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Exam 7: Accounting for Receivables

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Question 111

Multiple Choice

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Jasper makes a $25,000,90-day,7% cash loan to Clayborn Co. -Jasper's entry to record the transaction should be:

A) Debit Notes Receivable for $25,000; credit Cash $25,000.
B) Debit Accounts Receivable $25,000; credit Notes Receivable $25,000.
C) Debit Cash $25,000; credit Notes Receivable for $25,000.
D) Debit Notes Payable $25,000; credit Accounts Payable $25,000.
E) Debit Notes Receivable $25,000; credit Sales $25,000.

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Question 112

Multiple Choice

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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:

A) An increase in the expenses of the current period.
B) An increase in current assets.
C) A reduction in equity.
D) No effect on the expenses of the current period.
E) A reduction in current liabilities.

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Question 113

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Installment accounts receivable is another name for aging of accounts receivable.

What is the accounts receivable turnover ratio? How is it calculated and how is it used to assess financial condition?

The Lily Company uses the percent of receivables method of accounting for uncollectible accounts receivable,and a perpetual inventory system.As of January 1,its net accounts receivable totaled $192,000 (Accounts Receivable $200,000 less an $8,000 Allowance for Doubtful Accounts).During the current year,the following transactions occurred.

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:

Prepare general journal entries for the following transactions of Norman Company,assuming they use the allowance method to account for uncollectible accounts.

A company has net sales of $1,200,000 and average accounts receivable of $400,000.What is its accounts receivable turnover for the period?

The allowance method of accounting for bad debts matches the estimated loss from uncollectible accounts receivable against the sales they helped produce.

Using the allowance method for bad debts,the end of the period adjusting entry for estimated bad debts is:

The accounts receivable turnover is calculated by:

Morgan had net sales of $310,000 and average accounts receivable of $75,600.Its competitor,Stanley,had net sales of $290,000 and average accounts receivables of $61,350.Calculate the accounts receivable turnover for both companies.Which company is doing a better job of managing its accounts receivables?

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.)

Thatcher Company had a January 1,credit balance in its Allowance for Doubtful Accounts of $4,000 for the current year.The following transactions and events affected the Allowance for Doubtful Accounts during the current year: What amount should appear in the allowance for doubtful accounts in the December 31,balance sheet for the current year?

On November 1,Orpheum Company accepted a $10,000,90-day,8% note from a customer to settle his account.What entry should be made on the November 1 to record the acceptance of the note?

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

The interest accrued on $7,500 at 6% for 90 days is: $\bold{\text{(Use 360 days a year.) }}$

Accrued interest on outstanding notes receivable should be recorded at the end of each accounting period.

Jervis sells $75,000 of its accounts receivable to Northern Bank in order to obtain necessary cash.Northern Bank charges a 5% factoring fee.What entry should Jervis make to record the transaction?