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Exam 8: Accounting for Receivables

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Question 111

True/False

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Notes receivable are reported on the statement of financial position following accounts receivable because notes receivable give the payee a weaker legal claim to assets than accounts receivable.

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Question 112

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A 90-day note dated May 14 has a maturity date of

A) August 14.
B) August 12.
C) August 13.
D) August 15.

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Question 113

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Compute the missing amount for each of the following notes:

On June 17, 2014, Pear, Inc. writes a 60-day, 6%, $30,000 note to settle an open account with Solar

Caps On Company manufactures sporting goods and clothing. Caps On sold merchandise to Pro Sports Company on June 5, 2014 for $1,500, terms 2/10, n/30. On June 9, 2014 Pro Sports returns merchandise worth $100 to Caps On. On June 14, 2014 Caps On receives payment in full from Pro Sports. Which of the following is true regarding the transaction on June 14, 2014?

The three primary accounting problems with accounts receivable are: (1) recognizing, (2) depreciating, and (3) disposing.

Short-term notes receivable are reported at

On February 1, 2014, Janssen Company sells merchandise on account to Nicholson Company for $5,000. The entry to record this transaction by Janssen Company is

When a note receivable is honored, Cash is debited for the note's

Moore Company had a $700 credit balance in Allowance for Doubtful Accounts at December 31, 2014, before the current year's provision for uncollectible accounts. An aging of the accounts receivable revealed the following: Instructions (a) Prepare the adjusting entry on December 31, 2014, to recognize bad debts expense. (b) Assume the same facts as above except that the Allowance for Doubtful Accounts account had a $500 debit balance before the current year's provision for uncollectible accounts. Prepare the adjusting entry for the current year's provision for uncollectible accounts. (c) Assume that the company has a policy of providing for bad debts at the rate of 1% of sales, that sales for 2014 were $500,000, and that Allowance for Doubtful Accounts had a $650 credit balance before adjustment. Prepare the adjusting entry for the current year's provision for bad debts.

When using the percentage of sales basis of estimating bad debts, the company disregards the existing balance in the statement of financial position account Allowance for Doubtful Accounts.

When counting the exact number of days to determine the maturity date of a note, the date of issue is included but the due date is omitted.

Compute the maturity date and interest for the following notes.

Kosko Furniture Store has credit sales of $400,000 in 2014 and a debit balance of $600 in the Allowance for Doubtful Accounts at year end. As of December 31, 2014, $130,000 of accounts receivable remain uncollected. The credit manager prepared an aging schedule of accounts receivable and estimates that $4,000 will prove to be uncollectible. On March 4, 2015, the credit manager authorizes a write-off of the $1,000 balance owed by A. Noonan. Instructions (a) Prepare the adjusting entry to record the estimated uncollectible accounts expense in 2014. (b) Show the statement of financial position presentation of accounts receivable on December 31, 2014. (c) On March 4, before the write-off, assume the balance of Accounts Receivable account is $140,000 and the balance of Allowance for Doubtful Accounts is a credit of $2,000. Make the appropriate entry to record the write-off of the Noonan account. Also show the statement of financial position presentation of accounts receivable before and after the write-off.

On March 9, Fillmore gave Camp Company a 60-day, 9% promissory note for €6,000. Fillmore dishonors the note on May 9. Record the entry that Camp would make when the note is dishonored, assuming that no interest has been accrued.

An alternative name for Bad Debt Expense is

An analysis and aging of the accounts receivable of Downs Company at December 31 revealed the following data: The cash realizable value of the accounts receivable at December 31, after adjustment, is:

The financial statements of Gentry Manufacturing Company report net sales of €600,000 and accounts receivable of €80,000 and €40,000 at the beginning and end of the year, respectively. What is the receivables turnover ratio for Gentry?

Pine Boat Company often requires customers to sign promissory notes for major credit purchases. Journalize the following transactions for Pine Boat Company. Feb. 12 Accepted a $40,000, 6%, 60-day note from Bob Weiss for a 24-foot motorboat built to his specifications. April 14 Received notification from Bob Weiss that he was unable to honor his promissory note but that he expects to pay the amount owed in May. May 26 Received a check from Bob Weiss for the total amount owed. June 10 Received notification by the bank that Bob Weiss check was being returned "NSF" and that Mr. Weiss had declared personal bankruptcy.

The percentage of receivables basis of estimating expected uncollectible accounts emphasizes income statement relationships.