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Exam 9: Accounting for Receivables

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Question 41

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On December 31 of the current year, a company's unadjusted trial balance included the following: Accounts Receivable, debit balance of $97,250; Allowance for Doubtful Accounts, credit balance of $951. What amount should be debited to Bad Debts Expense, assuming 6% of outstanding accounts receivable at the end of the current year will be uncollectible?

A) $951.
B) $3,992.
C) $4,884.
D) $5,835.
E) $6,786.

F) All of the above
G) B) and D)

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Question 42

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A company borrowed $6,000 by signing a 4-month promissory note at 12%. The total interest on the note is $720.

A) True
B) False

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Question 43

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A company borrowed $1,000 by signing a six month promissory note at 5% interest. The total amount of interest is $25.

A credit sale of $3,275 to a customer would result in:

A company borrowed $10,000 by signing a 180-day promissory note at 11%. The maturity value of the note is:

The ________________ method of accounting for bad debts records the loss from an uncollectible account receivable at the time it is determined to be uncollectible (and not before).

All of the following are regarding credit card expense except:

Credit sales are recorded by crediting an Accounts Receivable.

Prepare general journal entries for the following transactions of this company for the current year:

The maturity date of a note refers to the date the note must be repaid.

The quality of receivables refers to:

At December 31 of the current year, a company reported the following: Total sales for the current year: $780,000 includes $160,000 in cash sales Accounts receivable balance at Dec. 31, end of current year: $190,000 Allowance for Doubtful Accounts balance at January 1, beginning of current year: $8,300 Bad debts written off during the current year: $6,800. Prepare the necessary adjusting entries to record bad debts expense assuming this company's bad debts are estimated to equal 5% of accounts receivable.

Match each of the following terms with the appropriate definitions.

A maker who dishonors a note is one who does not pay it at maturity.

A promissory note received from a customer in exchange for an account receivable:

Teller purchased merchandise from TechCom on October 17 of the current year and TechCom accepted Teller's $4,800, 90-day, 10% note. What entry should TechCom make on January 15 of the next year when the note is paid?

A promissory note is a written promise to pay a specified amount of money either on demand or at a definite future date.

Cairo Co. uses the allowance method of accounting for uncollectible accounts. Cairo Co. accepted a $5,000, 12%, 90-day note dated May 16, from Alexandria Co. in exchange for its past-due account receivable. Make the necessary general journal entries for Cairo Co. on May 16 and the August 14 maturity date, assuming that the: a. Note is held until maturity and collected in full at that time. b. Note is dishonored; the amount of the note and its interest are written off as uncollectible.

Companies use two methods to account for uncollectible accounts, the direct write-off method and the allowance method.

A company has the following unadjusted account balances at December 31, of the current year; Accounts Receivable of $185,700 and Allowance for Doubtful Accounts of $1,600 (credit balance). The company uses the aging of accounts receivable to estimate its bad debts. The following aging schedule reflects its accounts receivable at the current year-end: 1. Calculate the amount of the Allowance for Doubtful Accounts that should appear on the December 31, of the current year, balance sheet. 2. Prepare the adjusting journal entry to record bad debts expense for the current year.