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Exam 9: Accounting for Receivables

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Question 101

Multiple Choice

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On July 9, Mifflin Company receives an $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 Notes Receivable $8,670; credit Sales $8,670.
B) Debit Notes Receivable $8,500; credit Accounts Receivable $8,500.
C) Debit Notes Receivable $8,725; credit Interest Revenue $225; credit Accounts Receivable $8,500.
D) Debit Accounts Receivable $8,500; credit Sales $8,500.
E) Debit Notes Receivable $8,500; credit Sales $8,500.

F) B) and C)
G) B) and D)

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Question 102

Multiple Choice

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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 immediately. The journal entry to record this sale transaction would be:

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

F) B) and D)
G) A) and D)

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Question 103

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When using the allowance method of accounting for uncollectible accounts, the entry to record the estimated bad debts expense is a debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts.

The account receivable turnover measures:

On July 9, Mifflin Company receives an $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, and no adjusting entries have been made related to the note? (Use 360 days a year.)

The quality of receivables refers to the likelihood of collection without loss.

The realizable value refers to the expected proceeds from converting an asset into cash.

As long as a company accurately records total credit sales information, it is not necessary to have separate accounts for specific customers.

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

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:

Installment accounts receivable is another name for aging of accounts receivable.

The person that borrows money and signs a promissory note is called the maker.

On July 31, Orwell Co. has $448,800 of accounts receivable. Required: 1. Prepare journal entries to record the following selected August transactions. The company uses the perpetual inventory system. 2. Also prepare any footnotes to the August 31 financial statements that result from these transactions. 3. Calculate the balance in the Accounts Receivable account as of August 10. Aug 3 Sold $250,000 of merchandise (that cost $122,000) to customers on credit. Aug 5 Sold $300,000 of accounts receivable to Cash Solutions. Cash Solutions charges a 7% factoring fee. Aug 8 Received $165,200 from customers in payment on their accounts. Aug 9 Borrowed $50,000 cash from State Bank, pledging $65,000 of accounts receivable as security for the loan. The note is a 90-day, 9% note.

On July 9, Mifflin Company receives an $8,500, 90-day, 8% note from customer Payton Summers as payment on account. Compute the amount due at maturity for the note. (Use 360 days a year.)

The quality of receivables refers to:

Notes receivable are classified as current liabilities regardless of the time to maturity.

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:

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

The maturity date of a note refers to the date the note must be repaid.

Describe the differences in how the direct write-off method and the allowance method are applied in accounting for uncollectible accounts receivables.