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Exam 8: Receivables

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Question 41

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Abbott Company uses the allowance method of accounting for uncollectible accounts. Abbott estimates that 3% of net credit sales will be uncollectible. On January 1, 2010, the Allowance for Doubtful Accounts had a credit balance of $2,400. During 2010, Abbott wrote-off accounts receivable totaling $1,800 and made credit sales of $100,000. There were no Sales Returns or Sales Discounts during the year. After the adjusting entry, the December 31, 2010, balance in the Bad Debt Expense would be

A) $1,200
B) $3,000
C) $3,600
D) $7,200

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Question 42

Multiple Choice

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Harper Company lends Hewell Company $40,000 on March 1, accepting a four-month, 6% interest note. Harper Company prepares financial statements on March 31. What adjusting entry should be made before the financial statements can be prepared?

A) Cash 200 Interest Revenue 200
B) Interest Receivable 800 Interest Revenue 800
C) Interest Receivable 200 Interest Revenue 200
D) Note Receivable 40,000 Cash 40,000

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Question 43

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Fill in the blanks related to the characteristics of a promissory note:

Although Allowance for Doubtful Accounts normally has a credit balance, it may have either a debit or a credit balance before adjusting entries are recorded at the end of the accounting period.

When a company uses the allowance method of accounting for uncollectible receivables, the entry to reinstate a previously written off account would include:

On the balance sheet, the amount shown for the Allowance for Doubtful Accounts is equal to the

When using the estimate based on sales method, the entry to record uncollectible accounts expense includes a credit to the Accounts Receivable account.

If a promissory note is dishonored, the payee should still record interest revenue.

At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful Accounts has a credit balance of $5,500; and net sales for the year total $2,500,000. An analysis of receivables estimates uncollectible receivables as $25,000. Determine the net realizable value of accounts receivable after adjustment. (Hint: Determine the amount of the adjusting entry for bad debt expense and the adjusted balance Allowance of Doubtful Accounts.)

Mr. Potts issued a 90-day, 7% note for $200,000, dated February 3rd to Valley Co. on account. (Assume a 360-day year when calculating interest.) a. Determine the due date of the note. b. Determine the interest. c. Determine the maturity value of the note. d. Journalize the entry to record the issuance of the note by Potts on Feb. 3. e. Journalize the entry to record the receipt of payment of the note at maturity by Valley Co.

When a company receives an interest-bearing note receivable, it will

If the maker of a promissory note fails to pay the note on the due date, the note is said to be

Interest on a note can be calculated without knowledge of the

Under the direct write-off method of accounting for uncollectible accounts, Bad Debts Expense is debited

Allowance for Doubtful Accounts has a credit balance of $500 at the end of the year (before adjustment) , and bad debt expense is estimated at 3% of net credit sales. If net credit sales are $300,000, the amount of the adjusting entry to record the estimated uncollectible accounts receivables is

When using the analysis of receivables method for estimating uncollectible receivables, the amount computed in the analysis is usually the amount that would be recorded in the end-of-period adjusting entry.

If the allowance method of accounting for uncollectible receivables is used, what general ledger account is debited to write off a customer's account as uncollectible?

At the beginning of the year, the balance in the Allowance for Doubtful Accounts is a credit of $760. During the year, $120 of previously written-off accounts were reinstated and accounts totaling $740 are written-off as uncollectible. The end of the year balance (before adjustment) in the Allowance for Doubtful Accounts should be

The Lowery Co. uses the direct write-off method of accounting for uncollectible accounts receivable. Lowery has a customer whose accounts receivable balance has been determined to likely be uncollectible. The entry to write off this account would be which of the following?:

Other receivables include non trade receivables such as loans to company officers.