Question 1

On April 5 Donna's Boutique accepted a Visa card for a $600 purchase. Visa charges a 2% service fee. The entry to record this transaction would include a
A) credit to Cash of $588.
B) debit to Cash of $600.
C) debit to Service Charge Expense of $12.
D) credit to Service Charge Expense of $12.

Accepted Answer

The service charge expense of $12 (2% of $600) should be recorded as a debit to Service Charge Expense.

Question 2

The retailer considers Visa and MasterCard sales as
A) cash sales.
B) promissory sales.
C) credit sales.
D) contingent sales.

Accepted Answer

Retailers consider Visa and MasterCard sales as cash sales because the funds are typically deposited into the retailer's account by the card processor within a few days, similar to cash transactions.

Question 3

When customers make purchases with a national credit card, the retailer
A) is responsible for maintaining customer accounts.
B) is not involved in the collection process.
C) absorbs any losses from uncollectible accounts.
D) receives cash equal to the full price of the merchandise sold from the credit card company.

Accepted Answer

When customers make purchases with a national credit card, the retailer is not involved in the collection process. The credit card company handles the collection of payments from customers, relieving the retailer of this responsibility.

Question 4

Determine the interest on the following notes:
(a) $5,000 at 6% for 90 days.
(b) $800 at 9% for 5 months.
(c) $6,000 at 8% for 60 days
(d) $1,600 at 7% for 6 months

Accepted Answer

The answer of Determine the interest on the following notes:
(a)...

Question 5

Gipson Furniture factors $500,000 of receivables to Kwik Factors, Inc. Kwik Factors assesses a 3% service charge on the amount of receivables sold. Gipson Furniture factors its receivables regularly with Kwik Factors. What journal entry does Gipson make when factoring these receivables?

Accepted Answer

The answer of Gipson Furniture factors $500,000 of receivables to...

Question 6

A company regularly sells its receivables to a factor who assesses a 2% service charge on the amount of receivables purchased. Which of the following statements is true for the seller of the receivables?
A) The loss section of the income statement will increase each time receivables are sold.
B) The credit to Accounts Receivable is less than the debit to Cash when the accounts are sold.
C) Selling expenses will increase each time accounts are sold.
D) The other expenses section of the income statement will increase each time accounts are sold.

Accepted Answer

The answer of A company regularly sells its receivables to...

Question 7

A captive finance company refers to
A) a finance company that is owned by individuals who borrow money from the company.
B) finance companies that won't allow early repayment of loans.
C) a company that is wholly owned by another company and provides financing to purchasers of its owner company's goods.
D) any company that issues a major credit card.

Accepted Answer

A captive finance company is a subsidiary of a larger company, usually a manufacturer, that provides financing for the purchase of their products. It is wholly owned by the parent company and is focused specifically on providing financing for their products, as opposed to being a general finance company. Option A refers to a private finance company, option B is a characteristic of some finance companies but not specific to captive finance companies, and option D is too broad and does not accurately describe captive finance companies.

Question 8

Finney had the following transactions during March 2012. 1. Finney sold and delivered $14,000 of merchandise to LJ Enterprises, terms 2/10, n30. 2. LJ Enterprises also ordered an additional $5,000 worth of goods on the last day of the month. 3. Finney lent $1,000 to its company president who promised to repay the loan on the 15^th day of the next month. 4. Finney sold old storage sheds to Alt Traders on 3/31. Alt Traders gave a $2,500 promissory note to Finney agreeing to pay for the sheds in 3 months. 5. Other current assets totaled $50,000. Finney received no cash arising from the above transactions during March. Based only on the above transactions, and ingnoring beginning balances, compute the percentage Accounts Receivable is of the total current assets as of month end.

Accepted Answer

The answer of Finney had the following transactions during March...

Question 9

Prepare journal entries to record the following transactions entered into by the Castagno Company:

Accepted Answer

The answer of Prepare journal entries to record the following...

Question 10

The ledger of the Ramirez Company at the end of the current year shows Accounts Receivable of $200,000. Instructions
(a) If Allowance for Doubtful Accounts has a credit balance of $3,000 in the trial balance and bad debts are expected to be 8% of accounts receivable, journalize the adjusting entry for end of the period. (Show all calculations.)
(b) If Allowance for Doubtful Accounts has a debit balance of $3,000 in the trial balance and bad debts are expected to be 8% of accounts receivable, journalize the adjusting entry for end of the period. (Show all calculations.)

Accepted Answer

The answer of The ledger of the Ramirez Company at...

Question 11

Benson Products uses the allowance method in estimating uncollectible accounts. On December 31, 2014, the balance in Accounts Receivable was $650,000. An aging analysis of the accounts receivable indicated that $29,500 in accounts are expected to be uncollectible.
Prepare the adjusting entry to record estimated bad debts expense using the percentage of receivables basis under each of the following independent assumptions:
(a) Allowance for Doubtful Accounts has a credit balance of $3,000 before adjustment.
(b) Allowance for Doubtful Accounts has a debit balance of $830 before adjustment.

Accepted Answer

The answer of Benson Products uses the allowance method in...

Question 12

Strickman Company uses the allowance method for estimating uncollectible accounts. Prepare journal entries to record the following transactions:

Accepted Answer

The answer of Strickman Company uses the allowance method for...

Question 13

Trent Distributors has the following transactions related to notes receivable during the last two months of the year.
Dec. 1 Loaned $16,000 cash to E. Kinder on a 1-year, 6% note.
16 Sold goods to J. Jones, receiving a $4,800, 60-day, 7% note.
31 Accrued interest revenue on all notes receivable.
Instructions
Journalize the transactions for Trent Distributors.

Accepted Answer

The answer of Trent Distributors has the following transactions related...

Question 14

Merry Co. sells Christmas angels. Merry determines that at the end of December, they have the following aging schedule of Accounts Receivable:  Compute the net receivables based on the above information at the end of December (There was no beginning balance in the Allowance for Doubtful Accounts).

Accepted Answer

The answer of Merry Co. sells Christmas angels. Merry determines...

Question 15

Assuming that the allowance method is being used, prepare general journal entries without explanations to record the following transactions.
January 1  $\quad $Sold merchandise to Mary Baden for $500 on account.
February 1  $\quad $Received $300 from Baden.
July 1  $\quad $ $\quad $Wrote off Baden's account as uncollectible.
September 1 $\quad $ Unexpectedly received payment in full from Baden.

Accepted Answer

The answer of Assuming that the allowance method is being...

Question 16

Receivables might be sold to
A) lengthen the cash-to-cash operating cycle.
B) take advantage of deep discounts on the cash realizable value of receivables.
C) generate cash quickly.
D) finance companies at an amount greater than cash realizable value.

Accepted Answer

Receivables may be sold to generate cash quickly. This allows a company to obtain immediate cash by selling its receivables to a third party, instead of waiting for customers to pay their debts. This can be helpful for improving cash flow and funding operations. Option A is incorrect as this would have the opposite effect, as lengthening the cash-to-cash operating cycle means it would take longer to convert inventory into cash. Option B is incorrect, as deep discounts on receivables would not be advantageous for the seller. Option D is incorrect, as selling receivables for an amount greater than their cash realizable value would be highly unlikely.

Question 17

The following are sales of The Holiday Store during February. The Store sells seasonal holiday items.
2/3 Sold 50 heart balloons for $5 cash each.
2/8 Sold 100 boxes of chocolates at $10 each, terms 2/10, n/30. Collected within the discount period.
2/10 Sold 50 heart necklaces for $25 each with no discount. Have not collected as of month end.
2/14 Sold 100 bouquets of roses at $30 per bouquet. Half the sales were on account. By month end, 75% of the credit sales were collected.
2/27 Sold 20 leftover heart necklaces to a discount store for $15 each on credit.
2/28 Sold a display cabinet at a swap meet for $100 on account.
Determine the balance in Accounts Receivable at 2/28.

Accepted Answer

The answer of The following are sales of The Holiday...

Question 18

If a company sells its accounts receivables to a factor
A) the seller pays a commission to the factor.
B) the factor pays a commission to the seller.
C) there is a gain on the sale of the receivables.
D) the seller defers recognition of sales revenue until the account is collected.

Accepted Answer

When a company sells its accounts receivables to a factor, the seller typically pays a commission to the factor for this service. The factor then takes on the responsibility of collecting the receivables.

Question 19

Compute the maturity value as indicated for each of the following notes receivable.
1. A $9,000, 6%, 3-month note dated July 20.
Maturity value $____________.
2. A $16,000, 9%, 150-day note dated August 5.
Maturity value $____________.

Accepted Answer

The answer of Compute the maturity value as indicated for...

Question 20

Schofield Retailers accepted $60,000 of Silver Bank MasterCard credit card charges for merchandise sold on August 1. Silver Bank charges 4% for its credit card use. The entry to record this transaction by Schofield Retailers will include a credit to Sales Revenue of $60,000 and a debit(s) to
A) Cash for $57,600 and Service Charge Expense for $2,400.
B) Accounts receivable for $57,600 and Service Charge Expense for $2,400.
C) Cash for $60,000.
D) Accounts Receivable for $60,000.

Accepted Answer

Schofield Retailers will receive $57,600 in cash after the 4% service charge ($2,400) is deducted by Silver Bank. Therefore, the entry will debit Cash for $57,600 and Service Charge Expense for $2,400.

Quiz 8: Reporting and Analyzing Receivables

On April 5 Donna's Boutique accepted a Visa card for a $600 purchase. Visa charges a 2% service fee. The entry to record this transaction would include a

The retailer considers Visa and MasterCard sales as

When customers make purchases with a national credit card, the retailer

Determine the interest on the following notes: (a) $5,000 at 6% for 90 days. (b) $800 at 9% for 5 months. (c) $6,000 at 8% for 60 days (d) $1,600 at 7% for 6 months

Gipson Furniture factors $500,000 of receivables to Kwik Factors, Inc. Kwik Factors assesses a 3% service charge on the amount of receivables sold. Gipson Furniture factors its receivables regularly with Kwik Factors. What journal entry does Gipson make when factoring these receivables?

A company regularly sells its receivables to a factor who assesses a 2% service charge on the amount of receivables purchased. Which of the following statements is true for the seller of the receivables?

A captive finance company refers to

Prepare journal entries to record the following transactions entered into by the Castagno Company:

Strickman Company uses the allowance method for estimating uncollectible accounts. Prepare journal entries to record the following transactions:

Merry Co. sells Christmas angels. Merry determines that at the end of December, they have the following aging schedule of Accounts Receivable: Compute the net receivables based on the above information at the end of December (There was no beginning balance in the Allowance for Doubtful Accounts).

Receivables might be sold to

If a company sells its accounts receivables to a factor

Compute the maturity value as indicated for each of the following notes receivable. 1. A $9,000, 6%, 3-month note dated July 20. Maturity value $. 2. A $16,000, 9%, 150-day note dated August 5. Maturity value $.

Schofield Retailers accepted $60,000 of Silver Bank MasterCard credit card charges for merchandise sold on August 1. Silver Bank charges 4% for its credit card use. The entry to record this transaction by Schofield Retailers will include a credit to Sales Revenue of $60,000 and a debit(s) to

Quiz 8: Reporting and Analyzing Receivables

On April 5 Donna's Boutique accepted a Visa card for a $600 purchase. Visa charges a 2% service fee. The entry to record this transaction would include a

The retailer considers Visa and MasterCard sales as

When customers make purchases with a national credit card, the retailer

Determine the interest on the following notes: (a) $5,000 at 6% for 90 days. (b) $800 at 9% for 5 months. (c) $6,000 at 8% for 60 days (d) $1,600 at 7% for 6 months

Gipson Furniture factors $500,000 of receivables to Kwik Factors, Inc. Kwik Factors assesses a 3% service charge on the amount of receivables sold. Gipson Furniture factors its receivables regularly with Kwik Factors. What journal entry does Gipson make when factoring these receivables?

A company regularly sells its receivables to a factor who assesses a 2% service charge on the amount of receivables purchased. Which of the following statements is true for the seller of the receivables?

A captive finance company refers to

Prepare journal entries to record the following transactions entered into by the Castagno Company:

Strickman Company uses the allowance method for estimating uncollectible accounts. Prepare journal entries to record the following transactions:

Merry Co. sells Christmas angels. Merry determines that at the end of December, they have the following aging schedule of Accounts Receivable: Compute the net receivables based on the above information at the end of December (There was no beginning balance in the Allowance for Doubtful Accounts).

Receivables might be sold to

If a company sells its accounts receivables to a factor

Compute the maturity value as indicated for each of the following notes receivable. 1. A $9,000, 6%, 3-month note dated July 20. Maturity value $____________. 2. A $16,000, 9%, 150-day note dated August 5. Maturity value $____________.

Schofield Retailers accepted $60,000 of Silver Bank MasterCard credit card charges for merchandise sold on August 1. Silver Bank charges 4% for its credit card use. The entry to record this transaction by Schofield Retailers will include a credit to Sales Revenue of $60,000 and a debit(s) to

Compute the maturity value as indicated for each of the following notes receivable. 1. A $9,000, 6%, 3-month note dated July 20. Maturity value $. 2. A $16,000, 9%, 150-day note dated August 5. Maturity value $.