Question 1

Assume that on December 1,a note which has a face value of $1,000,bears interest at 6 percent for 90 days,received from a customer as an extension of his of past - due account is honored on due date.The entry that would be made to record the receipt on due date (ignoring interest)is:

Accepted Answer

The note is being honored, meaning the customer is paying off the note. Therefore, the Notes Receivable account is credited (decreased) and Cash is debited (increased) to reflect the receipt of cash.

Question 2

Compute the correct amount for each letter in the following table:
 $\begin{array}{|l|r|r|r|r|}  
\hline &\text { Case 1 } & \text { Case 2 } & \text { Case } 3 & \text { Case } 4 \
\hline\text {Balance per bank statement} & \$ \mathbf{a}  & \$ 17,800 & \$ 630& \$ 3,980 \
\hline\text { Deposits in transit }& 1,200 & \text { b } & 100 & 250 \
\hline\text { Outstanding checks} & 3,000 & 2,000 & \mathbf{c} & 150 \
\hline \text {Balance per books }& 6,900 & 18,800 & 450 & \text {d }\
\hline
\end{array}$

Accepted Answer

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Question 3

Cottage Sales Company made most of its sales on credit during its first year of operation,2010.At the end of the year,accounts receivable amounted to $100,000.On December 31,2010,management reviewed the collectible status of the accounts receivable.Approximately $6,000 of the $100,000 of accounts receivable were estimated to be uncollectible.As per the accounts receivable aging method the adjusting entry that would be made on December 31 of that year is:

Accepted Answer

The adjusting entry required for estimated uncollectible accounts is a debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts. Based on the information provided, the estimated uncollectible accounts are $6,000 which need to be credited to the Allowance for Doubtful Accounts. Therefore, the correct option is C as it is the only option that reflects a credit to the Allowance for Doubtful Accounts.

Question 4

For each of the items below,use the following letters to identify the correct treatment in a bank reconciliation.
 $ A= $ Add to balance per bank$\quad $$\quad $$\quad $$ \mathrm{C}= $ Add to balance per books
$ B= $ Deduct from balance per bank$\quad $$ \mathrm{D}= $ Deduct from balance per books
 ____ 1.Interest income
____ 2.Outstanding checks
____ 3.Check written for $89,but $98 recorded in books
____ 4.Customer's NSF check
____ 5.Note receivable collected by bank
____ 6.Deposit made for $70,but $700 recorded in books
____ 7.Bank check-printing charge
____ 8.Check written for $52,but $25 recorded in books
____ 9.Deposits in transit
____ 10.Bank fee for collection on note receivable

Accepted Answer

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Question 5

Assume that on December 1,a $3,000,90-day,10 percent note receivable was received from a customer as an extension of his of past - due account.The entry that would be made to record the note is:

Accepted Answer

The note receivable is recorded by debiting Notes Receivable and crediting Accounts Receivable, as it replaces the past-due account.

Question 6

What is a compensating balance? By whom is it required?

Accepted Answer

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Question 7

Interest on a note receivable may be calculated without knowledge of the

Accepted Answer

Interest on a note receivable requires knowledge of the principal amount, the rate of interest, and the note's duration to calculate. The note's maturity date is not directly required for calculating interest, as the interest calculation depends on the duration (how long the interest is accruing for), not the specific end date.

Question 8

What purpose is served by a factoring arrangement? What does it mean to factor accounts receivable with recourse?

Accepted Answer

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Question 9

Why do businesses need to keep some currency on hand?

Accepted Answer

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Question 10

Using the following transactions for 2010,show how the T account below would appear after all appropriate postings have been made.Assume an opening balance of $900. $\begin{array}{lrl} \text { Feb. } & 13 & \text { Wrote off an individual account for } \$ 1,000 . \ & 21 & \text { Reinstated the account written off on February } 13 . \ \text { July }& 8 & \text { Wrote off an individual account for } \$ 700 . \ \text { Dec. }& 31 & \text { Made year-end adjustment of } \$ 800 \text { for estimated uncollectible accounts. } \end{array}$ $$\begin{array}{l} \text { Allowance for Uncollectible Accounts }\ \begin{array} { l | l r } \hline\quad\quad\quad\quad\quad\quad\quad & { 1 / 1 } &\quad\quad\quad 900 \ & \end{array} \end{array}$$

Accepted Answer

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Question 11

Assume that the $1,000,90-day,8 percent note was received on August 31 and that the fiscal year ended on September 30.The adjusting entry that would be made to record the interest receivable is (amounts rounded to nearest dollar):

Accepted Answer

The interest for one month (September) on a $1,000 note at 8% annual interest is calculated as $1,000 * 0.08 * (30/360) = $7. The adjusting entry records this interest as receivable.

Question 12

The following data exist for Conner Company:
 $\begin{array}{lrr}
&2010&2009\
\text { Accounts Receivable } & \$ 80,000 & \$ 90,000 \
\text { Sales } & 510,000 & 410,500
\end{array}$ Calculate the receivable turnover and the average days' sales uncollected for 2010.Round answers to one decimal place.

Accepted Answer

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...

Question 13

A dishonored note means the payee's entry includes a

Accepted Answer

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Question 14

On a balance sheet,what items normally are included in Cash?

Accepted Answer

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Question 15

Assume that on January 15,a customer who owes Shawni sales company $1,000 is declared bankrupt by a federal court.The entry that would be made to write off this account is:

Accepted Answer

The correct entry to write off an uncollectible account under the allowance method is to debit the Allowance for Uncollectible Accounts and credit Accounts Receivable.

Question 16

A promissory note is executed in June.When the note is paid the following January,the payee's entry includes (assuming a calendar-year accounting period and no reversing entries)a

Accepted Answer

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Question 17

Assume that on December 1,a note which has a face value of $9,000,bears interest at 9 percent for 120 days,received from a customer as an extension of his of past - due account is dishonored.The entry that would be made to record the dishonor (ignoring interest)is:

Accepted Answer

When a note is dishonored, the amount is transferred back to accounts receivable from notes receivable.

Question 18

Jayne Luke started a computer business in her basement less than a year ago.Her personal attention to clients and persistence in obtaining new customers has caused the business to grow at a tremendous pace.Jayne has become so busy she has neglected to keep after clients who have failed to pay her.As a result,Jayne has a large amount of accounts receivable and notes receivable on her balance sheet but not much cash.She continues to service clients,but she now realizes that her cash will soon be exhausted.Suggest some options Jayne has to achieve a strong cash balance.

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Question 19

What is a contingent liability,and how does it relate to the discounting of a note receivable at the bank?

Accepted Answer

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Question 20

Use the following T account to answer the questions below (assume a calendar-year accounting period). $$\begin{array}{l} \text { Allowance for Uncollectible Accounts }\ \begin{array} { r r | r r } \hline 1 / 10 & 300 & 1 / 15 & 300 \ 5 / 12 & 440 & 12 / 31 & 3,600 \end{array} \end{array}$$ What apparently occurred on: a. January 10? b. January 15? c. May 12? d. December 31?

Accepted Answer

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Quiz 7: Cash and Receivables

Assume that on December 1,a note which has a face value of $1,000,bears interest at 6 percent for 90 days,received from a customer as an extension of his of past - due account is honored on due date.The entry that would be made to record the receipt on due date (ignoring interest) is:

Assume that on December 1,a $3,000,90-day,10 percent note receivable was received from a customer as an extension of his of past - due account.The entry that would be made to record the note is:

What is a compensating balance? By whom is it required?

Interest on a note receivable may be calculated without knowledge of the

What purpose is served by a factoring arrangement? What does it mean to factor accounts receivable with recourse?

Why do businesses need to keep some currency on hand?

Assume that the $1,000,90-day,8 percent note was received on August 31 and that the fiscal year ended on September 30.The adjusting entry that would be made to record the interest receivable is (amounts rounded to nearest dollar) :

The following data exist for Conner Company: $\begin{array}{lrr}&2010&2009\\\text { Accounts Receivable } & \$ 80,000 & \$ 90,000 \\\text { Sales } & 510,000 & 410,500\end{array}$ Calculate the receivable turnover and the average days' sales uncollected for 2010.Round answers to one decimal place.

A dishonored note means the payee's entry includes a

On a balance sheet,what items normally are included in Cash?

Assume that on January 15,a customer who owes Shawni sales company $1,000 is declared bankrupt by a federal court.The entry that would be made to write off this account is:

A promissory note is executed in June.When the note is paid the following January,the payee's entry includes (assuming a calendar-year accounting period and no reversing entries) a

Assume that on December 1,a note which has a face value of $9,000,bears interest at 9 percent for 120 days,received from a customer as an extension of his of past - due account is dishonored.The entry that would be made to record the dishonor (ignoring interest) is:

What is a contingent liability,and how does it relate to the discounting of a note receivable at the bank?