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Exam 8: Receivables

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Question 1

Multiple Choice

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Jefferson uses the percent of sales method of estimating uncollectible expenses. Based on past history, 2% of credit sales are expected to be uncollectible. Sales for the current year are $5,550,000. Which of the following is correct?

A) Uncollectible accounts are estimated to be $55,500.
B) Uncollectible accounts are estimated to be $111,000.
C) Bad debt expense is estimated to be $5,550.
D) Bad debt expense is estimated to be $11,100.

E) None of the above
F) A) and B)

Correct Answer

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B

Question 2

Multiple Choice

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Selling receivables is called

A) factoring
B) sales revenue
C) a factor
D) sold receivables

E) A) and D)
F) A) and C)

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Question 3

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Determine the due date and the amount of interest due at maturity on the following notes: ​

Fill in the blanks related to the characteristics of a promissory note. 1.The party promising to pay the note is called the ________. 2.The amount for which the note is written is called the _______ amount. 3.The date the note is to be paid is the _______ date. 4.The time between the date when a note is written and the time it must be paid is called the _____ of the note.

At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful Accounts has a credit balance of $5,500; and sales for the year total $2,500,000. An analysis of receivables estimates uncollectible receivables as $25,000. Determine the net realizable value of accounts receivable after adjustment. (Hint: Determine the amount of the adjusting entry for bad debt expense and the adjusted balance of Allowance for Doubtful Accounts.)

Indications that an account may be uncollectible include all of the following except

The direct write-off method records bad debt expense in the year the specific account receivable is determined to be uncollectible.

Under the direct write-off method of uncollectible accounts, what is the effect on the accounting equation of writing off a customer's account?

A $6,000, 60-day, 12% note recorded on November 21 is not paid by the maker at maturity. The journal entry to recognize this event is

Which of the following receivables would not be classified as an "other receivable"?

A primary difference between the direct write-off and allowance method is whether or not bad debts is based on a percentage of sales.

Under the allowance method, when a year-end adjustment is made for estimated uncollectible accounts

A company uses the allowance method to account for uncollectible accounts receivable. When the firm writes off a specific customer's account receivable

The difference between the balance in Accounts Receivable and the balance in the Allowance for Doubtful Accounts is called the net realizable value of the receivables.

The maturity value of a $40,000, 9%, 40-day note receivable dated July 3 is

When an account receivable is written off under the direct write-off method, the accounting equation is kept in balance because

When the allowance method for accounting for uncollectible receivables is used, net income is reduced when a specific receivable is written off.

The direct write-off method of accounting for uncollectible accounts

The journal entry to record a note received from a customer to replace an account is

The receivable that is usually evidenced by a formal, written instrument of credit is a(n)