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Exam 8: Receivables

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Question 1

Multiple Choice

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Allowance for Doubtful Accounts has a credit balance of $1,500 at the end of the year (before adjustment) , and an analysis of customers' accounts indicates uncollectible receivables of $17,900. Which of the following entries records the proper adjustment for Bad Debt Expense?

A) debit Allowance for Doubtful Accounts, $16,400; credit Bad Debt Expense, $16,400
B) debit Allowance for Doubtful Accounts, $19,400; credit Bad Debt Expense, $19,400
C) debit Bad Debt Expense $19,400; credit Allowance for Doubtful Accounts, $19,400
D) debit Bad Debt Expense, $16,400; credit Allowance for Doubtful Accounts, $16,400

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

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Question 2

Multiple Choice

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A $6,000, 60-day, 12% note recorded on November 21 is not paid by the maker at maturity. The journal entry to recognize this event is

A) debit Cash, $6,120; credit Notes Receivable, $6,120
B) debit Accounts Receivable, $6,120; credit Notes Receivable, $6,000; Credit Interest Receivable, $120
C) debit Notes Receivable, $6,060; credit Accounts Receivable, $6,060
D) debit Accounts Receivable, $6,120; credit Notes Receivable, $6,000; Credit Interest Revenue, $120

E) B) and C)
F) B) and D)

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Question 3

Multiple Choice

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What is the type of account and normal balance of Allowance for Doubtful Accounts?

The maturity value of a $40,000, 9%, 40-day note receivable dated July 3 is

At the end of the current year, Accounts Receivable has a balance of $90,000; Allowance for Doubtful Accounts has a credit balance of $850; and net sales for the year total $300,000. Bad debt expense is estimated at 2.5% of net sales. Determine (a) the amount of the adjusting entry for uncollectible accounts; (b) the adjusted balances of Accounts Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value of accounts receivable.

The maturity value of a note receivable is always the same as its face value.

The direct write-off method of accounting for uncollectible accounts

Journalize the following transactions in the accounts of Simmons Company:

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

Stephanie Roe utilizes the direct write-off method of accounting for uncollectible receivables. On September 15th she is notified by the attorneys for Jacob Marley that Jacob Marley is bankrupt and no cash is expected in the liquidation of Jacob Marley. Write off the $675 of accounts receivable due Jacob Marley.

When comparing the direct write-off method and the allowance method of accounting for uncollectible receivables, a major difference is that the direct write-off method

In accounting for uncollectible receivables, the balance in Allowance for Doubtful Accounts will directly impact the amount of the adjustment when applying which method?

Allowance for Doubtful Accounts is a liability account.

A company uses the allowance method to account for uncollectible accounts receivables. When the firm writes off a specific customer's account receivable

You have just received notice that a customer of yours with an Account Receivable balance of $100 has gone bankrupt and will not make any future payments. Assuming you use the allowance method, the entry you make is to

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 $10,000 face value and 6% interest. On October 30, the journal entry to record the collection of the note should include a

Financial Statement data for the years ended December 31 for Parker Corporation is as follows: 2012 2011 Net Sales $2,595,600 $2,409,500 Accounts Receivable Beginning of the year $ 390,000 $400,000 End of the year 434,000 390,000 a) Determine the accounts receivable turnover for 2012 and 2011. b) Determine the number of days' sales in receivables for 2012 and 2011. c) Does the change in accounts receivable turnover and number of days' sales in receivables from 2011 to 2012 indicate a favorable or unfavorable trend.?

The direct write-off method records Bad Debt Expense in the year the specific account receivable is determined to be uncollectible.

Determine the due date and the amount of interest due at maturity on the following notes:

The amount of a promissory note is called the