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Exam 7: Accounts and Notes Receivable

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Question 71

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Calculate the total amount of interest that would be owed on a $9,000, 60-day, 9% note receivable.

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$9,000 x ....

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Question 72

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A maker who dishonors a note is one who does not pay it upon maturity.

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Question 73

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When using the allowance method of accounting for uncollectible accounts, the entry to write off Harold's uncollectible account is a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable - Harold.

A company borrowed $1,000 by signing a six month promissory note at 5% interest. The total amount of interest on this promissory note is $25.

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

The matching principle requires that accrued interest on outstanding notes receivable be recorded at the end of each accounting period.

A company received a $1,000, 90-day, 10% note receivable. The journal entry to record receipt of the note would include a debit to Notes Receivable.

The _______________________ method uses both past and current receivables to estimate the allowance amount and assumes that the longer an amount is past due, the more likely it is to be uncollectible.

When a company holds a large number of notes receivable it sometimes sets up a controlling account and a subsidiary ledger for notes.

On November 15, 2010, Betty Corporation accepted a note receivable in place of an outstanding accounts receivable in the amount of $138,460. The note is due in 90 days and has an interest rate of 7.5%. What is the appropriate journal entry to record at maturity?

Prepare general journal entries for the following transactions of this company for the current year: $\begin{array} { | l | l | } \hline \text { Apr. } 25 & \begin{array} { l } \text { Sold } \$ 4,500 \text { of merchandise to CBC Corp., receiving a } 10 \% , 60 \text {-day, } \$ 4,500 \text { note } \\\text { receivable. }\end{array} \\\hline \text { June } 24 & \text { The note of CBC Corp., received on April } 25 \text { was dishonored. } \\\hline\end{array}$

A promissory note received from a customer in exchange for an account receivable:

The buyer who pays cash for an account receivable referred to as a:

Temper Company has credit sales of $3.10 million for year 2010. Temper estimates that .9% of the credit sales will not be collected. On December 31, 2010, the company's Allowance for Doubtful Accounts has an unadjusted credit balance of $2,222. Temper prepares a schedule of its December 31, 2010, accounts receivable by age. Based on past experience, it estimates the percent of receivables in each age category that will become uncollectible. This information is summarized here: $\begin{array}{rlr}\text { December } 31,2010 & \text { Age of Accounts } & \text { Expected Percent } \\\text { Accounts Receivable } & \text { Receivable } & \text { Uncollectible }\\\$ 620,000 & \text { Not yet due } & 1.05 \% \\248,000 & 1 \text { to } 30 \text { days past due } & 1.80 \\49,600 & 31 \text { to } 60 \text { days past due } & 6.30 \\24,800 & 61 \text { to } 90 \text { days past due } & 31.75 \\4,960 & \text { Over } 90 \text { days past due } & 66.00\end{array}$ Assuming the company uses the percent of sales method, what is the amount that Temper will enter as the Bad Debt Expense in the December 31 adjusting journal entry?

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

Notes receivable are classified as current liabilities.

The ____________________ of a note is the day the principle plus interest of a note must be repaid.

Chiller Company has credit sales of $5.60 million for year 2010. Chiller estimates that 1.32% of the credit sales will not be collected. Historically, 4% of outstanding accounts receivable is uncollectible. On December 31, 2010, the company's Allowance for Doubtful Accounts has an unadjusted credit balance of $3,561. Chiller prepares a schedule of its December 31, 2010, accounts receivable by age. Based on past experience, it estimates the percent of receivables in each age category that will become uncollectible. This information is summarized here: $\begin{array}{rlr}\text { December } 31,2010 & \text { Age of Accounts } & \text { Expected Percent } \\\text { Accounts Receivable } & \text { Receivable } & \text { Uncollectible }\\\hline\$ 1,095,000 & \text { Not yet due } & 0.85 \% \\322,550 & 1 \text { to } 30 \text { days past due } & 1.42 \\84,700 & 31 \text { to } 60 \text { days past due } & 7.60 \\50,420 & 61 \text { to } 90 \text { days past due } & 42.50 \\12,500 & \text { Over } 90 \text { days past due } & 81.00\end{array}$ Assuming the company uses the percent of accounts receivable method, what is the amount that Chiller will enter as the Bad Debt Expense in the December 31 adjusting journal entry?

Failure by a promissory note's maker to pay the amount due at maturity is known as:

The person who signs a note receivable and promises to pay the principal and interest is the: