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Exam 9: Receivables

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Question 71

Multiple Choice

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The entity to whom the promise of future payment is made for a promissory note is the:

A) maker of the note.
B) endorser of the note.
C) banker of the note.
D) payee of the note.

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

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Question 72

Multiple Choice

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On October 1, 2015, Ealys Jewellers accepted a 4-month, 12% note for $6,000 in settlement of an overdue account receivable. The company closes its accounts at the year end. Calculate and record the accrued interest on the note at December 31, 2015.

A) $180
B) $160
C) $240
D) $140

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

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Question 73

Multiple Choice

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A company reports net accounts receivable of $150,000 on its December 31, 2015 balance sheet. The Allowance for Bad Debts has a credit balance of $15,000. What is the balance in Accounts Receivable?

A newly created design business called Smart Art is just finishing up its first year of operations. During the year, there were credit sales of $40,000 and collections of credit sales of $36,000. One account for $650 was written off. Smart Art uses the aging method to account for uncollectible account expense. It has estimated $200 as uncollectible at year-end. At the end of the year, what is the ending balance in the Bad Debts Expense account?

The Allowance for Bad Debts account has a debit balance of $9,000 before the adjusting entry for bad debt expense. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging method, the company's management estimates that uncollectible accounts will be $15,000. What will be the amount of Bad debts expense reported on the income statement?

A company has net credit sales of $1,012,500, beginning net accounts receivable of $250,000 and ending net accounts receivable of $200,000. What is the days' sales in accounts receivable? (Round to nearest whole day.)

Companies that follow GAAP are required to use the direct write-off method for uncollectible accounts receivable.

Accounts receivable has a balance of $5,000 and the Allowance for Bad Debts has a credit balance of $440. The allowance method is used. What is the net realizable value after a $160 account receivable is written off?

On January 16, 2015, Whole Circle had sold goods worth $5,000 to Smith on account. It could not collect cash from the customer, and finally decided to write off the account on December 31, 2015. However, in November 4, 2016, Smith approached the company to make payment, and made payment. Journalize the transactions on December 31, 2015 and November 4, 2016. (Whole Circle uses the allowance method.)

On November 1, 2015, Ealys Jewellers accepted a 3-month, 15% note for $6,000 in settlement of an overdue account receivable. Give the journal entry to record the accrued interest at the year end.

At the beginning of 2015, Peter Dots has the following ledger balances: During the year, credit sales amounted to $800,000. Cash collected on credit sales amounted to $760,000, and $18,000 has been written off. At the end of the year, the company adjusted for bad debts expense using the percent-of-sales method and applied a rate, based on past history, of 2.5%. The ending balance of Accounts Receivable would be:

Sun Inc. had completely written off the account of one of its old customers, Brad, in 2014 for $500. On January 21, 2015, Brad unexpectedly repaid his debt in full. The company uses the direct write-off method to account for uncollectible receivables. Journalize the entries required for Sun Inc. on January 21, 2015.

Which of the following are two methods of estimating uncollectible receivables?

When a company is using the direct write-off method, and an account is written off, the journal entry consists of a:

A company has net credit sales of $95,000, beginning net accounts receivable of $20,000 and ending net accounts receivable of $18,000. Calculate the days' sales in receivables.

The number of times a company collects the average accounts receivable balance in a year is known as the accounts receivable turnover ratio.

The accounts receivable turnover ratio indicates whether a company could pay all its current liabilities if they were become due immediately.

Which of the following is included in the denominator of the acid-test ratio?