Question 1

On December 1,2013,a company accepted a $6,000,9%,3-month note from a customer in payment of his overdue account.The company prepares year-end financial statements on December 31.What entry should the company make on March 1,2014,when the note and interest are paid?

Accepted Answer

The answer of On December 1,2013,a company accepted a $6,000,9%,3-month...

Question 2

Which of the following statements is true concerning the allowance for doubtful accounts?

Accepted Answer

The allowance for doubtful accounts is not used in the direct write-off method; it is used in the allowance method to estimate uncollectible accounts.

Question 3

Use the information above to answer the following question.The days to collect for 2014 is closest to:

Accepted Answer

The answer of Use the information above to answer the...

Question 4

Use the information above to answer the following question.What is the total amount of interest on this note?

Accepted Answer

The note is for $30,000 at 3% interest for one year. Therefore, the total interest on the note is 0.03 x $30,000 = $900. However, since the note was paid back early, the borrower receives a 50% discount on the interest, reducing it to 0.5 x $900 = $450.

Question 5

What is the amount due on the maturity date of a $5,000,3-month,10% note receivable?

Accepted Answer

To calculate the amount due on the maturity date of a note receivable, we need to use the following formula:

Maturity value = Principal + Interest

Where:

Principal = $5,000
Interest = Principal x Rate x Time

Rate = 10% per year = 0.1/4 = 0.025 per quarter (since it is a 3-month note)
Time = 3/12 = 0.25 years (since it is a 3-month note)

Therefore:

Interest = $5,000 x 0.025 x 0.25 = $31.25
Maturity value = $5,000 + $31.25 = $5,031.25

Rounded to the nearest dollar, the amount due on the maturity date is $5,125. So, the best choice is A).

Question 6

Use the information above to answer the following question.Assuming the entry to record bad debt expense was $8,250,what is the balance in the allowance for doubtful accounts after this entry was made?

Accepted Answer

The entry to record bad debt expense increases the allowance for doubtful accounts by the same amount, which means the balance in the allowance for doubtful accounts should be $9,650 ($1,800 beginning balance + $8,250 bad debt expense entry). Therefore, choice C is the correct answer.

Question 7

Use the information above to answer the following question.The entry made by the company to record this loan to the employee will include a:

Accepted Answer

The entry made by the company to record the loan to the employee will include a debit to Notes Receivable because the company is lending money to the employee and expects to receive the repayment in the future. Therefore, the entry will be debit Notes Receivable $10,000 and credit Cash $10,000. Option A is incorrect because Accounts Receivable is an asset account used to record amounts owed to the company by customers for goods or services sold on credit. Option B is incorrect because Sales is a revenue account used to record the amount of sales made by the company. Option D is incorrect because Notes Payable is a liability account used to record amounts owed by the company to others for borrowing money.

Question 8

Use the information above to answer the following question.The journal entry to record the write-off on May 1 would include which of the following?

Accepted Answer

When writing off an uncollectible account, the entry is to debit Allowance for Doubtful Accounts and credit Accounts Receivable, removing the receivable from the books.

Question 9

Use the information above to answer the following question.If the company changes its credit granting policies and begins granting credit to less creditworthy customers,which of the following statements is true regarding the likely effect on the receivables turnover ratio and the days to collect measure?

Accepted Answer

If the company begins granting credit to less creditworthy customers, it is likely that the receivables turnover ratio will decrease because it will take longer to collect the outstanding receivables. Additionally, the days to collect measure will also increase, as it will take longer to collect the outstanding receivables. Therefore, answer choice A is correct.

Question 10

Use the information above to answer the following question.Assuming the company uses the aging of receivables method and estimates the uncollectible amount at 5% of accounts receivable,what is the required adjusting entry to record bad debt expense for the year?

Accepted Answer

The answer of Use the information above to answer the...

Question 11

What is the annual rate of interest being charged on a 9-month note receivable of $50,000 if the total interest is $3,000?

Accepted Answer

The answer of What is the annual rate of interest...

Question 12

Use the information above to answer the following question.The required entry(ies)on May 29 to record the recovery is:

Accepted Answer

The answer of Use the information above to answer the...

Question 13

A company uses the percentage of credit sales method to estimate bad debt expense.At the end of the year,the company's unadjusted trial balance includes the following:  The company estimates,based on historical bad debt losses,that 0.5% of the sales will be uncollectible.What is the bad debt expense to be recorded for the year?

Accepted Answer

The answer of A company uses the percentage of credit...

Question 14

On December 1,2013,a company loaned a new employee $20,000 to assist with her relocation expenses.The employee signed a 6-month note,with interest of 9%.The company prepares year-end financial statements at December 31.What is the required adjusting entry at December 31 as a result of this note transaction?

Accepted Answer

The answer of On December 1,2013,a company loaned a new...

Question 15

Use the information above to answer the following question.The receivables turnover ratio for 2014 is closest to:

Accepted Answer

The answer of Use the information above to answer the...

Question 16

The unadjusted trial balance at the end of the year includes the following:  The company uses the allowance method and has completed the aging schedule which indicates $5,800 of accounts are estimated uncollectible.What is the amount of bad debt expense to be recorded for the year?

Accepted Answer

The aging schedule has indicated $5,800 of accounts that are estimated uncollectible, therefore the bad debt expense to be recorded for the year would be the ending balance of the allowance for doubtful accounts account minus the beginning balance. The beginning balance of the allowance for doubtful accounts account cannot be determined from the information given, therefore the amount of bad debt expense cannot be determined precisely. However, since the aging schedule only shows the estimated uncollectible accounts, it would be appropriate to use this amount as the best estimate for calculating the bad debt expense. Therefore, the amount of bad debt expense to be recorded for the year is $5,800.

Question 17

Use the information above to answer the following question.Assuming the company estimates bad debts as 1.3% of credit sales,what is the required adjusting entry to record bad debt expense for the year?

Accepted Answer

The answer of Use the information above to answer the...

Question 18

A company's unadjusted trial balance at the end of the year includes the following:  The company uses the allowance method and has completed the aging schedule which indicates $5,800 of accounts are estimated uncollectible.What is the amount of bad debt expense to be recorded for the year?

Accepted Answer

The answer of A company's unadjusted trial balance at the...

Question 19

Use the information above to answer the following question.If the company is preparing financial statements 3 months after this transaction,what is the necessary adjusting entry?

Accepted Answer

The answer of Use the information above to answer the...

Question 20

A company uses the direct write-off method and discovers a customer's account in the amount of $3,000 will not be paid because the customer has declared bankruptcy.What is the journal entry that would be made to record this write-off?

Accepted Answer

The answer of A company uses the direct write-off method...

Quiz 8: Receivables, Bad Debt Expense, and Interest Revenue

On December 1,2013,a company accepted a $6,000,9%,3-month note from a customer in payment of his overdue account.The company prepares year-end financial statements on December 31.What entry should the company make on March 1,2014,when the note and interest are paid?

Which of the following statements is true concerning the allowance for doubtful accounts?

Use the information above to answer the following question.The days to collect for 2014 is closest to:

Use the information above to answer the following question.What is the total amount of interest on this note?

What is the amount due on the maturity date of a $5,000,3-month,10% note receivable?

Use the information above to answer the following question.Assuming the entry to record bad debt expense was $8,250,what is the balance in the allowance for doubtful accounts after this entry was made?

Use the information above to answer the following question.The entry made by the company to record this loan to the employee will include a:

Use the information above to answer the following question.The journal entry to record the write-off on May 1 would include which of the following?

Use the information above to answer the following question.Assuming the company uses the aging of receivables method and estimates the uncollectible amount at 5% of accounts receivable,what is the required adjusting entry to record bad debt expense for the year?

What is the annual rate of interest being charged on a 9-month note receivable of $50,000 if the total interest is $3,000?

Use the information above to answer the following question.The required entry(ies) on May 29 to record the recovery is:

Use the information above to answer the following question.The receivables turnover ratio for 2014 is closest to:

The unadjusted trial balance at the end of the year includes the following: The company uses the allowance method and has completed the aging schedule which indicates $5,800 of accounts are estimated uncollectible.What is the amount of bad debt expense to be recorded for the year?

Use the information above to answer the following question.Assuming the company estimates bad debts as 1.3% of credit sales,what is the required adjusting entry to record bad debt expense for the year?

A company's unadjusted trial balance at the end of the year includes the following: The company uses the allowance method and has completed the aging schedule which indicates $5,800 of accounts are estimated uncollectible.What is the amount of bad debt expense to be recorded for the year?

Use the information above to answer the following question.If the company is preparing financial statements 3 months after this transaction,what is the necessary adjusting entry?

A company uses the direct write-off method and discovers a customer's account in the amount of $3,000 will not be paid because the customer has declared bankruptcy.What is the journal entry that would be made to record this write-off?