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Exam 8: Receivables

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Question 61

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At the end of the current year, Accounts Receivable has a balance of $750,000; Allowance for Doubtful Accounts has a debit balance of $6,200; and net sales for the year total $3,500,000. Bad debt expense is estimated at 1/2 of 1% of net sales. Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value of accounts receivable.

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Question 62

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

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B) False

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Question 63

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On August 1, Kim Company accepted a 90-day note receivable as payment for services provided to Hsu Company. The terms of the note were $20,000 face value and 6% interest. On October 30, the journal entry to record the collection of the note should include a

Journalize the following transactions using the direct write-off method of accounting for uncollectible receivables. April 1 Sold merchandise on account to Jim Dobbs, $7,200. The cost of the merchandise is $5,400. June 10 Received payment for one-third of the receivable from Jim Dobbs and wrote off the remainder. Oct. 11 Reinstated the account of Jim Dobbs for and received cash in full payment.

When the allowance method for accounting for uncollectible receivables is used, net income is reduced when a specific receivable is written off.

The direct write-off method of accounting for uncollectible accounts

A primary difference between the direct write-off and allowance method is whether or not bad debts is based on a percentage of sales.

The balance in Allowance for Doubtful Accounts will directly impact the end of period adjustment for the bad debt expense when using which of the following methods?

If the allowance method of accounting for uncollectible receivables is used, what general ledger account is credited to write off a customer's account as uncollectible?

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

When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when

Generally accepted accounting principles do not normally allow the use of the direct write-off method of accounting for uncollectible accounts.

When using the allowance method to estimate uncollectible accounts receivable based on an analysis of receivables shows that $640 of accounts receivables are uncollectible. The Allowance for Doubtful Accounts has a debit balance of $110. The adjusting entry at the end of the year will include a credit to Allowance for Doubtful Accounts in the amount of:

Paper Company receives a $6,000, 3-month, 6% promissory note from Dame Company in settlement of an open accounts receivable. What entry will Paper Company make upon receiving the note?

The number of days' sales in receivables

Given the following information, compute Accounts Receivable Turnover: $\begin{array}{|ll|ll|}\hline \text { Gross Sales: } & \$ 150,000 & \text { Accounts Receivable, Beginning of Year: } &\$ 18,000 \\\hline \text { Net Sales: } & \$ 135,000 & \text { Accounts Receivable, End of Year: }& \$ 22,000 \\\hline\end{array}$

Allowance for Doubtful Accounts is a liability account.

On June 30th (the end of the period) Brown Company has a credit balance of $2,275 in Allowance for Doubtful Accounts. An evaluation of accounts receivable indicates that the proper balance should be $30,025. Journalize the appropriate adjusting entry. Jun 30th Bad Debt Expense 27,750 Allowance for Doubtful Accounts 27,750

If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is credited to write off a customer's account as uncollectible?

Determine the due date and the amount of interest due at maturity on the following notes: $\begin{array} { | l | l | l | l | l | } \hline & \text { Date of Note } & \text { Face Amount } & \text { Interest Rate } & \text { Term of Note } \\\hline ( 1 ) & \text { October 1 } & \$ 21,000 & 8 \% & 60 \text { days } \\\hline ( 2 ) & \text { August 30 } & 9,000 & 10 & 120 \text { days } \\\hline ( 3 ) & \text { May 30 } & 12,000 & 12 & 90 \text { days } \\\hline ( 4 ) & \text { March 6 } & 15,000 & 9 & 60 \text { days } \\\hline ( 5 ) & \text { May 23 } & 9,000 & 10 & 60 \text { days } \\\hline\end{array}$