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Exam 9: Receivables

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Question 31

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Markus Company maintains a separate accounts receivable account for each customer. On June 18, Markus sells $6,200 services on account to customer Anthony and $1,600 services on account to customer Walker. How will these two transactions affect the control and subsidiary accounts?

A) The control account, Accounts Receivable, will be increased with a debit of $7,800.
B) The individual customer accounts in the subsidiary ledger will be increased with credits.
C) After posting this sales transaction, the sum of the balances in subsidiary accounts receivable will not equal the control account balance.
D) The control account will have a debit balance and the subsidiary accounts will have a credit balance. This keeps the accounting equation in balance.

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Question 32

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

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Question 33

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Prairie Outfitters, Inc., a retailer, accepts payment through credit cards. During August, credit card sales amounted to $12,000. The processor charges a 3% fee. Assuming that the credit card processor uses the gross method, prepare the journal entries, on the books of Prairie Outfitters, for the credit card sales and the payment of fees. (Ignore cost of goods sold.)

The entity that signs the promissory note and promises to pay the required amount is the ________.

Niagara Art is a new business. During its first year of operations, credit sales were $44,000 and collections of credit sales were $33,000. One account, $625, was written off. Management uses the percent-of-sales method to account for bad debts expense and estimates 2% of credit sales to be uncollectible. Bad debts expense for the first year of operations is ________.

A company has net credit sales of $94,000, beginning net accounts receivable of $22,000 and ending net accounts receivable of $18,000. Calculate the days' sales in receivables. (Round any intermediate calculations to two decimal places, and your final answer to the nearest whole day.)

Which of the following is true of the balance sheet presentation of the Allowance for Bad Debts?

On October 1, 2017, Android, Inc. made a loan to one of its customers. The customer signed a 4-month note for $110,000 at 12%. How much interest revenue did the company record in the year 2017? (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)

The percent-of-sales method calculates bad debts expense as a percentage of net credit sales.

On December 1, 2017, Falcon, Inc. sold machinery to a customer for $22,000. The customer could not pay at the time of sale but agreed to pay 6 months later and signed a 6-month note at 11% interest. How much interest revenue was earned for the entire term of the note? (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)

A debtor is a party to a credit transaction who will receive the cash for the transaction at a later date.

On October 1, 2017, Zircon Jewelry Company accepted a 4-month, 10% note for $2,400 in settlement of an overdue account receivable. Interest revenue was accrued through December 31, 2017. Zircon receives the maturity value of the note at maturity. Prepare the journal entry to record the collection.

Separate customer accounts receivable are called subsidiary accounts.

Accounts Receivable has a balance of $6,000, and the Allowance for Bad Debts has a credit balance of $400. The allowance method is used. What is the net realizable value of Accounts Receivable after a $150 account receivable is written off?

The interest period extends from the original date of the note to the maturity date.

Accounts Receivable has a balance of $34,000, and the Allowance for Bad Debts has a credit balance of $3,400. The allowance method is used. What is the net realizable value of Accounts Receivable before and after a $2,300 account receivable is written off?

When the credit card processor deposits the gross proceeds from credit and debit card sales ________.

Tanglewood Clothing Store reported the following selected items at June 30, 2017 (last year - 2016 - amounts are also given as needed): Compute Tanglewood's days' sales in receivables for 2017. Show your computations.

If the maker of a note does not pay at maturity, ________.

A company has net credit sales of $1,200,000, beginning net accounts receivable of $260,000, and ending net accounts receivable of $202,000. What is the days' sales in accounts receivable? (Round any intermediate calculations to two decimal places, and your final answer to the nearest whole day.)