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Exam 8: Receivables

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Question 21

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An aging of a company's accounts receivable indicates the estimate of uncollectible receivables totals $7,900. If Allowance for Doubtful Accounts has a $700 credit balance, the adjustment to record the bad debt expense for the period will require a

A) debit to Bad Debt Expense for $8,600
B) debit to Bad Debt Expense for $7,900
C) debit to Bad Debt Expense for $7,200
D) credit to Allowance for Doubtful Accounts for $700

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

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Question 22

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

A) True
B) False

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Question 23

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

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?

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

For the fiscal years 1 and 2, Grange Co. reported the following: (a) Compute the accounts receivable turnover for Year 2. Round to two decimals.(b) Compute the number of days' sales in receivables at the end of Year 2. Round to two decimals.

Morry Company wrote off the following accounts receivable as uncollectible for the first year of its operations ending December 31: 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 1.50% 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?

Interest on a note can be calculated without knowledge of the

The equation for computing interest on an interest-bearing note is as follows: Interest = Maturity Value × Interest Rate × Time.

When does an account become uncollectible?

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

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 goods sold 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 and received cash in full payment.

Watson Company 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.

The journal entry to record a note received from a customer to replace an account is

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.

At the end of the current year, Accounts Receivable has a balance of $700,000; Allowance for Doubtful Accounts has a credit balance of $5,500; and 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 for Doubtful Accounts, and Bad Debt Expense; and (c) the net realizable value of accounts receivable.

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

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

Match each description to the appropriate term (a-i). -A list of customer accounts sorted by age classes A)Accounts receivable turnover B)Net realizable value C)Accounts receivable D)Aging report E)Receivables F)Direct write-off method G)Allowance for doubtful accounts H)Bad debt expense I)Factoring

Current assets are usually listed in order