Deck 9: Accounting for Receivables

Question 1

A promissory note:

A)Is a short-term investment for the maker.
B)Is a written promise to pay a specified amount of money at a certain date.
C)Is a liability to the payee.
D)Is another name for an installment receivable.
E)Cannot be used in payment of an account receivable.

Answer 1

B

Question 2

The person who signs a note receivable and promises to pay the principal and interest is the:

A)Maker.
B)Payee.
C)Holder.
D)Receiver.
E)Owner.

Answer 2

A

Question 3

Sellers allow customers to use credit cards for all of the following reasons except:

A)To be able to charge more due to fees and interest.
B)To lessen the risk of extending credit to customers who cannot pay.
C)To speed up receipt of cash from the credit sale.
D)To increase total sales volume.
E)To avoid having to evaluate a customer's credit standing for each sale.

Answer 3

A

Question 4

The quality of receivables refers to:

A)The creditworthiness of sellers.
B)The speed of collection.
C)The likelihood of collection without loss.
D)Sales turnover.
E)The interest rate.

Question 5

Reporting the details of notes is consistent with which accounting principle that requires financial statements (including footnotes)to report all relevant information?

A)Relevance.
B)Full disclosure.
C)Evaluation.
D)Materiality.
E)Matching.

Question 6

A company borrowed $10,000 by signing a 180-day promissory note at 9%.The total interest due on the maturity date is.

A)$900
B)$75
C)$450
D)$300
E)$1,800

Question 7

A company factored $45,000 of its accounts receivable and was charged a 4% factoring fee.The journal entry to record this transaction would include a:

A)Debit to Cash of $45,000,a debit to Factoring Fee Expense of $1,800,and a credit to Accounts Receivable of $46,800.
B)Debit to Cash of $45,000 and a credit to Accounts Receivable of $45,000.
C)Debit to Cash of $43,200,a debit to Factoring Fee Expense of $1,800,and a credit to Accounts Receivable of $45,000.
D)Debit to Cash of $46,800 and a credit to Accounts Receivable of $46,800.
E)Debit to Cash of $45,000 and a credit to Notes Payable of $45,000.

Question 8

A 90-day note issued on April 10 matures on:

A)July 9.
B)July 10.
C)July 11.
D)July 12.
E)July 13.

Question 9

A company receives a 10%,120-day note for $1,500.The total interest due on the maturity date is:

A)$50.00.
B)$150.00.
C)$75.00.
D)$37.50.
E)$87.50.

Question 10

Which of the following is not true regarding a credit card expense?

A)Credit card expense may be classified as a "discount" deducted from sales to get net sales.
B)Credit card expense may be classified as a selling expense.
C)Credit card expense may be classified as an administrative expense.
D)Credit card expense is not recorded by the seller.
E)Credit card expense is a fee the seller pays for services provided by the card company.

Question 11

The account receivable turnover measures:

A)How long it takes to sell accounts receivable to a factor.
B)How often,on average,receivables are received and collected during the period.
C)The relation of cash sales to credit sales.
D)How long it takes to sell merchandise inventory.
E)All of the options are correct.

Question 12

A company borrowed $10,000 by signing a 180-day promissory note at 9%.The maturity value of the note is:

A)$10,450
B)$10,900
C)$10,075
D)$11,800
E)$10,300

Question 13

The maturity date of a note receivable:

A)Is the day of the credit sale.
B)Is the day the note was signed.
C)Is the day the note is due to be repaid.
D)Is the date of the first payment.
E)Is the last day of the month.

Question 14

Factoring receivables is beneficial to a seller for all of the following reasons except:

A)Allows firms to receive cash earlier.
B)Passes ownership of the receivables to the factor.
C)There are no fees for factoring.
D)Seller avoids the cost of billing and accounting for receivables.
E)May transfer the risk of bad debts to the factor.

Question 15

A promissory note received from a customer in exchange for an account receivable is recorded by the payee as:

A)A cash equivalent.
B)An account receivable.
C)A note receivable.
D)A short-term investment.
E)A note payable.

Question 16

The accounts receivable turnover is calculated by:

A)Dividing net sales by average accounts receivable.
B)Dividing net sales by average accounts receivable and multiplying by 365.
C)Dividing average accounts receivable by net sales.
D)Dividing average accounts receivable by net sales and multiplying by 365.
E)Dividing net income by average accounts receivable.

Question 17

A finance company or bank that purchases and takes ownership of another company's accounts receivable is called a:

A)Payer.
B)Pledger.
C)Factor.
D)Payee.
E)Pledgee.

Question 18

The interest accrued on $7,500 at 6% for 90 days is:

A)$450.00.
B)$37.50.
C)$112.50.
D)$11.25.
E)$1,800.00.

Question 19

A credit sale of $5,275 to a customer would result in which of the following?

A)A debit to the Accounts Receivable account in the general ledger and a debit to the customer's account in the accounts receivable subsidiary ledger.
B)A credit to the Accounts Receivable account in the general ledger and a credit to the customer's account in the accounts receivable subsidiary ledger.
C)A debit to the Accounts Receivable account in the general ledger and a credit to the customer's account in the accounts receivable subsidiary ledger.
D)A credit to the Accounts Receivable account in the general ledger and a debit to the customer's account in the accounts receivable subsidiary ledger.
E)A credit to Sales and a credit to the customer's account in the accounts receivable subsidiary ledger.

Question 20

Separate accounts receivable information for each customer is important because it reveals all of the following except:

A)How much each customer has purchased on credit.
B)How much each customer has paid.
C)How much each customer still owes.
D)The basis for sending bills to customers.
E)When the customer intends to pay outstanding balances.

Question 21

The materiality constraint,as applied to bad debts:

A)Permits the use of the direct write-off method when bad debts expenses are relatively small.
B)Requires use of the allowance method for bad debts.
C)Requires use of the direct write-off method.
D)Requires that bad debts not be written off.
E)Requires that expenses be reported in the same period as the sales they helped produce.

Question 22

Jasper makes a $25,000,90-day,7% cash loan to Clayborn Co.The amount of interest that Jasper will collect on the loan is:

A)$1,750.
B)$145.83.
C)$437.50.
D)$19.44.
E)$875.00.

Question 23

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

A)Direct write-off method.
B)Aging of accounts receivable method.
C)Percentage of sales method.
D)Aging of investments method.
E)Percent of accounts receivable method.

Question 24

A company has net sales of $1,200,000 and average accounts receivable of $400,000.What is its accounts receivable turnover for the period?

A)0.20
B)5.00
C)20.0
D)73.0
E)3.0

Question 25

A company has $90,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts.Experience suggests that 4% of outstanding receivables are uncollectible.The current balance (before adjustments)in the allowance for doubtful accounts is an $800 debit.The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for:

A)$3,600
B)$3,568
C)$3,632
D)$2,800
E)$4,400

Question 26

On December 31 of the current year,the unadjusted trial balance of a company using the percent of receivables method to estimate bad debt included the following: Accounts Receivable,debit balance of $95,250;Allowance for Doubtful Accounts,credit balance of $921.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?

A)$5,715.
B)$6,636.
C)$4,794.
D)$5,770.
E)$5,660.

Question 27

A company had net sales of $600,000,total sales of $750,000,and an average accounts receivable of $75,000.Its accounts receivable turnover equals:

A).13
B).80
C)7.75
D)8.00
E)10.00

Question 28

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

A)The percent of sales method.
B)The percent of accounts receivable method.
C)The aging of accounts receivable method.
D)Direct write-off method.
E)Factoring method.

Question 29

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 that 0.6% of credit sales are uncollectible.What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

A)$1,275
B)$1,775
C)$4,500
D)$4,800
E)$5,500

Question 30

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 $375.What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

A)
B)
C)
D)

Question 31

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?

A)Debit Bad Debts Expense $2,130;credit Allowance for Doubtful Accounts $2,130.
B)Debit Bad Debts Expense $2,630;credit Allowance for Doubtful Accounts $2,630.
C)Debit Bad Debts Expense $4,300;credit Allowance for Doubtful Accounts $4,300.
D)Debit Bad Debts Expense $4,800;credit Allowance for Doubtful Accounts $4,800.
E)Debit Bad Debts Expense $5,300;credit Allowance for Doubtful Accounts $5,300.

Question 32

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?

A)Decrease in net income;no effect on total assets.
B)No effect on net income;no effect on total assets.
C)Decrease in net income;decrease in total assets.
D)Increase in net income;no effect on total assets.
E)No effect on net income;decrease in total assets.

Question 33

If the credit balance of the Allowance for Doubtful Accounts account exceeds the amount of a bad debt being written off,the entry to record the write-off against the allowance account results in:

A)An increase in the expenses of the current period.
B)A reduction in current assets.
C)A reduction in equity.
D)No effect on the expenses of the current period.
E)A reduction in current liabilities.

Question 34

Axle Co.'s accounts receivable turnover was 9.9 for this year and 11.0 for last year.Betterman's turnover was 9.3 for this year and 9.3 for last year.These results imply that:

A)Betterman has the better turnover for both years.
B)Axle has the better turnover for both years.
C)Betterman's turnover is improving.
D)Axle's credit policies are too loose.
E)Betterman is collecting its receivables more quickly than Axle in both years.

Question 35

Jasper makes a $25,000,90-day,7% cash loan to Clayborn Co.Jasper's entry to record the collection of the note and interest at maturity should be:

A)Debit Cash for $25,000;credit Notes Receivable $25,000.
B)Debit Cash $25,437.50;credit Interest Revenue $437.50;credit Notes Receivable $25,000.
C)Debit Cash $25,437.50;credit Notes Receivable for $25,437.50.
D)Debit Notes Payable $25,000;Debit Interest Expense $1,750;credit Cash $26,750.
E)Debit Cash $26,750;credit Interest Revenue $1,750,credit Notes Receivable $25,000.

Question 36

Pepperdine reported net sales of $8,600 million,net income of $126 million and average accounts receivable of $890 million.Its accounts receivable turnover is:

A)37.8.
B)9.7.
C)68.3.
D)7.1.
E)51.7.

Question 37

Lemming makes an $18,750,120-day,8% cash loan to Notions Co.on November 2.Lemming's end-of-period adjusting entry on December 31 should be:

A)Debit Cash for $250;credit Notes Receivable $250.
B)Debit Interest Revenue $500;credit Notes Receivable $500.
C)Debit Interest Receivable $250;credit Interest Revenue $250.
D)Debit Interest Receivable $500;credit Interest Revenue $500.
E)Debit Notes Receivable $500;credit Interest Revenue $500.

Question 38

Jasper makes a $25,000,90-day,7% cash loan to Clayborn Co.Jasper's entry to record the transaction should be:

A)Debit Notes Receivable for $25,000;credit Cash $25,000.
B)Debit Accounts Receivable $25,000;credit Notes Receivable $25,000.
C)Debit Cash $25,000;credit Notes Receivable for $25,000.
D)Debit Notes Payable $25,000;credit Accounts Payable $25,000.
E)Debit Notes Receivable $25,000;credit Sales $25,000.

Question 39

A company had total sales of $600,000,net sales of $550,000,and an average accounts receivable of $95,000.Its accounts receivable turnover equals:

A)6.1
B)63.0
C)54.8
D)1.1
E)6.3

Question 40

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?

A)Allowance method of accounting for bad debts.
B)Aging of notes receivable.
C)Adjustment method for uncollectible debts.
D)Direct write-off method of accounting for bad debts.
E)Cash basis method of accounting for bad debts.

Question 41

Brinker accepts all major bank credit cards,including First Savings Bank's,which assesses a 2.5% charge on sales for using its card.On May 26,Brinker had $4,800 in First Savings Bank Card credit sales.What entry should Brinker make on May 26 to record the deposit?

A)Debit Accounts Receivable $4,800;credit Sales $4,800.
B)Debit Cash $4,680;debit Credit Card Expense $120;credit Sales $4,800.
C)Debit Cash $4,800;credit Sales $4,800.
D)Debit Cash $4,920;credit Credit Card Expense $120;credit Sales $4,800.
E)Debit Accounts Receivable $4,680;debit Credit Card Expense $120;credit Sales $4,800.

Question 42

Valley Spa purchased $7,800 in plumbing components from Tubman Co.Valley Spa Studios signed a 60-day,10% promissory note for $7,800.If the note is dishonored,what is the journal entry to record the dishonored note?

A)Debit Accounts Receivable $7,930;debit Bad Debt Expense $130;credit Notes Receivable $7,800.
B)Debit Bad Debt Expense $7,930;credit Accounts Receivable $7,930.
C)Debit Bad Debt Expense $7,800;credit Notes Receivable $7,800.
D)Debit Accounts Receivable-Valley Spa $7,800;credit Notes Receivable $7,800.
E)Debit Accounts Receivable-Valley Spa $7,930,credit Interest Revenue $130;credit Notes Receivable $7,800.

Question 43

Uniform Supply accepted a $4,800,90-day,10% note from Tracy Janitorial on October 17.What entry should Uniform Supply make on December 31,to record the accrued interest on the note?

A)Debit Cash $20;credit Notes Receivable $20.
B)Debit Cash $100;credit Notes Receivable $100.
C)Debit Interest Receivable $20;credit Interest Revenue $20.
D)Debit Interest Receivable $100;credit Interest Revenue $100.
E)Debit Cash $120;credit Interest Revenue $100;credit Interest Receivable $20.

Question 44

On July 9,Mifflin Company receives a $8,500,90-day,8% note from customer Payton Summers as payment on account.Compute the maturity date for the note.

A)October 8
B)October 7
C)November 8
D)November 7
E)November 6

Question 45

Which of the following is not true about the Allowance for Doubtful Accounts?

A)It is a contra asset account.
B)It is used instead of reducing accounts receivable directly.
C)It is debited when uncollectible accounts are written off.
D)It is a liability account.
E)It is credited when bad debts expense is estimated and recorded.

Question 46

Craigmont uses the allowance method to account for uncollectible accounts.Its year-end unadjusted trial balance shows Accounts Receivable of $104,500,allowance for doubtful accounts of $665 (credit)and sales of $925,000.If uncollectible accounts are estimated to be 0.5% of sales,what is the amount of the bad debts expense adjusting entry?

A)$4,625
B)$3,960
C)$5,290
D)$4,750
E)$4,825

Question 47

Giorgio Italian Market bought $4,000 worth of merchandise from Food Suppliers and signed a 90-day,6% promissory note for the $4,000.Food Supplier's journal entry to record the sales transaction is:

A)Debit Accounts Receivable $4,000;credit Sales $4,000
B)Debit Notes Receivable $4,000;credit Sales $4,000
C)Debit Accounts Receivable $4,060;credit Sales $4,060
D)Debit Notes Receivable $4,060;credit Sales $4,060
E)Debit Notes Receivable $4,000;debit Interest Receivable $60;credit Sales $4,060

Question 48

Jervis sells $75,000 of its accounts receivable to Northern Bank in order to obtain necessary cash.Northern Bank charges a 5% factoring fee.What entry should Jervis make on to record the transaction?

A)Debit Cash $71,250;debit Factoring Fee Expense $3,750;credit Accounts Receivable $75,000
B)Debit Accounts Receivable $71,250;debit Factoring Fee Expense $3,750;credit Cash $75,000
C)Debit Cash $75,000;credit Factoring Fee Expense $3,750;credit Accounts Receivable $75,000
D)Debit Cash $71,250;credit Accounts Receivable $71,250
E)Debit Accounts Receivable $75,000;credit Factoring Fee Expense $3,750;credit Cash $71,250

Question 49

Jax Recording Studio purchased $7,800 in electronic components from Music World.Jax signed a 60-day,8% promissory note for $7,800.Music World's journal entry to record the collection on the maturity date is:

A)Debit Cash $7,800;credit Accounts Receivable $7,800
B)Debit Accounts Receivable $7,904;credit Notes Receivable $7,800;credit Interest Receivable $104
C)Debit Notes Receivable $7,800;credit Cash $7,904;credit Interest Revenue $104
D)Debit Cash $7,904;credit Notes Receivable $7,800;credit Interest Revenue $104
E)Debit Cash $7,904;credit Notes Receivable $7,904

Question 50

Craigmont uses the allowance method to account for uncollectible accounts.Its year-end unadjusted trial balance shows Accounts Receivable of $104,500,allowance for doubtful accounts of $665 (credit)and sales of $925,000.If uncollectible accounts are estimated to be 4% of accounts receivable,what is the amount of the bad debts expense adjusting entry?

A)$4,845
B)$4,180
C)$3,515
D)$3,700
E)$3,850

Question 51

Jervis accepts all major bank credit cards,including those issued by Northern Bank (NB),which assesses a 3% charge on sales for using its card.On June 28,Jervis had $3,500 in NB Card credit sales.What entry should Jervis make on June 28 to record the deposit?

A)Debit Cash $3,500;credit Sales $3,500
B)Debit Accounts Receivable $3,500;credit Sales $3,500
C)Debit Cash $3,605;credit Credit Card Expense $105;credit Sales $3,500
D)Debit Cash $3,395;debit Credit Card Expense $105;credit Sales $3,500
E)Debit Accounts Receivable $3,395;debit Credit Card Expense $105;credit Sales $3,500

Question 52

Honoring a note receivable indicates that the maker has:

A)Signed.
B)Paid in full.
C)Guaranteed.
D)Notarized.
E)Cosigned.

Question 53

Uniform Supply accepted a $4,800,90-day,10% note from Tracy Janitorial on October 17.If the note is dishonored,what entry should Uniform Supply make on January 15 of the next year?

A)Debit Notes Receivable $4,800;debit Interest Receivable $120;credit Sales $4,920.
B)Debit Cash $4,920;credit Notes Receivable $4,920.
C)Debit Cash $4,920;credit Interest Revenue $100;credit Interest Receivable $20,credit Notes Receivable $4,800.
D)Debit Cash $4,920;credit Interest Revenue $20;credit Interest Receivable $100,credit Notes Receivable $4,800.
E)Debit Accounts Receivable $4,920;credit Interest Revenue $20;credit Interest Receivable $100,credit Notes Receivable $4,800.

Question 54

The amount due on the maturity date of a $6,000,60-day 4%,note receivable is:

A)$6,000.
B)$6,240.
C)$5,760.
D)$6,040.
E)$5,960.

Question 55

Uniform Supply accepted a $4,800,90-day,10% note from Tracy Janitorial on October 17.What entry should Uniform Supply make on January 15 of the next year when the note is paid?

A)Debit Notes Receivable $4,800;debit Interest Receivable $120;credit Sales $4,920.
B)Debit Cash $4,920;credit Notes Receivable $4,920.
C)Debit Cash $4,920;credit Interest Revenue $100;credit Interest Receivable $20;credit Notes Receivable $4,800.
D)Debit Cash $4,920;credit Interest Revenue $20;credit Interest Receivable $100;credit Notes Receivable $4,800.
E)Debit Cash $4,920;credit Interest Revenue $120;credit Notes Receivable $4,800.

Question 56

On July 9,Mifflin Company receives a $8,500,90-day,8% note from customer Payton Summers as payment on account.Compute the amount due at maturity for the note.

A)$8,628
B)$8,192
C)$8,613
D)$8,500
E)$8,670

Question 57

Valley Spa purchased $7,800 in plumbing components from Tubman Co.Valley Spa Studios signed a 60-day,10% promissory note for $7,800.If the note is dishonored,what is the amount due on the note?

A)$130
B)$7,800
C)$7,930
D)$8,050
E)$8,130

Question 58

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

A)Protesting a note.
B)Closing a note.
C)Dishonoring a note.
D)Discounting a note.
E)Depreciating a note.

Question 59

Giorgio Italian Market bought $4,000 worth of merchandise from Food Suppliers and signed a 90-day,6% promissory note for the $4,000.Food Supplier's journal entry to record the collection on the maturity date is:

A)Debit Cash $4,060;credit Notes Receivable $4,060
B)Debit Notes Receivable $4,000;credit Cash $4,000
C)Debit Cash $4,000;debit Interest Receivable $60;credit Sales $4,000
D)Debit Notes Receivable $4,060;credit Sales $4,060
E)Debit Cash $4,060;credit Interest Revenue $60;credit Notes Receivable $4,000

Question 60

Jax Recording Studio purchased $7,800 in electronic components from Music World.Jax signed a 60-day,8% promissory note for $7,800.Music World's journal entry to record the sales transaction is:

A)Debit Accounts Receivable $7,800;credit Sales $7,800
B)Debit Accounts Receivable $7,904;credit Sales $7,904
C)Debit Notes Receivable $7,800;credit Sales $7,800
D)Debit Notes Receivable $7,904;credit Sales $7,904
E)Debit Notes Receivable $7,800;debit Interest Receivable $104;credit Sales $7,904

Question 61

On February 1,a customer's account balance of $2,300 was deemed to be uncollectible.What entry should be recorded on February 1 to record the write-off assuming the company uses the allowance method?

A)Debit Bad Debts Expense $2,300;credit Accounts Receivable $2,300.
B)Debit Allowance for Doubtful Accounts $2,300;credit Bad Debts Expense $2,300.
C)Debit Allowance for Doubtful Accounts $2,300;credit Accounts Receivable $2,300.
D)Debit Bad Debts Expense $2,300;credit Allowance for Doubtful Accounts $2,300.
E)Debit Accounts Receivable $250;credit Allowance for Doubtful Accounts $2,300.

Question 62

MacKenzie Company sold $300 of merchandise to a customer who used a Regional Bank credit card.Regional Bank deducts a 1.5% service charge for sales on its credit cards and credits MacKenzie's account immediately when sales are made.The journal entry to record this sale transaction would be:

A)Debit Cash of $300 and credit Sales $300.
B)Debit Cash of $300 and credit Accounts Receivable $300.
C)Debit Accounts Receivable $300 and credit Sales $300.
D)Debit Cash $295.50;debit Credit Card Expense $4.50 and credit Sales $300.
E)Debit Cash $295.50 and credit Sales $295.50.

Question 63

MacKenzie Company sold $180 of merchandise to a customer who used a Regional Bank credit card.Regional Bank deducts a 4% service charge for sales on its credit cards.MacKenzie electronically remits the credit card sales receipts to the credit card company and receives payment in approximately 5 days.The journal entry to record this sale transaction would be:

A)Debit Cash of $180 and credit Sales $180.
B)Debit Cash of $180 and credit Accounts Receivable-Regional $180.
C)Debit Accounts Receivable-Regional $172.80;debit Credit Card Expense $7.20 and credit Sales $180.
D)Debit Cash $172.80;debit Credit Card Expense $7.20 and credit Sales $180.
E)Debit Cash $172.80 and credit Sales $172.80.

Question 64

Gemstone Products allows customers to use bank credit cards to charge purchases.The bank used by Gemstone Products processes all bank credit cards in exchange for a 3% processing fee and all credit card receipts deposited are credited to the company account on the day of deposit.Assume that on January 18,Gemstone Products sold and deposited $18,000 worth of bank credit card receipts.Prepare the general journal entry to record this transaction.

Question 65

On July 9,Mifflin Company receives a $8,500,90-day,8% note from customer Payton Summers as payment on account.What entry should be made on the maturity date assuming the maker pays in full?

A)Debit Notes Receivable $8,500;debit Interest Receivable $170;credit Sales $8,670.
B)Debit Cash $8,670;credit Interest Revenue $170;credit Notes Receivable $8,500.
C)Debit Cash $8,628;credit Interest Revenue $128;credit Notes Receivable $8,500.
D)Debit Cash $8,613;credit Interest Revenue $113;credit Notes Receivable $8,500.
E)Debit Cash $8 500;credit Notes Receivable $8,500.

Question 66

A company allows its customers to use bank credit cards to charge purchases.When customers use the credit cards,the net amount is deposited in the company's checking account,less a 2.5% service charge.Assume that on April 13,the company sold $20,000 worth of merchandise to customers who used credit cards.Prepare the company's journal entry to record the credit card sales for April 13 assuming the company deposited the receipts that same day.

Question 67

Mullis Company sold merchandise on account to a customer for $625,terms n/30.The journal entry to record the collection on account would be:

A)Debit Cash of $625 and credit Sales $625.
B)Debit Cash of $625 and credit Accounts Receivable $625.
C)Debit Accounts Receivable $625 and credit Sales $625.
D)Debit Accounts Receivable $625 and credit Cash $625.
E)Debit Sales $625 and credit Accounts Receivable $625.

Question 68

Majesty Productions accepted a $7,200,120-day,6% note from Swartz Studio on March 1.On the date the note matures,Swartz is unable to pay,but Majesty intends to continue collection efforts.What entry should Majesty record on the maturity date for this dishonored note?

A)Debit Accounts Receivable $7,200;credit Notes Receivable $7,200.
B)Debit Accounts Receivable $7,200;credit Allowance for Doubtful Accounts $7,200.
C)Debit Bad Debt Expense $7,344;credit Notes Receivable $7,344.
D)Debit Accounts Receivable $7,344;credit Interest Revenue $144;credit Notes Receivable $7,200.
E)Debit Accounts Receivable $7,056;debit Interest Revenue $144;credit Notes Receivable $7,200.

Question 69

Winkler Company borrows $85,000 and pledges its receivables as security.The journal entry to record this transaction would be:

A)Debit Cash of $85,000 and credit Accounts Receivable $85,000.
B)Debit Cash of $85,000 and credit Accounts Payable $85,000.
C)Debit Note Receivable $85,000 and credit Accounts Receivable $85,000.
D)Debit Cash $85,000 and credit Notes Payable $85,000.
E)Debit Accounts Receivable $85,000 and credit Notes Payable $85,000.

Question 70

All of the following statements regarding recognition of receivables under U.S.GAAP and IFRS are true except:

A)U.S.GAAP and IFRS have similar asset criteria that apply to recognition of receivables.
B)Receivables that arise from revenue-generating activities are subject to broadly similar criteria for U.S.GAAP and IFRS.
C)The realization principle under GAAP implies an arm's length transaction occurs.
D)GAAP refers to the earnings process and IFRS refers to risk transfer and ownership reward.
E)Differences arise mainly from industry-specific guidance under U.S.GAAP.

Question 71

Frederick Company borrows $63,000 from First City Bank and pledges its receivables as security.Which of the following is true regarding this transaction:

A)First City Bank is the factor in this transaction.
B)Frederick Company's financial statements must disclose the pledging of receivables.
C)Frederick Company no longer has the risk of bad debts.
D)First City Bank takes ownership of the receivables at the time of the pledge.
E)No journal entry is required for this event.

Question 72

On November 19,Nicholson Company receives a $15,000,60-day,8% note from a customer as payment on account.What adjusting entry should be made on the December 31 year-end?

A)Debit Interest Receivable $1,200;credit Interest Revenue $1,200.
B)Debit Interest Receivable $140;credit Interest Revenue $140.
C)Debit Interest Receivable $200;credit Interest Revenue $200.
D)Debit Interest Revenue $140;credit Interest Receivable $140.
E)Debit Interest Revenue $200;credit Interest Receivable $200.

Question 73

Mullis Company sold merchandise on account to a customer for $625,terms n/30.The journal entry to record this sale transaction would be:

A)Debit Cash of $625 and credit Sales $625.
B)Debit Cash of $625 and credit Accounts Receivable $625.
C)Debit Accounts Receivable $625 and credit Sales $625.
D)Debit Accounts Receivable $625 and credit Cash $625.
E)Debit Sales $625 and credit Accounts Receivable $625.

Question 74

Under IFRS,the term provision:

A)Refers to expense.
B)Usually refers to a liability whose amount or timing is uncertain.
C)Means establishing a provision for bad debts.
D)Means establishing a contra-asset account.
E)Means establishing an asset account.

Question 75

The unadjusted trial balance at year-end for a company that uses the percent of receivables method to determine its bad debts expense reports the following selected amounts: All sales are made on credit.Based on past experience,the company estimates 3.5% of ending account receivable to be uncollectible.What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

A)Debit Bad Debts Expense $13,975;credit Allowance for Doubtful Accounts $13,975.
B)Debit Bad Debts Expense $15,225;credit Allowance for Doubtful Accounts $15,225.
C)Debit Bad Debts Expense $16,475;credit Allowance for Doubtful Accounts $16,475.
D)Debit Bad Debts Expense $7,350;credit Allowance for Doubtful Accounts $7,350.
E)Debit Bad Debts Expense $17,350;credit Allowance for Doubtful Accounts $17,350.

Question 76

MacKenzie Company sold $180 of merchandise to a customer who used a Regional Bank credit card.Regional Bank deducts a 4% service charge for sales on its credit cards.MacKenzie electronically remits the credit card sales receipts to the credit card company and receives payment in approximately 5 days.The journal entry to record the collection from the credit card company would be:

A)Debit Cash of $172.80 and credit Accounts Receivable-Regional $172.80.
B)Debit Cash of $180;credit Credit Card Expense $7.20 and credit Accounts Receivable $172.80.
C)Debit Accounts Receivable-Regional $172.80;debit Credit Card Expense $7.20 and credit Sales $180.
D)Debit Cash $172.80;debit Credit Card Expense $7.20 and credit Sales $180.
E)Debit Cash $172.80 and credit Sales $172.80.

Question 77

On July 9,Mifflin Company receives a $8,500,90-day,8% note from customer Payton Summers as payment on account.What entry should be made on July 9 to record receipt of the note?

A)Debit Accounts Receivable $8,500;credit Sales $8,500.
B)Debit Notes Receivable $8,670;credit Sales $8,670.
C)Debit Notes Receivable $8,500;credit Accounts Receivable $8,500.
D)Debit Notes Receivable $8,500;credit Sales $8,500.
E)Debit Notes Receivable $8,725;credit Interest Revenue $225;credit Accounts Receivable $8,500.

Question 78

All of the following statements regarding valuation of receivables under U.S.GAAP and IFRS are true except:

A)Both require the allowance method for uncollectibles unless uncollectibles are immaterial.
B)Both require that receivables be reported net of estimated collectibles.
C)Both require that the expenses for estimated collectibles be recorded in the same period revenues generated from those receivables are recorded.
D)Both allow using percent of sales,percent of receivables,or aging of receivables to estimate uncollectibles.
E)Both require that the expense related to uncollectibles be recorded when the receivable is determined to be uncollectible.

Question 79

The following selected amounts are reported on the year-end unadjusted trial balance report for a company that uses the percent of sales method to determine its bad debts expense. All sales are made on credit.Based on past experience,the company estimates 1% 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?

A)Debit Bad Debts Expense $19,750;credit Allowance for Doubtful Accounts $19,750.
B)Debit Bad Debts Expense $15,225;credit Allowance for Doubtful Accounts $15,225.
C)Debit Bad Debts Expense $22,250;credit Allowance for Doubtful Accounts $22,250.
D)Debit Bad Debts Expense $7,350;credit Allowance for Doubtful Accounts $7,350.
E)Debit Bad Debts Expense $21,000;credit Allowance for Doubtful Accounts $21,000.

Question 80

On November 1,Orpheum Company accepted a $10,000,90-day,8% note from a customer settle an account.What entry should be made on the November 1 to record the note acceptance?

A)Debit Note Receivable $10,000;credit Cash $10,000.
B)Debit Note Receivable $10,000;credit Accounts Receivable $10,000.
C)Debit Note Receivable $10,000;credit Sales $10,000.
D)Debit Cash $10,000;credit Sales $10,000.
E)Debit Sales $10,000;credit Accounts Receivable $10,000.