Question 1

When the maker of a note honors a note this indicates that the note is:

Accepted Answer

Honoring a note means that the maker of the note has paid the note in full as per the terms of the agreement.

Question 2

Teller purchased merchandise from TechCom on October 17 of the current year and TechCom accepted Teller's $4,800,90-day,10% note.What entry should TechCom make on January 15 of the next year when the note is paid?

Accepted Answer

Interest accrued at December 31: $4,800 * .10 * 75/360 = $100
Interest earned during January: $4,800 * .10 * 15/360 = $20

Question 3

Hankco accepts all major bank credit cards,including Omni Bank's,which assesses a 4% charge on sales for using its card.On June 28,Hankco had $3,500 in Omni Card credit sales.What entry should Hankco make on June 28 to record the deposit?

Accepted Answer

Credit card fee expense: $4,800 * .035 = $168
Cash received: $4,800 - $168 = $4,632

Question 4

A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and their length of time past due is the:

Accepted Answer

The aging of accounts receivable method involves analyzing outstanding accounts to determine how long they have been past due. This allows for a more accurate estimation of bad debts expense, as older accounts are less likely to be collected. The other methods listed do not involve this level of detail and may not provide as accurate of an estimate.

Question 5

An accounting procedure that (1)estimates and reports bad debts expense from credit sales during the period the sales are recorded,and (2)reports accounts receivable at the estimated amount of cash to be collected is the:

Accepted Answer

The allowance method of accounting for bad debts estimates and reports bad debts expense based on credit sales during the period, and reports accounts receivable at the estimated amount of cash to be collected. It is a widely used and generally accepted accounting procedure for estimating uncollectible accounts. The aging of notes receivable and adjustment method for uncollectible debts are not applicable to all types of receivables, while the direct write-off method and cash basis method are not generally accepted accounting principles.

Question 6

Teller purchased merchandise from TechCom on October 17 of the current year and TechCom accepted Teller's $4,800,90-day,10% note.If the note is dishonored,what entry should TechCom make on January 15 of the next year?

Accepted Answer

Interest accrued at December 31: $4,800 * .10 * 75/360 = $100
Interest earned during January: $4,800 * .10 * 15/360 =$20

Question 7

The allowance method based on the idea that a given percent of a company's credit sales for the period are uncollectible is:

Accepted Answer

The allowance method based on a given percent of credit sales for the period being uncollectible is known as the percent of sales method. This method estimates bad debts based on the percentage of credit sales, which helps to determine the amount of the allowance for doubtful accounts.

Question 8

The Allowance for Doubtful Accounts:

Accepted Answer

The Allowance for Doubtful Accounts is a contra asset account that is used instead of reducing accounts receivable directly. It is debited when uncollectible accounts are written off and is credited when bad debts expense is estimated and recorded. Therefore, all of the options are correct.

Question 9

A company has $90,000 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 debit balance (before adjustments)in the allowance for doubtful accounts is $800.The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for:

Accepted Answer

11ea7277_eebe_fd31_9608_6d4239614b5c_TB2411_00

Question 10

A company ages its accounts receivables to determine its end of period adjustment for bad debts.At the end of the current year,management estimated that $15,750 of the accounts receivable balance would be uncollectible.Prior to any year-end adjustments,the Allowance for Doubtful Accounts had a debit balance of $175.What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Accepted Answer

11ea7277_eebe_87fe_9608_17174eed4a12_TB2411_00

Question 11

MixRecording Studios purchased $7,800 in electronic components from TechCom.MixRecording Studios signed a 60-day,10% promissory note for $7,800.TechCom's journal entry to record the sales portion of the transaction is:

Accepted Answer

TechCom's journal entry to record the sales portion of the transaction involves debiting Notes Receivable for the principal amount of the note, $7,800, and crediting Sales for the same amount, $7,800. This entry reflects the creation of a promissory note receivable in exchange for the sale of goods, without initially recognizing any interest income. Interest income would be recognized over the term of the note.

Question 12

Teller purchased merchandise from TechCom on October 17 of the current year and TechCom accepted Teller's $4,800,90-day,10% note.What entry should TechCom make on December 31,to record the accrued interest on the note?

Accepted Answer

Interest accrued at December 31: $4,800 * .10 * 75/360 = $100

Question 13

A company uses the percent of sales method to determine its bad debts expense.At the end of the current year,the company's unadjusted trial balance reported the following selected amounts:
 All sales are made on credit.Based on past experience,the company estimates 0.6% of credit sales to be uncollectible.What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

Accepted Answer

$800,000 * 0.006 = $4,800

Question 14

MixRecording Studios purchased $7,800 in electronic components from TechCom.MixRecording Studios signed a 60-day,10% promissory note for $7,800.If the note is dishonored,what is the amount due on the note?

Accepted Answer

$7,800 * 0.10 * 60/360 = $130 + $7,800 = $7,930

Question 15

Electron borrowed $75,000 cash from TechCom by signing a promissory note.TechCom's entry to record the transaction should include a:

Accepted Answer

When Electron borrows money by signing a promissory note, TechCom records it as an asset, namely Notes Receivable, since they expect to receive payment in the future. Therefore, the correct entry is a debit to Notes Receivable for $75,000.

Question 16

On December 31 of the current year,a company's unadjusted trial balance included the following: Accounts Receivable,debit balance of $97,250; Allowance for Doubtful Accounts,credit balance of $951.What amount should be debited to Bad Debts Expense,assuming 6% of outstanding accounts receivable at the end of the current year will be uncollectible?

Accepted Answer

11ea7277_eebe_12c8_9608_33e31205bbe9_TB2411_00

Question 17

Paoli Pizza bought $5,000 worth of merchandise from TechCom and signed a 90-day,10% promissory note for the $5,000.TechCom's journal entry to record the sales portion of the transaction is:

Accepted Answer

The journal entry to record a sale made on credit with a promissory note is to debit Notes Receivable for the amount of the note plus any interest and credit Sales for the total amount. Therefore, the journal entry is to Debit Notes Receivable $5,000 and Credit Sales $5,000. Since the note is for 90 days with a 10% rate, interest will also be recorded separately when the note is collected.

Question 18

A company uses the percent of sales method to determine its bad debts expense.At the end of the current year,the company's unadjusted trial balance reported the following selected amounts:
 All sales are made on credit.Based on past experience,the company estimates 0.6% of credit sales 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

$800,000 * 0.006 = $4,800

Question 19

Failure by a promissory notes' maker to pay the amount due at maturity is known as:

Accepted Answer

Dishonoring a note refers to the failure of the maker of a promissory note to pay the amount due at maturity. Protesting a note refers to the formal process of recording the dishonor of the note, while closing a note means to pay off the full amount owed on the note. Discounting a note refers to selling the note to a third party at a discount, and depreciating a note is not a relevant term in this context.

Question 20

The amount due on the maturity date of a $6,000,60-day 8%,note receivable is:

Accepted Answer

Interest = $6,000 * 0.08 * 60/360 = $80
Maturity Value = $6,000 + $80 = $6,080

Quiz 9: Accounting for Receivables

When the maker of a note honors a note this indicates that the note is:

Teller purchased merchandise from TechCom on October 17 of the current year and TechCom accepted Teller's $4,800,90-day,10% note.What entry should TechCom make on January 15 of the next year when the note is paid?

Hankco accepts all major bank credit cards,including Omni Bank's,which assesses a 4% charge on sales for using its card.On June 28,Hankco had $3,500 in Omni Card credit sales.What entry should Hankco make on June 28 to record the deposit?

A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and their length of time past due is the:

An accounting procedure that (1) estimates and reports bad debts expense from credit sales during the period the sales are recorded,and (2) reports accounts receivable at the estimated amount of cash to be collected is the:

Teller purchased merchandise from TechCom on October 17 of the current year and TechCom accepted Teller's $4,800,90-day,10% note.If the note is dishonored,what entry should TechCom make on January 15 of the next year?

The allowance method based on the idea that a given percent of a company's credit sales for the period are uncollectible is:

The Allowance for Doubtful Accounts:

MixRecording Studios purchased $7,800 in electronic components from TechCom.MixRecording Studios signed a 60-day,10% promissory note for $7,800.TechCom's journal entry to record the sales portion of the transaction is:

Teller purchased merchandise from TechCom on October 17 of the current year and TechCom accepted Teller's $4,800,90-day,10% note.What entry should TechCom make on December 31,to record the accrued interest on the note?

MixRecording Studios purchased $7,800 in electronic components from TechCom.MixRecording Studios signed a 60-day,10% promissory note for $7,800.If the note is dishonored,what is the amount due on the note?

Electron borrowed $75,000 cash from TechCom by signing a promissory note.TechCom's entry to record the transaction should include a:

Paoli Pizza bought $5,000 worth of merchandise from TechCom and signed a 90-day,10% promissory note for the $5,000.TechCom's journal entry to record the sales portion of the transaction is:

Failure by a promissory notes' maker to pay the amount due at maturity is known as:

The amount due on the maturity date of a $6,000,60-day 8%,note receivable is: