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Exam 8: Receivables

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Question 71

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At the end of the current year, Accounts Receivable has a balance of $700,000; Allowance for Doubtful Accounts has a credit balance of $5,500; and net sales for the year total $3,500,000. Bad debt expense is estimated at 1/2 of 1% of net sales. Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value of accounts receivable.

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Question 72

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The equation for computing interest on an interest-bearing note is as follows: interest equals maturity value times interest rate times time.

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Question 73

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List at least three things that indicate a receivable may be uncollectible.

At the end of the current year, Accounts Receivable has a balance of $90,000; Allowance for Doubtful Accounts has a credit balance of $850; and net sales for the year total $300,000. Bad debt expense is estimated at 2.5% of net sales. Determine (a) the amount of the adjusting entry for uncollectible accounts; (b) the adjusted balances of Accounts Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value of accounts receivable.

The following journal entries would be used in one of the two methods of accounting for uncollectible receivables. Identify each. (a) (b)

A company uses the allowance method to account for uncollectible accounts receivables. When the firm writes off a specific customer's account receivable

Determine the due date and amount of interest due at maturity on the following notes:

If the maker of a note fails to pay the debt on the due date, the note is said to be dishonored.

When a note is written to settle an open account, no entry is necessary.

For a business that uses the allowance method of accounting for uncollectible receivables:

An alternative name for Bad Debt Expense is

The due date of a 60-day note dated July 10 is September 10.

Discount Mart utilizes the allowance method of accounting for uncollectible receivables. On December 12th the company receives a $550 check from Chad Thomas in settlement of Thomas' $1,100 outstanding accounts receivable. Due to Thomas' failing health he is closing his company and is expecting to make no further payments to Discount Mart. Journalize this declaration.

The amount of the promissory note plus the interest earned on the due date is called the

The balance in the Allowance for Doubtful Accounts account at the end of the year includes the total of all accounts written-off since the beginning year.

Journalize the following transactions using the allowance method of accounting for uncollectible receivables. April 1 Sold merchandise on account to Jim Dobbs, $7,200. The cost of the merchandise is $5,400. June 10 Received payment for one-third of the receivable from Jim Dobbs and wrote off the remainder. Oct. 11 Reinstated the account of Jim Dobbs and received cash in full payment.

The accounts receivables turnover ratio is computed by dividing total gross sales by the average net receivables during the year.

You have just received notice that a customer of yours with an Account Receivable balance of $100 has gone bankrupt and will not make any future payments. Assuming you use the allowance method, the entry you make is to

Dalton Company uses the allowance method to account for uncollectible receivables. Dalton has determined that the Irish Company account is uncollectible. To write-off this account, Dalton should debit

At the end of a period (before adjustment), Allowance for Doubtful Accounts has a debit balance of $2,000. The Accounts Receivable balance is analyzed by aging the accounts and the amount estimated to be uncollectible is $15,000. The amount to be recorded in the adjusting entry for the bad debt expense is $15,000.