Question 1

The comparative financial statements for the years ended December 31, 2012 and 2011, for Rimm Company reported the following information.
  Answer these questions concerning Rimm Company's receivables:

Accepted Answer

The answer of The comparative financial statements for the years...

Question 2

Metal Company 
Metal Company sold merchandise to Steel Corporation on December 1, 2012, for $150,000, and accepted a promissory note for payment in the same amount. The note has a term of three months and an annual interest rate of 8%. Metal's accounting period ends on December 31.
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Refer to the data provided for Metal Company. What is the maturity date of the note?

Accepted Answer

The answer of Metal Company 
Metal Company sold merchandise to...

Question 3

What is the distinguishing characteristic between accounts receivable and notes receivable?

Accepted Answer

The distinguishing characteristic between accounts receivable and notes receivable is that notes receivable generally specify an interest rate and a maturity date at which any interest and principle must be repaid, while accounts receivable do not have these specifications. Additionally, accounts receivable are usually current assets while notes receivable are usually long-term assets. The type of company (service or merchandising) does not impact the classification of these receivables.

Question 4

Land Shoes 
Land Shoes received a promissory note from a customer on July 1, 2012. The face value of the note is $45,000; the terms are 12 months and 10% annual interest.
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Refer to the information provided for Land Shoes. How much interest revenue will Land Shoes recognize for the year ended December 31, 2012?

Accepted Answer

The interest revenue for the year ended December 31, 2012, is calculated for 6 months (from July 1 to December 31) at 10% annual interest on $45,000. The interest for 6 months is $45,000 * 10% * (6/12) = $2,250.

Question 5

Lubing Company 
Lubing Company sold merchandise to Lewing Corporation. on December 1, 2012, for $100,000. Lubing accepted a promissory note from Lewing Corporation for $100,000. The note has a term of 6 months and an annual interest rate of 9%. Lubing's accounting period ends on December 31, 2012.
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Refer to the information provided for Lubing Company. What amount should Lubing recognize as interest revenue on the maturity date of the note?

Accepted Answer

The answer of Lubing Company 
Lubing Company sold merchandise to...

Question 6

Hammer Associates
The following information concerns Hammer Associates at the end of 2012.
  Refer to the information provided for Hammer Associates. Determine the effect on Hammer's accounting equation of the year-end adjustment of bad debts using the aging approach.

Accepted Answer

The answer of Hammer Associates
The following information concerns Hammer Associates...

Question 7

Hammer Associates
The following information concerns Hammer Associates at the end of 2012.
  Refer to the information provided for Hammer Associates. If the aging approach is used to estimate bad debts, how much is the net realizable value of the accounts receivable at December 31, 2012?

Accepted Answer

The answer of Hammer Associates
The following information concerns Hammer Associates...

Question 8

Hammer Associates
The following information concerns Hammer Associates at the end of 2012.
  Refer to the information provided for Hammer Associates. If bad debts are estimated at 1% of net credit sales, how much will Hammer report as bad debts expense for 2012?

Accepted Answer

The answer of Hammer Associates
The following information concerns Hammer Associates...

Question 9

Peach Tree Farm 
Peach Tree Farm received a promissory note from a customer on March 1, 2012. The principal amount of the note is $20,000; the terms are 3 months and 9% annual interest.
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Refer to the information for Peach Tree Farm. At the maturity date, the customer pays the amount due for the note and interest. What entry is required on the books of Peach Tree Farm on the maturity date assuming that none of the interest had already been recognized?

Accepted Answer

The maturity value of the note is $20,450, which includes the principal of $20,000 and interest of $450 ($20,000 x 9% x 3/12). The entry records the receipt of cash, recognizes interest revenue, and removes the note receivable from the books.

Question 10

On June 3, 2012, Irvine Corporation sells $45,000 of merchandise to a customer on account with terms of 2/10, n/30.
Prepare the journal entries to:

Accepted Answer

The answer of On June 3, 2012, Irvine Corporation sells...

Question 11

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 Harper should make before the financial statements can be prepared?

Accepted Answer

The answer of Harper Company lends Hewell Company $40,000 on...

Question 12

Hammer Associates
The following information concerns Hammer Associates at the end of 2012.
  Refer to the information provided for Hammer Associates. If the aging approach is used to estimate bad debts, how much bad debts expense will Hammer report for 2012?

Accepted Answer

The answer of Hammer Associates
The following information concerns Hammer Associates...

Question 13

On March 1, 2012, Mack Corporation accepted cash of $10,000 and a six-month, $80,000 interest-bearing note from Gee, Inc., as settlement of an account receivable. Mack has a fiscal year-end of July 31st and Gee paid the principle and the interest on time. Select the appropriate journal entry that reflects the acceptance of the note on March 1, 2012?

Accepted Answer

The answer of On March 1, 2012, Mack Corporation accepted...

Question 14

Metal Company 
Metal Company sold merchandise to Steel Corporation on December 1, 2012, for $150,000, and accepted a promissory note for payment in the same amount. The note has a term of three months and an annual interest rate of 8%. Metal's accounting period ends on December 31.
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Refer to the data provided for Metal Company. What amount should Metal recognize as interest revenue on the maturity date of the note?

Accepted Answer

The interest revenue is calculated as principal x rate x time = $150,000 x 8% x (3/12) = $3,000.

Question 15

The following information is available for Spin Corporation for the year ending December 31, 2012:

Accepted Answer

The answer of The following information is available for Spin...

Question 16

What should a company do to improve its accounts receivable turnover ratio?

Accepted Answer

By giving customers credit terms of 2/10, n/30 rather than 1/10, n/30, the company is offering an incentive to customers who pay their bills early. This can speed up the collection process and improve the accounts receivable turnover ratio. Lowering selling prices or increasing the sales force may increase sales, but it will not necessarily improve the accounts receivable turnover ratio. Similarly, reducing the number of employees in the credit department may reduce costs, but it may also result in slower collections and lower accounts receivable turnover.

Question 17

Land Shoes 
Land Shoes received a promissory note from a customer on July 1, 2012. The face value of the note is $45,000; the terms are 12 months and 10% annual interest.
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Refer to the information provided for Land Shoes. At the maturity date, the customer pays for the note and interest. Land Shoes made the proper adjustment at the end of December 2012 for interest. The effect of recognizing the transaction on the maturity date is:

Accepted Answer

The answer of Land Shoes 
Land Shoes received a promissory...

Question 18

Peach Tree Farm 
Peach Tree Farm received a promissory note from a customer on March 1, 2012. The principal amount of the note is $20,000; the terms are 3 months and 9% annual interest.
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Refer to the information for Peach Tree Farm. What is the total amount of interest that Peach Tree Farm will receive when the note is collected?

Accepted Answer

The interest is calculated as Principal x Rate x Time = $20,000 x 9% x (3/12) = $450.

Question 19

Lubing Company 
Lubing Company sold merchandise to Lewing Corporation. on December 1, 2012, for $100,000. Lubing accepted a promissory note from Lewing Corporation for $100,000. The note has a term of 6 months and an annual interest rate of 9%. Lubing's accounting period ends on December 31, 2012.
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Refer to the information provided for Lubing Company. What amount should Lubing recognize as interest revenue on December 31, 2012?

Accepted Answer

Interest revenue for one month (December) is calculated as $100,000 * 9% * (1/12) = $750.

Question 20

Metal Company 
Metal Company sold merchandise to Steel Corporation on December 1, 2012, for $150,000, and accepted a promissory note for payment in the same amount. The note has a term of three months and an annual interest rate of 8%. Metal's accounting period ends on December 31.
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Refer to the data provided for Metal Company. What amount should Metal recognize as interest revenue on December 31, 2012?

Accepted Answer

The interest revenue for one month is calculated as $150,000 * 8% * (1/12) = $1,000.

Quiz 6: Receivables

The comparative financial statements for the years ended December 31, 2012 and 2011, for Rimm Company reported the following information. Answer these questions concerning Rimm Company's receivables:

What is the distinguishing characteristic between accounts receivable and notes receivable?

Hammer Associates The following information concerns Hammer Associates at the end of 2012. Refer to the information provided for Hammer Associates. Determine the effect on Hammer's accounting equation of the year-end adjustment of bad debts using the aging approach.

Hammer Associates The following information concerns Hammer Associates at the end of 2012. Refer to the information provided for Hammer Associates. If the aging approach is used to estimate bad debts, how much is the net realizable value of the accounts receivable at December 31, 2012?

Hammer Associates The following information concerns Hammer Associates at the end of 2012. Refer to the information provided for Hammer Associates. If bad debts are estimated at 1% of net credit sales, how much will Hammer report as bad debts expense for 2012?

On June 3, 2012, Irvine Corporation sells $45,000 of merchandise to a customer on account with terms of 2/10, n/30. Prepare the journal entries to:

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 Harper should make before the financial statements can be prepared?

Hammer Associates The following information concerns Hammer Associates at the end of 2012. Refer to the information provided for Hammer Associates. If the aging approach is used to estimate bad debts, how much bad debts expense will Hammer report for 2012?

The following information is available for Spin Corporation for the year ending December 31, 2012:

What should a company do to improve its accounts receivable turnover ratio?