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Exam 9: Accounting for Receivables

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Question 21

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A company using the percentage of sales method for estimating bad debts has sales of $350,000 and estimates that 1.0% of its sales are uncollectible. The estimated amount of bad debts expense is $3,500.

A) True
B) False

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Question 22

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When using the allowance method of accounting for uncollectible accounts, the entry to write off Jeannie's uncollectible account is a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable-Jeannie.

A) True
B) False

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Question 23

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A company has $80,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 6% of outstanding receivables are uncollectible. The current credit balance (before adjustments) in the allowance for doubtful accounts is $1,200. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for $4,800.

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:

On October 12 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 direct write-off method is used to account for bad debts, what effect will this write-off have on the company's net income and total assets?

If a 60-day note receivable is dated September 22, what is the maturity date of the note?

When using the allowance method of accounting for uncollectible accounts, the recovery of a bad debt would be recorded as a debit to Cash and a credit to Bad Debts Expense.

Gideon Company uses the direct write-off 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 debt is:

Prepare general journal entries for the following transactions for the current year: Apr. 25 Sold $4,500 of merchandise to Dunn Corp., receiving a 10%, 60-day. $4,500 note receivable. June 24 The note of Dunn Corp., received on April 25 was dishonored.

The ________ method of computing uncollectible accounts uses income statement relationships to estimate bad debts and is based on the idea that a given percent of a company's credit sales for a period are uncollectible.

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 acceptance of the note?

Explain how to record the receipt (acceptance) of a note receivable.

The accounts receivable turnover indicates how often accounts receivable are received and collected during the period.

The percent of sales method for estimating bad debts assumes that a given percent of a company's credit sales for the period are uncollectible.

________ are amounts owed by customers from credit sales where payment is required in periodic amounts over an extended time period.

Match the following definitions with the appropriate term

A note that the maker is unable or refuses to pay at maturity is called a dishonored note.

Explain the options a company may use to convert its receivables to cash before they are due.

Orman Co. sold $80,000 of accounts receivable to First Savings and incurred a 3% factoring fee. Prepare the journal entry for Orman Co. to record the sale.

A receivable is an amount due from another party.