The two most common receivables are _____ receivables and _____ receivables.
-accounts
-notes
An accounts receivable ledger:
-is a supplementary record to maintain an account for reach customer
-records journal entries that affect accounts receivable
Zion Company sells merchandise on account to BRC, Inc. in the amount of $1,200. The
entry to record this sale would include a:
-debit to Accounts Receivable
-credit to Sales
On July 10, Yao Co. collects $740 from Ean, Inc. from a prior credit sale. This entry
would be recorded by Yao with a:
-debit to Cash
-credit to Accounts Receivable
Woodstock Co. had $500 of credit cards sales. The net cash receipts were deposited
immediately into Woodstock's bank account less a 2% fee. The entry to record this
sales transaction would include a credit to:
Sales in the amount for $500
Accounts receivable
amounts due from customers for credit sales
Notes receivable
an asset consisting of a written promise to receive a definite sum of money on demand
or on specific future dates
Receivable
amount due from another party
Thomas Co. sold $1,000 worth of merchandise on a bank credit card less a 3% fee. The
entry to record the sales transaction would include a debit to Cash in the amount of
$_____
970
A(n) _____ is a supplementary record created to maintain a separate account for each
customer
accounts receivable ledger
_____ _____ are accounts of customers who do not pay what they have promised to
pay. It's considered an expense of selling on credit.
-bad
-debts
A company sells merchandise to a customer on credit. The journal entry to record this
transaction would include a debit entry to the Accounts _____ account.
receivable
Iron Company collects cash in full from a customer who purchased merchandise last
month on credit. To record the receipt of cash, Iron Company should make the following
entries in the general journal.
-credit to accounts receivable
-debit to cash
On August 1, Hanes Co. determines that it cannot collect $150 from a customer. Hanes
uses the direct write-off method. Hanes will record the write-off of this account by
debiting:
bad debts expense for $150
P. Jameson Co. sold $500 of merchandise on Master Card credit sales. The net cash
receipts from the sale are immediately deposited in the seller's bank account. Master
Card charges a 4% fee. The journal entry to record this sales transaction would include
a:
-debit to credit card expense for $20
-credit to sales for $500
-debit to cash for $480
T. Hillcrest Co. sold $500 of merchandise on a bank credit card less a 5% fee. The entry
to record this sales transaction would include debit(s) to:
cash for $475 and credit card expense for $25
The _____ method of accounting for bad debts records the loss from an uncollectible
account receivable when it is determined to be uncollectible. No attempt is made to
predict bad debts expense.
direct write-off
Bad debts are:
-also called uncollectible accounts
-accounts of customers who do not pay
-an expense of selling on credit
Ace Company sells merchandise to a customer in the amount of $200 on credit, terms
n/30. The entry to record this sale would include a debit to the _____ account:
accounts receivable
In August, Johns Co's account receivable balance was written off using the direct
method. In November, Johns pays the balance in full. The journal entry to record the
reinstatement of the account receivable must include a credit to the _____ _____ _____
account before recording a debit to the Cash account.
-bad
-debts
-expense
On February 15, Smith Co. determines that it cannot collect $500 owed by its customer,
A. Winds Symth records the loss using the direct write-ff method. This entry to record
the write-off on February 15 would include a:
-credit to accounts receivable - A. Winds
-debit to bad debts expense
True or False: The direct write-off method of accounting for bad debts matches the
estimated loss from uncollectible accounts receivable against the sales they helped
produce.
FALSE
The allowance for doubtful accounts is a contra asset account that equals:
total uncollectible accounts
True or False: The allowance method of accounting for bad debts records the loss from
an uncollectible account receivable when it is determined to be uncollectible. No attempt
is made to predict bad debts.
FALSE
Avia Company determines that a customer balance of $400 from Allia, Inc. is
uncollectible. Avia uses the allowance method to account for bad debts. The entry to
write off the uncollectible balance will include a debit to:
allowance for doubtful accounts
If an account receivable balance previously written off using the direct write-off method
is later collected in full, the entry to record the payment must include a credit to:
bad debts expense
The advantages of using the allowance method to account for bad debts include which
of the following?
-matches expenses with related sales
-reports accounts receivable balance at net realizable value
Yates Co. uses the allowance method to account for bad debts. At the end of the period,
Yate's unadjusted trial balance shows an accounts receivable balance of $10,000;
allowance for doubtful accounts balance of $400 (credit); and sales of $500,000. Based
on history, Yates estimates that bad debts will be 1% of sales. The entry to record
estimated bad debts will include a debit to bad debts expense in the amount of:
$5,000
The allowance for doubtful accounts is a(n) _____ asset account and has a normal
credit balance.
contra
Ana Co. uses the allowance method to account for bad debts. At the end of the period,
Ana's unadjusted trial balance shows an accounts receivable balance of $40,000;
allowance for doubtful accounts balance of $300 (credit); and sales of $500,000. Based
on history, Ana estimates that bad debts will be 2% of accounts receivable. The entry to
record estimated bad debts will include a debit to bad debts expense in the amount of:
$500
Lina Co. uses the allowance method to account for bad debts. On January 28, Lina
determines that a $200 balance from ZRT, Inc. is uncollectible and writes the balance
off. The journal entry to write this balance off will include a:
-credit to accounts receivable - ZRT
-debit to allowance for doubtful accounts
The _____ method of estimating bad debts uses both past and current receivables
information to estimate the allowance amount. Specifically, each receivable is classified
by how long it is past its due date.
aging of receivables
Flash Co. uses the allowance method to account for bad debts. At the end of the year,
Flash Co's unadjusted trial balance shows an accounts receivable balance of $45,000;
allowance for doubtful accounts balance of $400 (debit); and sales of $1,500,000.
Based on history, Flash estimates that bad debts will be 0.5% (.005) of sales. The entry
to record estimated bad debts will include an debit to bad debts expense in the amount
of:
$7,500
The _____ of the note is the one that signed the note and promised to pay at maturity.
The _____ of the note is the person to whom the note is payable.
-maker
-payee
Leo Co. uses the allowance method to account for bad debts. At the end of 2010, Leo
Co's accounts receivable balance is $25,000; allowance for doubtful accounts balance
of $100 (credit); and sales of $500,000. Based on history, Leo estimates that bad debts
will be 2% of accounts receivable. The entry to record estimated bad debts will include a
debit to Bad Debts Expense in the amount of:
$400
A 90-day note is signed on October 21. The due date of the note is:
January 19
The _____ of accounts receivable method uses several percentages to estimate the
allowance.
aging
On November 1, Eli Co. received a $6,000, 60-day, 6% note from a customer as
payment on his $6,000 account. Eli's journal entry to record this transaction on
November 1, would include a:
-credit to accounts receivable for $6,000
-debit to notes receivable for $6,000
Finish Co. uses the allowance method to account for bad debts. At the end of 2010,
Finish Co's unadjusted trial balance shows an accounts receivable balance of $30,000;
allowance for doubtful accounts balance of $200 (credit); and sales of $600,000. Based
on history, Finish estimates that bad debts will be 1% of sales. The entry to record
estimated bad debts will include a debit to Bad Debts Expense in the amount of:
$6,000
On January 1, Franz Co. accepted a 30-day, 6% note in the amount of $5,000 from Bria
Co., a customer. On January 31, the due date of the note, Bria honors the note and
pays in full. The journal entry that Franz would make to record payment of this note
would include a:
-credit to interest revenue for $25
-credit to note receivable for $5,000
-debit to cash for $5,025
Promissory note
written promise to pay a specified amount of money
Principal
amount that the signer agrees to pay back, not including interest
Interest
charge from using money loaned from one entity to another
Maker
one who signed the note and promised to pay at maturity
Payee
the person to whom the note is payable
Maturity Date
day that the principal and interest must be paid
A 60-day note signed on February 15 (and it's not leap year). The due date of the note
is:
April 16
DonCo, Inc. sold merchandise on January 14, and accepted a 90-day, 5% promissory
note in the amount of $5,000. On January 14, the entry to record this transaction would
include a debit to:
notes receivable in the amount of $5,000
On March 14, Zest Co. accepted a 120-day, 6% note in the amount of $5,000 from AZC
Co., a customer. On the due date of the note, AZC dishonors the note and fails to pay.
The journal entry that Zest would make to record the failure to pay this note on the due
date would include a debit to:
accounts receivable - AZC for $5,100
On March 14, Teal Co. accepted a 120-day, 6% note in the amount of $10,000 from
AZC Co., a customer. On the due date of the note, AZC honors the note and pays in
full. The journal entry that Teal would make to record payment of this note would include
a credit to:
interest revenue for $200
Kaiven Company accepted a $12,000, 60-day, 6% note on December 21 from Diaz Co,
granting a time extension on his past-due account receivable. The adjusting entry on
December 31 would include a debit to:
interest receivable for $20
On December 1, Christy Co. accepted a 60-day, 6%, $1,000 note due January 30. On
December 31, the appropriate year-end adjusting entry was made. On January 30, the
note was honored and paid in full. The entry to record receipt of payment on January 30
(assuming no reversing entry was made) would include a credit to:
-interest revenue for $5
-interest receivable for $5
-notes receivable for $1,000
Lani Co. uses the allowance method to account for bad debts. At the end of 2010, their
unadjusted trial balance shows an accounts receivable balance of $400,000; allowance
for doubtful accounts balance of $400 (debit); and sales of $1,200,000. Based on
history, Lani estimates that bad debts will be 1% of accounts receivable. The entry to
record estimated bad debts will include a debit to Bad Debts Expense in the amount of:
$4,400
On September 1, Horn Co. accepted a 60-day, 5% note in the amount of $3,000 from a
customer. On the due date of the note, the customer dishonors the note and fails to pay.
The journal entry that Horn would make on the due date would include a debit to:
accounts receivable for $3,025
Lion Company accepted a $15,000, 30-day, 6% note on December 16 from Diaz Co,
granting a time extension on his past-due account receivable. The adjusting entry on
December 31 for Lion Company would include a credit to:
interest revenue for $37.50
On November 1, Alice Co. accepted a 90-day, 6%, $2,000 note due January 30. On
12/31, the appropriate adjusting entry was made. On January 30, the note was honored
and paid in full. The entry to record receipt of payment on January 30 would include a
credit to:
-notes receivable for $2,000
-interest revenue for $10
-interest receivable for $20
True or False: The two methods companies can use to convert receivables to cash
before they are due includes selling them and pledging them.
TRUE
The _____ ratio is a measure of both the quality and liquidity of accounts receivable; it
indicates how often, on average, receivables are received and collected during the
period.
accounts receivable turnover
On March 14, Zest Co. accepted a 120-day, 6% note in the amount of $5,000 from AZC
Co, a customer. On the due date of the note, AZC dishonors the note and fails to pay.
The journal entry that Zest would make to record the failure to pay this note on the due
date would include a debit to:
accounts receivable - AZC for $5,100
Companies sometimes convert receivables to cash before they are due by selling them
or using them as security for a loan. The reasons that a company may convert
receivables before their due date inlcude:
-to reduce risk of nonpayment
-to quickly generate cash
Accounts receivable turnover is calculated using the following formula:
net sales/average accounts receivable
On March 14, Ian Co. accepted a 180-day, 5% note in the amount of $1,000 from Ali
Co, a customer. On the due date of the note, Ali dishonors the note and fails to pay. The
journal entry that Ian would record on the due date would include a:
-credit to interest revenue for $25
-credit to notes receivable for $1,000
-debit to accounts receivable - Ali for $1,025
