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Exam 9: Receivables

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Question 71

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The following information is from the records of Armadillo Camera Shop: $\begin{array} { | l | r | } \hline \text { Accounts receivable, December } 31,2015 & \$ 20,000 \text { (debit) } \\\hline \text { Allowance for Bad Debts, December 31,2015 } & \\\hline \text { prior to adjustment } & 600 \text { (debit) } \\\hline \text { Net credit sales for 2015 } &95,000 \\\hline \text { Accounts written off as uncollectible during 2015 } & 350 \\\hline\end{array}$ Bad debts expense is estimated by the aging-of-accounts-receivables method. Management estimates that $2,850 of accounts receivable will be uncollectible. Calculate the amount of net accounts receivable after the adjustment for bad debts.

A) $17,750
B) $17,150
C) $16,550
D) $13,000

E) A) and B)
F) C) and D)

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Question 72

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A method of accounting for uncollectible receivables in which the company estimates bad debts expense instead of waiting to see which customers the company will not collect from is known as the allowance method.

A) True
B) False

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Question 73

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If the maker of the note fails to repay the borrowed amount on the maturity date, the note is said to be dishonored.

Which of the following statements is true?

A company has net credit sales of $95,000, beginning net accounts receivable of $20,000 and ending net accounts receivable of $18,000. Calculate the days' sales in receivables.

Martin Sales provides the following information: Net credit sales: $750,000 Beginning net accounts receivable: $40,000 Ending net accounts receivable: $20,000 Calculate the accounts receivable turnover ratio. (Round to the nearest whole number.)

Sun Inc. had completely written off the account of one of its old customers, Brad, in 2014 for $500. On January 21, 2015, Brad unexpectedly repaid his debt in full. The company uses the direct write-off method to account for uncollectible receivables. Journalize the entries required for Sun Inc. on January 21, 2015.

Smart Art is a new establishment. During the first year, there were credit sales of $40,000 and collections of credit sales of $36,000. One account for $650 was written off. The company decided to use the percent-of-sales method to account for bad debts expense, and decided to use a factor of 2% for their year-end adjustment of bad debts expense. The ending balance in Allowance for Bad Debts account would be:

When a company is using the direct write-off method, and an account is written off, the journal entry consists of a:

Accounts receivable has a balance of $30,000 and the Allowance for Bad Debts has a credit balance of $3,000. The allowance method is used. What is the net realizable value before and after a $2,000 Account Receivable is written off? A) $27,000; $27,000 B) $14,300; $14,300 C) $16,000; $15,940 D) $16,000; $16,000

Which of the following would be included in the entry by the payee to record a dishonored note receivable?

On January 16, 2015, Whole Circle had sold goods worth $5,000 to Smith on account. It could not collect cash from the customer, and finally decided to write off the account on December 31, 2015. However, in November 4, 2016, Smith approached the company to make payment, and made payment. Journalize the transactions on December 31, 2015 and November 4, 2016. (Whole Circle uses the allowance method.)

On October 1, 2015, Ealys Jewellers accepted a 4-month, 12% note for $6,000 in settlement of an overdue account receivable. The company closes its accounts at the year end. Calculate and record the accrued interest on the note at December 31, 2015.

Factoring is one of the options available to a business to reduce the risk of uncollectible accounts receivable.

On January 1, Davidson Services has the following balances: Davidson has the following transactions during January: Credit sales of $100,000, collections of credit sales of $85,000, and write-offs of $15,000. Davidson uses the direct write-off method. -At the end of January, the balance in Bad Debts Expense is:

A receivable can be described as a monetary claim against a business or an individual.

GAAP requires most companies to use the:

On December 1, 2015, Parsons Inc. sold machinery to a customer for $20,000. The customer could not pay at the time of sale, but agreed to pay 9 months later, and signed a 9-month note at 9% interest. How much interest revenue was earned during the year 2015?