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Exam 9: Accounting for Receivables

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Question 41

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The person who signs a note receivable and promises to pay the principal and interest is the:

A) Maker.
B) Owner.
C) Payee.
D) Holder.
E) Receiver.

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Question 42

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Explain the difference between honoring and dishonoring a note receivable.

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When a note is honored, the ma...

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Question 43

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If the credit balance of the Allowance for Doubtful Accounts account exceeds the amount of a bad debt being written off, the entry to record the write-off against the allowance account results in:

As long as a company accurately records total credit sales information, it is not necessary to have separate accounts for specific customers.

The aging method of determining bad debts expense is based on the knowledge that the longer a receivable is past due, the higher the likelihood of collection.

A company receives a 10%, 120-day note for $1,500. The total interest due on the maturity date is: (Use 360 days a year.)

The use of the direct write-off method is allowed under the materiality constraint.

A company using the percentage of sales method for estimating bad debts has sales of $350,000 and estimates that 1.0% of its sales are uncollectible. The unadjusted balance in Allowance for Doubtful Accounts is a $300 credit. The estimated amount of bad debts expense is $3,200

Which of the following is not true about the Allowance for Doubtful Accounts?

The allowance method based on the idea that a given percent of a company's credit sales for the period is uncollectible is:

The accounts receivable turnover is calculated by dividing average accounts receivable by net sales.

Gideon Company uses the direct write-off method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $2,000 uncollectible account of its customer, A. Hopkins. On July 10, Gideon received a check for the full amount of $2,000 from Hopkins. On July 10, the entry or entries Gideon makes to record the recovery of the bad debt is: A) $\begin{array}{|l|r|r|}\hline \text { Allowance for Doubtful Accounts } & 2,000 & \\\hline \text { Accounts Receivable-A. Hopkinse } & & 2,000 \\\hline \text { Accounts Receivable-A. Hopkins } & 2,000 & \\\hline \text { Cash } & & 2,000 \\\hline\end{array}$ B) $\begin{array}{|l|r|r|}\hline \text { Accounts Receivable-A. Hopkins } & 2,000 & \\\hline \text { Bad debts expense } & & 2,000 \\\hline \text { Cash } & 2,000 & \\\hline \text { Accounts Receivable-A. Hopkins } & & 2,000 \\\hline\end{array}$ C) $\begin{array}{|l|r|r|}\hline \text { Accounts Receivable-A. Hopkins } & 2,000 & \\\hline \text { Allowance for Doubtful Accounts } & & 2,000 \\\hline \text { Cash } & 2,000 & \\\hline \text { Accounts Receivable-A. Hopkins } & & 2,000 \\\hline\end{array}$ D) $\begin{array}{|l|r|r|}\hline \text { Cash } & 2,000 & \\\hline \text { Accounts Receivable-A. Hopkins } & & 2,000 \\\hline\end{array}$ E) $\begin{array}{|l|r|r|}\hline \text { Cash } & 2,000 & \\\hline \text { Bad debts expense } & & 2,000 \\\hline\end{array}$

A promissory note received from a customer in exchange for an account receivable is recorded by the payee as:

Gideon Company uses the direct write-off method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $2,000 uncollectible account of its customer, A. Hopkins. The entry or entries Gideon makes to record the write off of the account on May 3 is: A) $\begin{array}{|l|r|r|}\hline \text { Allowance for Doubtful Accounts } & 2,000 & \\\hline \text { Accounts Receivable-A. Hopkins } & & 2,000 \\\hline\end{array}$ B) $\begin{array}{|l|r|r|}\hline \text { Accounts Receivable-A. Hopkins } & 2,000 & \\\hline \text { Bad Debts Expense } & & 2,000 \\\hline\end{array}$ C) $\begin{array}{|l|r|r|}\hline \text { Cash } & 2,000 & \\\hline \text { Accounts Receivable-A. Hopkins } & & 2,000 \\\hline\end{array}$ D) $\begin{array}{|l|r|r|}\hline \text { Accounts Receivable-A. Hopkins } & 2,000 & \\\hline \text { Cash } & & 2,000 \\\hline\end{array}$ E) $\begin{array}{|l|r|r|}\hline \text { Bad Debts Expense } & 2,000 & \\\hline \text { Accounts Receivable-A. Hopkins } & & 2,000 \\\hline\end{array}$

A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts: $\begin{array}{ll}\text { Accounts receivable } & \$ 375,000 \text { debit } \\\text { Allowance for unco llectible accounts } & 500 \text { credit } \\\text { Net Sales } & 800,000 \text { credit }\end{array}$ All sales are made on credit. Based on past experience, the company estimates that 0.6% of net credit sales are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

A finance company or bank that purchases and takes ownership of another company's accounts receivable is called a:

The following selected amounts are reported on the year-end unadjusted trial balance report for a company that uses the percent of sales method to determine its bad debts expense. $\begin{array} { | l | r | l | } \hline \text { Accounts receivable } & \$ 435,000 & \text { Debit } \\\hline \text { Allowance for Doubtful Accounts } & 1,250 & \text { Debit } \\\hline \text { Net Sales } & 2,100,000 & \text { Credit } \\\hline\end{array}$ All sales are made on credit. Based on past experience, the company estimates 1% of credit sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

A company borrowed $10,000 by signing a 180-day promissory note at 9%. The maturity value of the note is: (Use 360 days a year.)

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

Gideon Company uses the allowance method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $2,000 uncollectible account of its customer, A. Hopkins. The entry or entries Gideon makes to record the write off of the account on May 3 is: A) $\begin{array}{|l|r|r|}\hline \text { Accounts Receivable-A. Hopkins } & 2,000 & \\\hline \text { Allowance for Doubtful Accounts } & & 2,000 \\\hline\end{array}$ B) $\begin{array}{|l|r|r|}\hline \text { Accounts Receivable-A. Hopkins } & 2,000 & \\\hline \text { Bad debts expense } & & 2,000 \\\hline \text { Cash } & 2,000 & \\\hline \text { Accounts Receivable-A. Hopkins } & & 2,000 \\\hline\end{array}$ C) $\begin{array}{|l|r|r|}\hline \text { Cash } & 2,000 & \\\hline \text { Accounts Receivable-A. Hopkins } & & 2,000 \\\hline\end{array}$ D) $\begin{array}{|l|r|r|}\hline \text { Allowance for Doubtful Accounts } & 2,000 & \\\hline \text { Accounts Receivable-A. Hopkins } & & 2,000 \\\hline\end{array}$ E) $\begin{array}{|l|r|r|}\hline \text { Allowance for Doubtful Accounts } & 2,000 & \\\hline \text { Bad debts expense } & & 2,000 \\\hline\end{array}$