ACCT 211 Read & Interact Chapter 7 Accounting for Receivables solutions complete answers

ACCT 211 Read & Interact Chapter 7 Accounting for Receivables solutions complete answers 

 

The ________ is a measure of both the quality and liquidity of accounts receivable; it indicates how often, on average, receivables are received and collected during the period.

 

Leo Co. uses the allowance method to account for bad debts. At the end of the year, Leo Co.'s accounts receivable balance is $25,000; allowance for doubtful accounts balance of $100 (credit); and sales of $500,000. Based on history, Leo estimates that bad debts will be 2% of accounts receivable. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of:

 

Finish Co. uses the allowance method to account for bad debts. At the end of the year, Finish Co.'s unadjusted trial balance shows an accounts receivable balance of $30,000; allowance for doubtful accounts balance of $200 (credit); and sales of $600,000. Based on history, Finish estimates that bad debts will be 1% of sales. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of:

 

Accounts receivable turnover is calculated using the following formula:

 

True or false: The two methods companies can use to convert receivables to cash before they are due includes selling them and pledging them.

 

The (maker/signer)      of the note is the one that signed the note and promised to pay at maturity. The (maker/payee)      of the note is the person to whom the note is payable.

 

The        of accounts receivable method uses several percentages to estimate the allowance.

 

Ace Company sells merchandise to a customer in the amount of $200 on credit, terms n/30. The entry to record this sale would include a debit to the ____________ account:

 

True or false: The direct write-off method of accounting for bad debts matches the estimated loss from uncollectible accounts receivable against the sales they helped produce.

 

True or false: The allowance method of accounting for bad debts records the loss from an uncollectible account receivable when it is determined to be uncollectible. No attempt is made to predict bad debts.

 

On August 1, Harris Co. determines that it cannot collect $200 from its customer, L. Dash. Harris Co. uses the direct write-off method, so they will record the write-off of this account by debiting:

 

Iron Company collects cash in full from a customer who purchased merchandise last month on credit. To record the receipt of cash, Iron Company should make the following entries in the general journal. (Check all that apply.)

 

Zion Company sells merchandise on account to BRC, Inc. in the amount of $1,200. The entry to record this sale would include a: (Check all that apply.)

 

A _________________ is an amount due from another party.

 

Dea Company sold $960 of merchandise to a customer who used Dea Company’s credit card. The entry to record this transaction on the date of the sale would include:

 

On September 1, Horn Co. accepted a 60-day, 5% note in the amount of $3,000 from a customer. On the due date of the note, the customer dishonors the note and fails to pay. The journal entry that Horn would make on the due date would include debit to:

 

The following financial information is available for Siu Co.

Compute accounts receivable turnover for 2010. Round your answer to one decimal place.

 

At period end, Bradon Company estimates that $1,200 of its accounts receivable balance is uncollectible.

 

Although U.S. GAAP and IFRS have similar rules in recording disposition of receivables, Under U.S. GAAP provision refers to expense. Under IFRS, provision refers to 

 

The direct write-off method records bad debts expense only when an account becomes uncollectible, which is not always in the same period as the sale. For this reason, the direct write-off method violates the         principle.

 

_______ _______ are accounts of customers who do not pay what they have promised to pay. It's considered an expense of selling on credit.

 

The principal and interest of a note are due on its maturity date. The maker of the note usually ______________ the note and pays it in full.

 

A(n) __________ is a supplementary record created to maintain a separate account for each customer.

 

In July, Lane Co. sells merchandise to Avery Co. on account. In August, Avery pays the balance in full. The entry that Lane will make to record the receipt of cash will include a credit to the __________ account.

 

On December 1, Christy Co. accepted a 60-day, 6%, $1,000 note due January 30. On December 31, the appropriate year-end adjusting entry was made. On January 30, the note was honored and paid in full. The entry to record receipt of payment on January 30 (assuming no reversing entry was made) would include a credit to: 



On March 14, Ian Co. accepted a 180-day, 5% note in the amount of $1,000 from All Co., a customer. On the due date of the note, Ali dishonors the note and fails to pay. The journal entry that Ian would record on the due date would include a: 

 

On March 14, Teal Co. accepted a 120-day, 6% note in the amount of $10,000 from AZC Co., a customer. On the due date of the note, AZC honors the note and pays in full. The journal entry that Teal would make to record payment of this note would include a credit to:

 

On December 31, DVS Company estimates that $2,500 of its accounts receivable balance is uncollectible. DVS uses the allowance method to account for bad debts. The entry to record this adjusting entry would include a:



On November 1, Eli Co. received a $6,000, 60-day, 6% note from a customer as payment on his $6,000 account. Eli's journal entry to record this transaction on November 1, would include a: (Check all that apply.)

 

Ana Co. uses the allowance method to account for bad debts. At the end of the period, Ana's unadjusted trial balance shows an accounts receivable balance of $40,000; allowance for doubtful accounts balance of $300 (credit); and sales of $500,000. Based on history, Ana estimates that bad debts will be 2% of accounts receivable. The entry to record estimated bad debts will include a debit to bad debts expense in the amount of:

 

In August, Johns Co.'s account receivable balance was written off using the direct method. In November, Johns pays the balance in full. The journal to record the reinstatement of the account receivable must include a credit to the __________ account before recording a debit to the Cash account.

 

Flash Co. uses the allowance method to account for bad debts. At the end of 2010, Flash Co.'s unadjusted trial balance shows an accounts receivable balance of $45,000; allowance for doubtful accounts of $400 (debit); and sales of $1,500,000. Based on history, Flash estimates that bad debts will be 0.5% of sales. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of:

 

The allowance for doubtful accounts is a(n) _______ asset account and has a normal credit balance:

 

On February 15, Smyth Co. determines that it cannot collect $500 owed by its customer, A. Winds. Smyth records the loss using the direct write-off method. This entry to record the write-off on February 15 would include a:

 

The ________ method of account for bad debts records the loss from an uncollectible account receivable when it is determined to be uncollectible. No attempt is made to predict bad debts expense.

 

P. Jameson Co. sold $500 of merchandise on Master Card credit sales. The net cash receipts from the sale are immediately deposited in the seller's bank account. Master Card charges a 4% fee. The journal entry to record this sales transaction would include a:

 

Thomas Co. sold $1,000 worth of merchandise on a bank credit card less a 3% fee. The entry to record the sales transaction would include a debit to Cash in the amount of   .

 

Lion Company accepted a $15,000, 30-day, 6% note on December 16 from Diaz Co, granting a time extension on his past-due account receivable.

 

Lina Co. uses the allowance method to account for bad debts. On January 28, Lina determines that a $200 balance from ZRT, Inc. is uncollectible and writes the balance off. The journal entry to write this balance off will include a:

 

Match the following terms to the appropriate definitions.

 

On November 1, Alice Co. accepted a 90-day, 6% 2,000 note due January 30. On 12/31, the appropriate adjusting entry was made. On January 30, the note was honored and pain in full. The entry to record receipt of payment on January 30 would include a credit to: 

 

The     method of accounting for bad debts matches the estimated loss from uncollectable accounts receivables against the sales they helped produce.

 

When a company makes a sale on credit, it records the amount due from the customer in _____________

 

A company sells merchandise to a company on credit. The journal entry that the company makes to record this sale would include a ___________ to the sale account.

 

A 60-day note is signed on February 15 (and it’s not leap year). The due date of the note is:

 

Match the definitions to the appropriate terms.

 

To compute interest due on a maturity date, you should multiple which of the following factors?

 

In September, DK Company sells merchandise to Lions Company on credit. In October, Lions Company pays the balance in full. The entry to record the collection of cash by DK Company in October will include a     to Accounts Receivable.

 

On August 21, Alix company receives a $2,000, 60-day, 6% note from a customer as payment on her account. How much interest will be due on October 20-the due date?

 

1.
A 90-day note is signed on October 21. The due date of the note is:
 
 
3.
Acel Co. uses the allowance method to account for bad debts. Early in 2010, Acel determined that it could not collect $400 from CTR, Inc. and wrote the balance off. On October 21, Acel received a check for $400 from CTR. The entries to record the receipt of cash on October 21 would include a debit to: (2)
 
 
4.
The advantages of using the allowance method to account for bad debts include which of the following? (2)
 
 
5.
All of the following are similarities in valuing receivable using U.S. GAAP and IFRS except:
 
 
6.
The allowance for doubtful accounts is a ________________ asset account and has a normal credit balance
 
 
8.
A. Stine Co. previously wrote off a $200 bad debt from Thorn Co. using the direct write-off method. On October 1, Stine unexpectedly receives a check in the amount of $200 from Thorn Co. The entry to record this receipt of $200 will include a:
 
 
9.
Both U.S. GAAP and IFRS require that companies use the ________________ method of accounting for bad debts
 
 
10.
Companies allow customers to pay for products using third-party credit cards because: (4)
 
 
11.
A company sells merchandise to a customer on credit. The journal entry to record this transaction would include a debit entry to the Accounts _______________ account.
 
 
12.
The _________________ constraint permits the use of the direct write-off method when bad debts expenses are very small in relation to a company's other financial statement items, such as sales and net income.
 
 
16.
DonCo, Inc. sold merchandise on January 14, and accepted a 90-day, 5% promissory note in the amount of $5,000. On January 14, the entry to record this transaction would include a debit to:
 
 
19.
JD Co. had $1,000 of credit cards sales. The net cash receipts were deposited immediately into Whitlock's bank account less a 3% fee. The entry to record this sales transaction would include the following debit entries. (Check all that apply.)
 
 
20.
Kaiden Company accepted a $12,000, 60-day, 6% note on December 21 from Diaz Co, granting a time extension on his past-due account receivable. The adjusting entry on December 31 would include a debit to:
 
 
23.
The (allowance/direct write-off)       method of accounting for bad debts matches the estimated loss from uncollectible accounts receivables against the sales they helped produce.
 
 
24.
The ________________ method of accounting for bad debts records the loss from an uncollectible account receivable when it is determined to be uncollectible. No attempt is made to predict bad debts expense.
 
 
25.
The _____________________ method of estimating allowance for doubtful accounts is based on the idea that a given percent of a company's credit sales for the period are uncollectible
 
 
26.
A method referred to as balance sheet method, uses balance sheet relations to estimate bad debts--mainly, the relationship between accounts receivable and the allowance account.
 
 
 
 
 
 
 
 
 
 
 
 

28.
On February 15, Symth Co. determines that it cannot collect $500 owed by its customer, A. Winds. Synth records the loss using the direct write-off method. This entry to record the write-off on February 15 would include a:
 
 
29.
On January 1, Franz Co. accepted a 30-day, 6% note in the amount of $5,000 from Bria Co., a customer. On January 31, the due date of the note, Bria honors the note and pays in full. The journal entry that Franz would make to record payment of this note would include a: (Check all that apply.)
 
 
30.
On June 30, Nance Company receives a $5,000, 90-day, 4% note from a customer as payment on her account. How much interest will be due on the note's maturity date?
 
 
31.
On March 14, Ian Co. accepted a 180-day, 5% note in the amount of $1,000 from Ali Co., a customer. On the due date of the note, Ali dishonors the note and fails to pay. The journal entry that Ian would record on the due date would include a:
 
 
32.
On November 1, Alice Co. accepted a 90-day, 6%, 2,000 note due January 30. On 12/31, the appropriate adjusting entry was made on 12/31. On January 30, the note was honored and paid in full. The entry to record receipt of payment of January 30 would include a credit to: (Check all that apply.)
 
 
37.
The ______________________ ratio is a measure of both the quality and liquidity of accounts receivable; it indicates how often, on average, receivables are received and collected during the period.
 
 
38.
The realization principle under IFRS refers to the following: (1)
 
 
40.
Simon Co. sold $500 of merchandise on credit cards. The net cash receipts are received 10 days later, less a 2% fee. The entry to record this sales transaction on the date of the sale would include a debit to:
 
 
41.
The __________ method of estimating bad debts uses both past and current receivables information to estimate the allowance amount. Specifically, each receivable is classified by how long it is past its due date.
 
 
42.
To compute interest due on a maturity date, you should multiply date, you should multiply which of the following factors?
 
 
43.
Triton Co. sells $10,000 of its accounts receivables and is charged a 5% factoring fee. It records this sale with a debit to: (1)
 
 
44.
True or false: Accounts receivable are amounts due from customers for credit sales.
 
 
45.
What are the two most common receivables?
 
 
46.
What does an accounts receivable ledger do? (2)
 
 
47.
What is it called when a company sells its receivables?
 
 
48.
What is it called when a company uses receivables as collateral for a bank loan?
 
 
49.
What is the accounts receivable turnover formula?
 
 
 
 
 
 
 
 
 

50.
When a note's maker is unable or refuses to pay at maturity, the note is considered_________________
 
 
52.
Zico Company determines that a customer balance of $200, from Hollis Co. is uncollectible. Zico uses the allowance method to account for bad debts. The entry to write off the uncollectible balance will include a: (1)
 
 
 

1.
An account receivable ledger:
 
 
2.
Acel Co. uses the allowance method to account for bad debts. Early in 2010, Acel determined that it could not collect $400 from CTR, Inc. and wrote the balance off. On October 21, Acel received a check for $400 from CTR. The entries to record the receipt of cash on October 21 would include a debit to:
 
 
3.
The allowance for doubtful accounts is an _____ asset account and has a normal credit balance.
 
 
4.
At year-end, Yates Company estimates that $1,500 of its accounts receivable balance is uncollectible. Yates uses the allowance method to account for bad debts. The entry to record this adjusting entry would include a:
 
 
5.
Avi Co. raises cash by borrowing $10,000 and pledging $12,000 accounts receivables as security for the loan. To comply with the full disclosure principle, Avi will record a journal entry in the amount of the $10, note payable, and also record a _________ to the financial statements, indicating that $12,000 of accounts receivables have been pledged.
 
 
6.
Companies allow customers for products using third-party credit cards because:
 
 
7.
Companies sometimes convert receivables to cash before they are due by selling them or using them as security for a loan. The reasons that a company may convert receivables before their due date include: (Check all that apply.)
 
 
8.
Companies sometimes convert receivable to cash before they are due. When a company sells its receivables, it is call _____. When a company uses receivables as collateral for a bank loan, it is called _____.
 
 
9.
The _____ constraint permits the use of the direct write-off method when bad debts expense are very small in relation to a company's other financial statement items, such as sales and net income.
 
 
10.
The _____ constraint permits the use of the direct write-off method when bad debts expenses are very small in relation to a company's other financial statement items, such as sales and net income.
 
 
11.
Customers sometimes convert receivables to cash before they are due by selling them or using them as security for a loan, The reasons that a company may convert receivables before their due date include:
 
 
13.
Don Inc., sold merchandise on January 14, and accepted a 90-day, 5% promissory note in the amount of $5,000. On January 14, the entry to record this transaction would include a debit to:
 
 
14.
Finish Co. uses the allowance method to account for bad debts. At the end of 2010, Finish Co.'s unadjusted trial balance shows an accounts receivable balance of $30,000; allowance for doubtful accounts balance of $200 (credit); and sales of $600,000. Based on history, Finish estimates that bad debts will be 1% of sales. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of:
 
 
15.
JD Co. had $1,000 of credit cards sales. The net cash receipts were deposited immediately into JD Company's bank account less a 3% fee. The entry to record this sales transaction would include the following debit entries:
 
 
16.
Kalven Company accepted a $12,000, 60-day, 6% note on December 21 from Diaz Co., granting a time extension on his past-due account receivable. The adjusting entry on December 31 would include a debit to:
 
 
17.
Leo Co. uses the allowance method to account for bad debts. At the end of 2010, Leo Co.'s accounts receivable balance is $25,000; allowance for doubtful accounts balance of $100 (credit); and sales of $500,000. Based on history, Leo estimates that bad debits will be 2% of accounts receivable. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of:
 
 
18.
On December 31, DVS Company estimates that $2,500 of its accounts receivable balance is uncollectable. DVS uses the allowance method to account for bad debts. The entry to record this entry would include:
 
 
19.
On January 1, Franz Co. accepted a 30-day, 6% note in the amount of $5,000 from Bria Co., a customer. On January 31, the due date of the note, Bria honors the note and pay in full. The journal entry that Franz would make to record payment of this note would include:
 
 
20.
On January 1, JC Co. accepted a 60-day, 6%, note in the amount of $10,000 from a customer. On March 2, the due date of the note, the customer honors the note and pays in full. The journal entry that JC would make to record the receipt of payment of this note would include a debit to:
 
 
 
 
 
 
 
 
 
 
 
 
 

23.
On March 14, Zest Co. accepted a 120-day, 6% note in the amount of $5,000 from AZC Co., a customer. On the due date of the note, AZC dishonors the note and fails to pay. The journal entry that Zest would make to record the failure to pay this note on the due date would include a debit to:
 
 
24.
On November 1, Alice Co. accepted a 90-day, 6%, 2,000 note due January 30. On 12/31, the appropriate adjusting entry was made. On January 30, the note was honored and paid in full. The entry receipt of payment on January 30 would include a credit to:
 
 
25.
On November 1, Eli Co. received a $6,000, 60-day, 6% note from a customer as a payment to his $6,000 account. Eli's journal entry to record this transaction on November 1, would include a:
 
 
26.
P. Jameson Co. sold $500 of merchandise on Master Card credit sales. The net cash receipts from the sale are immediately deposited in the seller's bank account. Master Card charges a 4% fee. The journal entry to record this sales transaction would include a:
 
 
27.
To compute interest due on a maturity date, use the formula:
 
 
28.
To compute interest due on a maturity date, you should multiply what?
 
 
29.
Tricon Co. sells $10,000 of its accounts receivables and is charged a 5% factoring fee. It records this sales with a debit to:
 
 
30.
Tunes Company determines that a customer balance of $250 from Able Co. is uncollectible. Tunes uses the allowance method to account for bad debts. The entry to write off the uncollectible balance will include a ______ to the Allowance for Doubtful Accounts.
 
 
31.
What are the advantages of using the allowance method to account for bad debts?
 
 
32.
Woodstock Co. had $500 of credit card sales. The net cash receipts were deposited immediately into Woodstock's bank account less a 2% fee. The entry to record this sales transaction would include a credit:
 
 
 
 
 
 
 
 
 

33.
Yates Co. uses the allowance method to account for bad debts. At the end of the period, Yate's unadjusted trial balance shows an accounts receivable balance of $10,000; allowance for doubtful accounts balance of $400 (credit); and sales of $500,000. Based on history, Yates estimates that bad debts will be 1% of sales. The entry to record estimated bad debts will include a debit to bad debts expense in the amount of:
 
$5,000
 

1.
 
 
When using the percent of sales method for estimating uncollectible, and because the unadjusted trial balance in Bad Debt Expenses is always __________, the adjusting entry amount always equals the percentage of sales.
3.
 
 
On August 21, Alix Company receives a $2,000, 60-day, 6% note from a customer as a payment on her account. How much interest will be due on October 20—the due date?
5.
 
 
T. Hillcrest Co. sold $500 of merchandise on credit cards. The net cash receipts are received 10 days later, less a 5% fee. The entry to record this sales transaction would include a debit to: 

A. Accounts Receivable in the amount of $475
B. Sales in the amount of $500
C. Sales in the amount of $475
D. Accounts Receivable in the amount of $500
6.
 
 
The advantages of using the allowance method to account for bad debts include which of the following? (Check all that apply.) 

A. Reports accounts receivable balance at net realizable value.
B. Matches expenses with related sales.
C. Requires no accounting estimates.
7.
 
 
P. Jameson Co. sold $500 of merchandise on Master Card credit sales. The net cash receipts from the sale are immediately deposited in the seller's bank account. Master Card charges a 4% fee. The journal entry to record this sales transaction would include:

A. credit to Sales for $580.
B. debit to Cash for $480.
C. debit to Cash for $485.
D. credit to Credit Card Expense for $20.
E. credit to Accounts Receivable for $500.
F. debit to Credit Card Expense for $20.
8.
 
 
Companies allow customers to pay for products using third-party credit cards because: (Check all that apply.)

A. the seller does not have to evaluate customer credit.
B. a variety of payment options typically increase sales volume.
C. cash is received from the credit card company faster than from a credit customer.
D. the seller avoids the risk of customer non-payment.
E. there is no cost to the seller to allow third-party credit cards.
9.
 
 
__________ are amounts due from customers for credit sales.
10.
 
 
The two most common receivables are __________ and __________.
11.
 
 
Zion Company sells merchandise on account to BRC, Inc. in the amount of $1,200. The entry to record this sale would include a debit to __________ and a credit to __________.
12.
 
 
If a company has $100 of credit card sales with a 4% sales fee, but must remit electronically the credit card sales receipt to the credit card company and wait for the cash payment, the entry is: 

Debit the __________ account $96; debit the __________ account $4; and credit the __________ account $100.
15.
 
 
A measure of both the quality and liquidity of accounts receivable. It indicates how often, on average, receivables are received and collected during the period. 

__________ is equal to net sales divided by average accounts receivable, net.
17.
 
 
The __________ method uses both past and current receivables information to estimate the allowance amount. Specifically, each receivable is classified by how long it is past its due date.
18.
 
 
Kaiven Company accepted a $12,000, 60-day, 6% note on December 21 from Diaz Co, granting a time extension on his past-due account receivable. The adjusting entry on December 31 would include a debit to:

A. Interest Receivable for $20.
B. Interest Revenue foe $20.
C. Interest Revenue for $120.
D. Interest Receivable for $120.
 
 
 
 
 
 
 
 
 
 
 

20.
Allowance for Doubtful Accounts
 
The __________ is a contra account. It is used (as an asset) instead of reducing accounts receivable directly because because at the time of the adjusting entry, it does not know which customers will not pay.
21.
 
 
When specific accounts (i.e., Accounts Receivable—J. Doe) are identified as uncollectible, they are written off against the __________.
22.
 
 
The __________ of accounting for bad debts matches the estimated loss from uncollectible accounts receivable against the sales they helped produce.
23.
 
 
The allowance for doubtful accounts is a contra asset account that equals:

A. Total uncollectible accounts
B. Total short-term assets
C. Total accounts receivable
24.
 
 
__________ are accounts of customers who pay what they have promised to pay. It's considered an expense of selling on credit.
25.
 
 
When a company directly grants credits to its customers, it expects that some of its customers will not pay what they promised. The accounts of these customers are uncollectible accounts, commonly called __________.
28.
 
 
On August 1, Hanes Co. determines that it cannot collect $150 from a customer. Hanes uses the direct write-off method. Hanes will record the write-off of this account by debiting:

A. Accounts Receivable foe $150.
B. Bad Debts Expense for $150.
C. Cash for $150.
D. Allowance for Doubt
29.
 
 
When a company makes a sale on credit, it records the amount due from the customer in __________.

A. prepaid sales
B. accounts payable
C. accounts receivable
D. unearned fees
30.
 
 
To record a company's check in full payment for a sale that was made the prior month, the company should debit the __________ account.
31.
 
 
If a company has $100 of credit card sales with a 4% sales fee, and $96 cash is received immediately on deposit, the entry is:

Debit the __________ account $96; debit the __________ account $4; and credit the __________ account $100.
32.
 
 
On January 1, Franz Co. accepted a 30-day, 6% note in the amount of $5,000 from Bria Co., a customer. On January 31, the due date of the note, Bria honors the note and pays in full. The journal entry that Franz would make to record payment of this note would include a:

Debit to __________ for $5,025; credit to __________ for $5,000, and credit to __________ for $25.
33.
 
 
__________ occur when companies allow their customers to pay for products and services using third-party credit cards such as Visa, MasterCard, or American Express, and debit cards (also called ATM or bank cards).
34.
 
 
When the time of a note is expressed in __________, its maturity date is the specified number of days after the mote's date.
35.
 
 
Tunes Company determines that a customer balance of $250 from Able Co. is uncollectible. Tunes uses the allowance method to account for bad debts. The entry to write off the uncollectible balance will include a __________ to the Allowance for Doubtful Accounts.
 
 
 
 
 
 
 

36.
 
 
The __________ of accounting for bad debts records the loss from an uncollectible account receivable when it is determined to be uncollectible. No attempt is made to predict bad debts expense.
37.
 
 
When a note's maker is unable or refuses to pay at maturity, the note is __________. The act of rendering a note in this condition does not relieve the maker of the obligation to pay.
38.
 
 
A 90-day note is signed on October 21. The due date of the note is:

A. January 20
B. January 18
C. January 21
D. January 19
39.
 
 
When notes receivable are outstanding at the end of a period, an __________ must be computed and recorded for any accrued interest earned. Debit interest receivable and credit interest revenue to record accrued interest earned.
40.
 
 
A company can sell all or a portion of its receivables to a finance company or bank. This process is called __________.
41.
 
 
Companies sometimes convert receivables to cash before they are due. When a company sells its receivables, it is called __________ (pledging/factoring). When a company uses receivables as collateral for a bank loan, it is called __________ (pledging/factoring).
42.
 
 
The __________ continues to have a single Accounts Receivable account (called a control account) along with other financial statement accounts.
43.
 
 
The charge for using money until its due date. To a borrower, it is an expense. To a lender, it is revenue.
44.
 
 
__________ is equal to the principal of the note times the annual interest rate times the time expressed in fraction of year.

I = P x R x T/360
45.
 
 
The person who signs a note and promises to to pay it to maturity.
46.
 
 
The __________ requires expenses to be reported in the same accounting period as the sales they helped produced. If extending credit to customers helped produce sales, the bad debts expense linked to those sales is matched and reported in the same period.
47.
 
 
The __________ states that an amount can be ignored if its effect on the financial statements is unimportant to users' business decisions. It permits the use of the direct write-off method when bad debts expenses are very small in relation to a company's other financial statement items such as sales and net income.
48.
 
 
The __________ is the day a note (principal and interest) must be repaid.
49.
 
 
When the time of a note is expressed in __________ or __________, the note matures and is payable in the respective time period of its maturity on the same day of the time period as its original date.
50.
 
 
Avi Co. raises cash by borrowing $10,000 and pledging $12,000 accounts receivables as security for the loan. To comply with the full disclosure principle, Avi will record a journal entry in the amount of the $10,000 note payable, and also record a __________ (debit/credit/note) to the financial statements, indicating that $12,000 of accounts receivable have been pledged.
51.
 
 
DonCo, Inc. sold merchandise on January 14, and accepted a 90-day, 5% promissory note in the amount of $5,000. On January 14, the entry to record this transaction would include a debit to __________ in the amount of $5,000.
52.
 
 
On November 1, Eli Co., received a $6,000, 60-day, 6% note from a customer as payment on his $6,000 account. Eli's journal entry to record this transaction on November 1, would include a:

debit to __________ for $6,000; and credit to __________ for $6,000.
53.
 
 
The person to whom a note is payable.
54.
 
 
The __________, also referred to as the income statement method, is based on the idea that a given percent of a company's credit sales for the period is uncollectible.
55.
 
 
A company can raise cash by borrowing money and __________ receivables as security for the loan. This does not transfer the risk of bad debts to the lender because the borrower retains ownership of the receivables. If the borrower defaults on the loan, the lender has a right to be paid from the cash receipts of the receivable when collected.
56.
 
 
To compute interest due on a maturity date, multiply __________ (principal/note) times __________ (interest/dividends) times time expressed in fraction of year.
 
 
 
 
 
 
 

57.
 
 
A specified amount of money one person promises to pay another person or to their order.
58.
 
 
A __________ is a written promise to pay a specified amount of money, usually with interest, either on demand or at a definite future date.
59.
 
 
__________ refers to the expected proceeds from converting an asset into cash.
60.
 
 
__________ are recorded by increasing (debiting) Accounts Receivable.
 

1.
An accounts receivable ledger: (Check all that apply.)
 
 
2.
Acel Co. uses the allowance method to account for bad debts. Early in 2010, Acel determined that it could not collect $400 from CTR Inc. and wrote the balance off. On October 21, Acel received a check for $400 from CTR. The entries to record the receipt of cash on October 21 would include a debit to:
 
 
3.
The advantages of using the allowance method to account for bad debts include which of the following:
 
 
6.
A. Stine Co. previously wrote off a $200 bad debt from Thorn Co. using the direct write-off method. On October 1, Stine unexpectedly receives a check in the amount of $200 from Thorn Co. The entry to record this receipt of $200 will include a:
 
 
7.
Avia Company determines that a customer balance of $400 from Allia, Inc. is collectible. Avia uses the allowance method to account for bad debits. The entry to write off the uncollectible balance will include a debit to:
 
 
8.
Companies allow customers to pay for products using third-party credit cards because:
 
 
9.
A company sells merchandise to a customer on credit. The journal entry that the company makes to record this sale would include a (debit/credit)        to the sales account.
 
 
10.
A company sells merchandise to a customer on credit. The journal entry to record this transaction would include a debit entry to the Accounts _______ account:
 
 
11.
The _______ constraint permits the use of the direct write-off method when bad debts expenses are very small in relation to a company's other financial statement items, such as sales and net income:
 
 
13.
The expected proceeds from accounts receivable, determined by taking accounts receivable less the allowance for doubtful accounts, is called:
 
 
14.
Gideon Company uses the allowance method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $2,000 uncollectible account of its customer, A. Hopkins. On July 10, Gideon received a check for the full amount of $2,000 from Hopkins. On July 10, the entry or entries Gideon makes to record the recovery of the bad debts are:
 
 
15.
In August, John's Co.'s account receivable balance was written off using the direct method. In November, Johns pays the balance in full. The journal entry to record the reinstatement of the account receivable must include a credit to the _________ ________ _________ account before recording a debit to the cash account:
 
 
17.
JD Co. had $1,000 of credit cards sales. The net cash receipts were deposited immediately into Whitlock's bank account less a 3% fee. The entry to record this sales transaction would include the following debit entries:
 
 
18.
Lani Co. uses the allowance method to account for bad debts. At the end of 2010, their unadjusted trial balance shows an accounts receivable balance of $400,000; allowance for doubtful accounts balance of $400 (debit); and sales of $1,200,000. Based on history, Lani estimates that bad debts will be 1% of accounts receivable. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of:
 
 
20.
The _______ method, also referred to as balance sheet method, uses balance sheet relations to estimate bad debts- mainly, the relationship between accounts receivable and the allowance account:
 
 
21.
The ________ method of account for bad debts matches the estimated loss from uncollectible accounts receivables against the sales they helped produce:
 
 
23.
The __________ method of estimating allowance for doubtful accounts is based on the idea that a given percent of a company's credit sales for the period are uncollectible:
 
 
 
 
 
 
 
 
 
 
 
 
 

24.
The _______ method of estimating bad debts uses both past and current receivables information to estimate the allowance amount. Specifically, each receivable is classified by how long it is past its due date:
 
 
25.
On December 31, Lee Company estimates that $1,000 of its accounts receivable balance is uncollectible. Lee Company uses the allowance method to account for bad debts. The adjusting entry to record this estimate will include a credit to:
 
 
27.
On July 10, Yao Co. collects $740 from Ean, Inc. from a prior credit sale. This entry would be recorded by Yao with a:
 
 
28.
On October 17 of the current year, a company determined that a customer's account receivable was uncollectible and that the account should be written off. Assuming the allowance method is used to account for bad debts, what effect will this write-off have on the company's net income and total assets:
 
 
30.
Simon Co. sold $500 of merchandise on credit cards. The net cash receipts are received 10 days later, less a 2% fee. The entry to record this sales transaction on the date of the sale would include a debit to:
 
 
31.
T/F
The allowance method of account for bad debts records the loss from an uncollectible account receivable when it is determined to be uncollectible. No attempt is made to predict bad debts:
 
 
32.
T/F
The direct write-off method of accounting for bad debts matching the estimated loss from uncollectible accounts receivable against the sales they helped produce:
 
 
34.
Tunes Company determines that a customer balance of $250 from Able Co. is uncollectible. Tunes uses the allowance method to account for bad debts. The entry to write off the uncollectible balance will include a _______ to the Allowance for Doubtful Accounts:
 
 
35.
The two most common receivables are ______ receivables and ______ receivables:
 
 
36.
When a company makes a sale on credit, it records the amount due from the customer in:
 
 
37.
Which of the following is 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:
 
 
38.
Woodstock Co. had $500 of credit cards sales. The net cash receipts were deposited immediately into Woodstock's bank account less a 2% fee. The entry to record this sales transaction would include a credit to:
 
 
 
 
 
 
 
 
 

1.
A 90-day note is signed on October 21. The due date of the note is:
 
2.
Accounts Receivable
 
3.
an accounts receivable ledger:
 
6.
Notes receivable
 
7.
On August 21, Alix company receives a $2,000, 60-day, 6% note form a customer as payment on her account. How much interest will be due on October 20 -- the due date?
 
8.
On July 10, Yao Co. collects $740 from Ean, Inc. from a prior credit sale. This entry would be recorded by Yao with a:
 
9.
On June 30, Nance Company receives a $5,000, 90-day, 4% note from a customer as payment on her account. How many interest will be due on the note's maturity date?
 
 

The two most common receivables are accounts receivables and notes receivables

 

Accounts receivables are amounts due from customers for credit sales

 

Zion company sells merchandise on account to BRC, Inc. in the amount of $1200

 

On July 10, Yao Co. collects $740 from Ean, Inc. from a prior credit sale.

 

Tunes Company determines that a customer balance of $250 from Able Co. is uncollectable. Tunes uses the allowance method to account for bad debts.

 

On January 1, JC Co. accepted a 60-day, 6% note in the amount of $10,000 from a customer. On March 2, the due date of the note, the customer honors the note and pays in full.

 

The direct write-off method of accounting for bad debts records the loss from an uncollectible account receivable when it is determined to be uncollectible. No attempt is made to predict bad debts expense.

 

Yates Co. uses the allowances method to account for bad debts. At the end of the period, Yate’s unadjusted trial balance shows an accounts receivable balance of $10,000; allowance for doubtful accounts balance of $400 (credit); and a sales of $500,000. Based on history, Yates estimates that bad debts will be 1% of sales. Estimated bad debts

 

The aging of receivables method of estimating bad debts uses both past and current receivables information to estimate the allowance amount. Specifically, each receivable is classified by how long it is past its due date.

 

Acel Co. uses the allowance method to account for bad debts. Early in 2010, Acel determined that it could not collect $400 from CTR, Inc. and wrote the balance off. On October 21, Acel received a check for $400 from CTR.

 

Conroy Company uses the allowance method to account for bad debts. During 2010, Conroy determined that a balance of $200 for Alegia Co. was uncollectible and wrote the balance off. The total decrease to net income related to this entry is $0.

 

Companies allow customers to pay for products using third-party credit cards because:

 

The materiality constraint permits the use of the direct write-off method when bad debts expenses are very small in relation to a company’s other financial statement items, such as sales and net income.

 

Companies sometimes convert receivables to cash before they are due. When a company sells its receivables, it is called factoring. When a company uses receivables as collateral for a bank loan, it is called pledging.

 

The accounts receivable method, also referred to as balance sheet method, uses balance sheet relations to estimate bad debts—mainly, the relationship between accounts receivable and the allowance account.

 

The advantages of using the allowance method to account for bad debts includes:

 

When the note’s make is unable or refuses to pay at maturity, the note is considered dishonored.

 

The expected proceeds from accounts receivable, determined by taking accounts receivable less the allowance for doubtful accounts is called realizable value.

 

The percent of sales method of estimating allowance for doubtful accounts is based on the idea that a given percent of a company’s credit sales for the period are uncollectable.

 

The accounts receivable turnover ratio is a measure of both the quality and liquidity of accounts receivable; it indicates how often, on average, receivables are received and collected during the period

 

Similarities in valuing receivables using US GAAP and IFRS:

 

Companies sometimes convert receivables to cash before they are due by selling them or using them as security for a loan to reduce risk of nonpayment and to quickly generate cash.

 

Both US GAAP and IFRS require that companies use the allowance method of accounting for bad debts.