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Exam 8: Receivables, bad Debt Expense, and Interest Revenue

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Question 71

Multiple Choice

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At the end of the accounting period,The Grass is Greener Corporation learns that a customer who owes $350 has gone bankrupt and payment will not be made.The Grass is Greener Corporation should:

A) debit Bad Debt Expense and credit Accounts Receivable for $350.
B) debit the Allowance for Doubtful Accounts and credit Accounts Receivable for $350.
C) debit Bad Debt Expense and credit Cash for $350.
D) debit Accounts Receivable and credit Bad Debt Expense for $350.

E) None of the above
F) C) and D)

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Question 72

Multiple Choice

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Your company previously averaged about 20% of its total accounts receivable in the "over 90 days past due" category and now has 35% in this category.All else equal,using the aging of accounts receivable method,the amount of the bad debt adjustment will:

A) fall,increasing the ending balance of the allowance account.
B) rise,increasing the ending balance of the allowance account.
C) fall,decreasing the ending balance of the allowance account.
D) rise,decreasing the ending balance of the allowance account.

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

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Question 73

Multiple Choice

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On July 1,2017,Icepresso Inc.signed a two-year $8,000 note receivable with 9 percent interest.At its due date,July 1,2017,the principal and interest will be received in full.Interest revenue should be reported on Icepresso's income statement for the year ended December 31,2017,in the amount of:

If an uncollectible account,previously written off,is recovered:

Match the term and the explanation.Not all explanations will be used. -Summary of Significant Accounting Policies

Purrfect Pets sells a $1,500 aquarium to a customer on account.This would be recorded under:

As of December 31,Frappa Company has a balance of $5,000 in accounts receivable.Of this amount $500 is past due and the remainder is not yet due.Frappa has a credit balance of $45 in the allowance for doubtful accounts.Frappa Company estimates its bad debt losses using the aging of receivables method,with estimated bad debt loss rates equal to 1% of accounts not yet due and 10% of past due accounts.How would the required adjusting journal entry be recorded in the Allowance for Doubtful Accounts?

The amount of the principal of a notes receivable depends on the maturity date.

$\text { Johnstone Supplies, Inc. Accounts Receivable Aging Report, July 31, } 2018$ $\begin{array} { | r | r | r | } \hline \text { Accounts receivable by due dute } & \text { Account Tatal } & \text { Estimated \% uncollectible } \\\hline \text { Not yet due } & \$ 126,500 & 2 \% \\\hline 1 - 30 \text { days past due } & \$ 89,200 & 12 \% \\\hline \text { 31-60 days past due } & \$ 53,600 & 18 \% \\\hline \text { Over 60 days past due } & \$ 31,800 & 35 \% \\\hline\end{array}$ The unadjusted balance of the allowance for doubtful accounts of Johnstone Supplies,Inc.,is $28,947 on July 31,2018.Based on the accounts receivable aging report,bad debt expense will be:

Receivables might be sold ("factored") to: