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Exam 8: Receivables

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Question 81

Multiple Choice

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

A) Uncollectible Accounts Expense
B) Accounts Receivable
C) Allowance for Doubtful Accounts
D) Interest Expense

E) B) and D)
F) C) and D)

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Question 82

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Receivables not currently collectible are reported in the investments section of the balance sheet.

A) True
B) False

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Question 83

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Journalize the following transactions using the allowance method of accounting for uncollectible receivables. April 1 Sold merchandise on account to Jim Dobbs,$7,200.The cost of the merchandise is $5,400. June 10 Received payment for one-third of the receivable from Jim Dobbs and wrote off the remainder. Oct.11 Reinstated the account of Jim Dobbs and received cash in full payment.

Determine the due date and amount of interest due at maturity on the following notes:

Fellows Corporation has determined that the $2,700 accounts receivable due from Andrew Stevens is uncollectible.Compare the journal entry that is required under the direct write-off method to the journal entry that is required using the allowance method.

Journalize the following transactions using the direct write-off method of accounting for uncollectible receivables. April 1 Sold merchandise on account to Jim Dobbs,$7,200.The cost of the merchandise is $5,400. June 10 Received payment for one-third of the receivable from Jim Dobbs and wrote off the remainder. Oct.11 Reinstated the account of Jim Dobbs for and received cash in full payment.

When accounting for uncollectible receivables and using the percentage of sales method,the matching principle is violated.

Allowance for Doubtful Accounts is a liability account.

The equation for computing interest on an interest-bearing note is as follows: Interest = Maturity Value × Interest Rate × Time.

When the allowance method for accounting for uncollectible receivables is used,net income is reduced when a specific receivable is written off.

Other receivables includes all of the following except

On June 30 the end of the period,Brown Company has a credit balance of $2,275 in Allowance for Doubtful Accounts.An evaluation of accounts receivable indicates that the proper balance should be $30,025.Journalize the appropriate adjusting entry.

Receivables that are expected to be collected in cash in eighteen months or less are reported in the current asset section of the balance sheet.

For each of the following notes receivables held by Christensen Company determine the interest revenue to be reported on the income statements for the year ended December 31.Round answers to nearest whole dollar. $\begin{array}{|l|c|c|c|c|}\hline {\text { Date }} & \text { Face } & \text { Rate } & \text { Time } & \begin{array}{c}\text { Interest } \\\text { Revenue }\end{array} \\\hline \text { Aug. 8 } & \$ 45,000 & 7 \% & 45 \text { days } & \\\hline \text { Oct. } 7 & \$ 62,000 & 5 \% & 60 \text { days } & \\\hline \text { Jan. 6 } & \$ 28,000 & 4 \% & 120 \text { days } & \\\hline \text { Nov. 12 } & \$ 43,000 & 6 \% & 49 \text { days } & \\\hline\end{array}$

The amount for which a promissory note is written is called the

At the end of a period before adjustment,Allowance for Doubtful Accounts has a debit balance of $500.Net credit sales for the period total $800,000.If bad debt expense is estimated at 1% of net credit sales,the amount of bad debt expense to be recorded in the adjusting entry is $8,500.

A $6,000,60-day,12% note recorded on November 21 is not paid by the maker at maturity.The journal entry to recognize this event is

Allowance for Doubtful Accounts has a credit balance of $800 at the end of the year before adjustment,and an analysis of accounts in the customer ledger indicates the estimated amount of uncollectible accounts should be $16,000.Based on the estimate above,which of the following adjusting entries should be made?

When an account receivable that has been written off is subsequently collected,the account receivable must first be reinstated before recording the receipt of payment.

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