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Exam 7: Accounting for Receivables

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Question 51

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Prudence Co.receives a $26,000,90-day,4% note receivable.What is the amount of interest that is due at maturity?

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$26,000 * ...

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Question 52

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Installment Accounts Receivable are classified as non-current assets if the installment period is more than one year,even if the seller regularly offers customers such terms.

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Question 53

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Calculate the amount of interest that would be owed on a $18,000,60-day,8% note receivable at maturity.

A company has the following unadjusted account balances at December 31,of the current year; Accounts Receivable of $183,400 and Allowance for Doubtful Accounts of $1,600 (credit balance).The company uses the aging of accounts receivable to estimate its bad debts.The following aging schedule reflects its accounts receivable at the current year-end: $\begin{array} { l l l } &&\text { Estimated } \\&&\text { Uncollectible } \\\text { Account Age }&\text { Balance }&\text { Percentage }\\\hline \text { Current (not yet due) } & \$ 106,000& 2.0 \% \\\text { 1-30 days past due } &54 , 0 0 0 & 4.0 \% \\\text { 30-60 days past due } &12,000& 10.0 \% \\61 - 90 \text { days past due } & 8,500 & 25.0 \% \\\text { Over 90 days past due } &2 , 9 0 0 & 75.0 \% \\\text { Total } & \underline { \$183,400 } &\end{array}$ Calculate the amount of the Allowance for Doubtful Accounts that should appear on the December 31,of the current year,balance sheet.

Match each of the following terms with the appropriate definitions. -Committing accounts receivable as security for a loan.

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

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

A company that uses the percent of sales to account for its bad debts had credit sales of $740,000 in Year 1,including a $720 sale to Marshall Fresh.On December 31,Year 1,the company estimated its bad debts at 1.5% of its credit sales.On June 1,Year 2,the company wrote off,as uncollectible,the $720 account of Marshall Fresh.On December 21,Year 2,Marshall Fresh unexpectedly paid his account in full.Prepare the necessary journal entries: (a)On December 31,Year 1,to reflect the estimate of bad debts expense. (b)On June 1,Year 2,to write off the bad debt. (c)On December 21,Year 2,to record the unexpected collection.

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 to record the transaction?

A company borrowed $16,000 by signing a 4-month promissory note at 12%.The amount of interest to be paid at maturity is $640.

What is the maturity date of a 120-day note receivable dated March 5?

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? (Use 360 days a year.)

The allowance method of accounting for bad debts matches the estimated loss from uncollectible accounts receivable against the sales they helped produce.

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.

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:

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.)

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:

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

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

The aging of accounts receivable involves classifying each account receivable by how long it is past its due date and estimating the percent of each uncollectible class.