Question 1

Which of the following is not true regarding a credit card expense?

Accepted Answer

A)  Credit card expense is not recorded by the seller.
B)  Credit card expense may be classified as a selling expense.
C)  Credit card expense is a fee the seller pays for services provided by the card company.
D)  Credit card expense may be classified as a "discount" deducted from sales to get net sales.
E)  Credit card expense may be classified as an administrative expense.

Question 2

Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. Jasper's entry to record the transaction should be:

Accepted Answer

A)  Debit Notes Receivable $25,000; credit Sales $25,000.
B)  Debit Accounts Receivable $25,000; credit Notes Receivable $25,000.
C)  Debit Notes Payable $25,000; credit Accounts Payable $25,000.
D)  Debit Notes Receivable for $25,000; credit Cash $25,000.
E)  Debit Cash $25,000; credit Notes Receivable for $25,000.

Question 3

MacKenzie Company sold $180 of merchandise to a customer who used a Regional Bank credit card. Regional Bank deducts a 4% service charge for sales on its credit cards. MacKenzie electronically remits the credit card sales receipts to the credit card company and receives payment immediately. The journal entry to record this sale transaction would be:

Accepted Answer

A)  Debit Cash of $180 and credit Accounts Receivable-Regional $180.
B)  Debit Cash $172.80 and credit Sales $172.80.
C)  Debit Accounts Receivable-Regional $172.80; debit Credit Card Expense $7.20 and credit Sales $180.
D)  Debit Cash of $180 and credit Sales $180.
E)  Debit Cash $172.80; debit Credit Card Expense $7.20 and credit Sales $180.

Question 4

The unadjusted trial balance at year-end for a company that uses the percent of receivables method to determine its bad debts expense reports the following selected amounts:   Accounts receivable $435,000 Debit  Allowance for Doubtful Accounts 1,250 Debit  Net Sales 2,100,000 Credit \begin{array} { | l | r | l | } \hline 	ext { Accounts receivable } & \$ 435,000 & 	ext { Debit } \\hline 	ext { Allowance for Doubtful Accounts } & 1,250 & 	ext { Debit } \\hline 	ext { Net Sales } & 2,100,000 & 	ext { Credit } \\hline\end{array} Accounts receivable  Allowance for Doubtful Accounts  Net Sales ​$435,0001,2502,100,000​ Debit  Debit  Credit ​​  All sales are made on credit. Based on past experience, the company estimates 3.5% of ending account receivable to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Accepted Answer

A)  Debit Bad Debts Expense $17,350; credit Allowance for Doubtful Accounts $17,350.
B)  Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350.
C)  Debit Bad Debts Expense $16,475; credit Allowance for Doubtful Accounts $16,475.
D)  Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225.
E)  Debit Bad Debts Expense $13,975; credit Allowance for Doubtful Accounts $13,975.

Question 5

A receivable is an amount due from another party.

Accepted Answer

A) True 
 B)False

Question 6

A 90-day note issued on April 10 matures on:

Accepted Answer

A)  July 10.
B)  July 11.
C)  July 12.
D)  July 13.
E)  July 9.

Question 7

A company has $80,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 6% of outstanding receivables are uncollectible. The current credit balance (before adjustments)in the allowance for doubtful accounts is $1,200. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for $4,800.

Accepted Answer

A) True 
 B)False

Question 8

Mercks uses the perpetual inventory system, and accepts the Discovery credit card for credit card sales. Discovery charges Mercks a 3% fee, and all credit card receipts deposited are credited to the company account on the day of deposit. Prepare journal entries to record the following transaction.
 March 11 $\quad$$\quad$Sold merchandise for $\$ 4,500$ (that had cost $\$ 2,100$ ) and accepted the 
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$customer's Discovery card.

Accepted Answer

The answer of Mercks uses the perpetual inventory system, and...

Question 9

The maturity date of a note refers to the date the note must be repaid.

Accepted Answer

A) True 
 B)False

Question 10

Explain the options a company may use to convert its receivables to cash before they are due.

Accepted Answer

A company's receivables are normally con...

Question 11

Prudence Co. receives a $26,000, 90-day, 4% note receivable. What is maturity value of the note?

Accepted Answer

$26,000 * .04 * 90/3...

Question 12

The percent of sales method for estimating bad debts uses only income statement account balances to estimate bad debts.

Accepted Answer

A) True 
 B)False

Question 13

Jax Recording Studio purchased $7,800 in electronic components from Music World. Jax signed a 60-day, 8% promissory note for $7,800. Music World's journal entry to record the collection on the maturity date is:

Accepted Answer

A)  Debit Notes Receivable $8,008; credit Cash $7,904; credit Interest Revenue $104
B)  Debit Cash $7,904; credit Notes Receivable $7,904
C)  Debit Accounts Receivable $7,904; credit Notes Receivable $7,800; credit Interest Receivable $104
D)  Debit Cash $7,800; credit Accounts Receivable $7,800
E)  Debit Cash $7,904; credit Notes Receivable $7,800; credit Interest Revenue $104

Question 14

On July 9, Mifflin Company receives an $8,500, 90-day, 8% note from customer Payton Summers as payment on account. What entry should be made on July 9 to record receipt of the note?

Accepted Answer

A)  Debit Notes Receivable $8,670; credit Sales $8,670.
B)  Debit Notes Receivable $8,500; credit Accounts Receivable $8,500.
C)  Debit Notes Receivable $8,725; credit Interest Revenue $225; credit Accounts Receivable $8,500.
D)  Debit Accounts Receivable $8,500; credit Sales $8,500.
E)  Debit Notes Receivable $8,500; credit Sales $8,500.

Question 15

A company borrowed $10,000 by signing a six-month promissory note at 5% interest. The amount of interest to be paid at maturity is $25.

Accepted Answer

A) True 
 B)False

Question 16

The percent of sales method for estimating bad debts assumes that a given percent of a company's credit sales for the period are uncollectible.

Accepted Answer

A) True 
 B)False

Question 17

The practice of placing dishonored notes receivable into accounts receivable keeps only notes that have not yet matured in the Notes Receivable account.

Accepted Answer

A) True 
 B)False

Question 18

The allowance method of accounting for bad debts requires an estimate of bad debt expense at the end of each accounting period. The two common methods to determine the estimate amount are the percent of sales method and the percent of receivables method. Explain the basic differences between the two methods.

Accepted Answer

The percent of sales method emphasizes t...

Question 19

Valley Spa purchased $7,800 in plumbing components from Tubman Co. Valley Spa signed a 1- day, 10% promissory note for $7,800. If the note is dishonored, but Tubman intends to continue collection efforts, what is the journal entry to record the dishonored note? (Use 360 days a year.)

Accepted Answer

A)  Debit Bad Debt Expense $7,930; credit Accounts Receivable $7,930.
B)  Debit Accounts Receivable-Valley Spa $7,800; credit Notes Receivable $7,800.
C)  Debit Accounts Receivable $7,930; debit Bad Debt Expense $130; credit Notes Receivable $8,060.
D)  Debit Accounts Receivable-Valley Spa $7,930, credit Interest Revenue $130; credit Notes Receivable $7,800.
E)  Debit Bad Debt Expense $7,800; credit Notes Receivable $7,800.

Question 20

Frederick Company borrows $63,000 from First City Bank and pledges its receivables as security. Which of the following is true regarding this transaction:

Accepted Answer

A)  First City Bank is the factor in this transaction.
B)  First City Bank takes ownership of the receivables at the time of the pledge.
C)  Frederick Company no longer has the risk of bad debts.
D)  Frederick Company's financial statements must disclose the pledging of receivables.
E)  No journal entry is required for this event.

Exam 9: Accounting for Receivables

Correct Answer
verified

A company borrowed $10,000 by signing a six-month promissory note at 5% interest. The amount of interest to be paid at maturity is $25.

Correct Answer
verified

Explain the options a company may use to convert its receivables to cash before they are due.

Correct Answer
verified
A company's receivables are normally con...
View Answer

Which of the following is not true regarding a credit card expense?

Correct Answer
verified

A receivable is an amount due from another party.

Correct Answer
verified

A 90-day note issued on April 10 matures on:

Correct Answer
verified

Prudence Co. receives a $26,000, 90-day, 4% note receivable. What is maturity value of the note?

Correct Answer
verified
$26,000 * .04 * 90/3...
View Answer

Correct Answer
verified

The maturity date of a note refers to the date the note must be repaid.

Correct Answer
verified

Frederick Company borrows $63,000 from First City Bank and pledges its receivables as security. Which of the following is true regarding this transaction:

Correct Answer
verified

The percent of sales method for estimating bad debts uses only income statement account balances to estimate bad debts.

Correct Answer
verified

Correct Answer
verified

Valley Spa purchased $7,800 in plumbing components from Tubman Co. Valley Spa signed a 1- day, 10% promissory note for $7,800. If the note is dishonored, but Tubman intends to continue collection efforts, what is the journal entry to record the dishonored note? (Use 360 days a year.)

Correct Answer
verified

Correct Answer
verified

The percent of sales method for estimating bad debts assumes that a given percent of a company's credit sales for the period are uncollectible.

Correct Answer
verified

Correct Answer
verified
The percent of sales method emphasizes t...
View Answer

Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. Jasper's entry to record the transaction should be:

Correct Answer
verified

Jax Recording Studio purchased $7,800 in electronic components from Music World. Jax signed a 60-day, 8% promissory note for $7,800. Music World's journal entry to record the collection on the maturity date is:

Correct Answer
verified

On July 9, Mifflin Company receives an $8,500, 90-day, 8% note from customer Payton Summers as payment on account. What entry should be made on July 9 to record receipt of the note?

Correct Answer
verified

The practice of placing dishonored notes receivable into accounts receivable keeps only notes that have not yet matured in the Notes Receivable account.

Correct Answer
verified

Exam 9: Accounting for Receivables

Correct AnswerverifiedShow Answer

A company borrowed $10,000 by signing a six-month promissory note at 5% interest. The amount of interest to be paid at maturity is $25.

Correct AnswerverifiedShow Answer

Explain the options a company may use to convert its receivables to cash before they are due.

Correct AnswerverifiedA company's receivables are normally con...View AnswerShow Answer

Which of the following is not true regarding a credit card expense?

Correct AnswerverifiedShow Answer

A receivable is an amount due from another party.

Correct AnswerverifiedShow Answer

A 90-day note issued on April 10 matures on:

Correct AnswerverifiedShow Answer

Prudence Co. receives a $26,000, 90-day, 4% note receivable. What is maturity value of the note?

Correct Answerverified$26,000 * .04 * 90/3...View AnswerShow Answer

Correct AnswerverifiedShow Answer

The maturity date of a note refers to the date the note must be repaid.

Correct AnswerverifiedShow Answer

Frederick Company borrows $63,000 from First City Bank and pledges its receivables as security. Which of the following is true regarding this transaction:

Correct AnswerverifiedShow Answer

The percent of sales method for estimating bad debts uses only income statement account balances to estimate bad debts.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Valley Spa purchased $7,800 in plumbing components from Tubman Co. Valley Spa signed a 1- day, 10% promissory note for $7,800. If the note is dishonored, but Tubman intends to continue collection efforts, what is the journal entry to record the dishonored note? (Use 360 days a year.)

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The percent of sales method for estimating bad debts assumes that a given percent of a company's credit sales for the period are uncollectible.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe percent of sales method emphasizes t...View AnswerShow Answer

Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. Jasper's entry to record the transaction should be:

Correct AnswerverifiedShow Answer

Jax Recording Studio purchased $7,800 in electronic components from Music World. Jax signed a 60-day, 8% promissory note for $7,800. Music World's journal entry to record the collection on the maturity date is:

Correct AnswerverifiedShow Answer

On July 9, Mifflin Company receives an $8,500, 90-day, 8% note from customer Payton Summers as payment on account. What entry should be made on July 9 to record receipt of the note?

Correct AnswerverifiedShow Answer

The practice of placing dishonored notes receivable into accounts receivable keeps only notes that have not yet matured in the Notes Receivable account.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A company's receivables are normally con...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
$26,000 * .04 * 90/3...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The percent of sales method emphasizes t...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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