 360-day year when calculating interest.) (a)Determine the due date of the note. (b)Determine the maturity value of the note. (c)Journalize the entries to record the following: (1)Receipt of the note by the payee. (2)Receipt by the payee of the amount due on the note at maturity. Round answers to the nearest $1.