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Exam 9: Receivables

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Question 41

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Which of the following statements regarding the allowance method of accounting for uncollectible receivables is incorrect?

A) Bad debt expense is not estimated.
B) The Allowance for Bad Debts is used to hold the pool of "unknown" uncollectible accounts.
C) The business does not wait to see which customers will not pay when estimating the allowance for bad debts.
D) The allowance method is based on the matching principle.

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

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Question 42

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The accounts receivable turnover ratio measures ________.

A) a company's ability to pay its current liabilities with its current assets
B) how many days it takes,on average,to collect receivables
C) how many days it takes,on average,to sell the inventory
D) the number of times a company collects the average accounts receivable balance in a year

E) A) and B)
F) None of the above

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Question 43

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When using the allowance method to account for uncollectibles,the balance sheet approaches require two steps in determining bad debts expense.

On October 1,2020,Jewelry Specialists Company made a loan to one of its customers.The customer signed a 6-month note for $100,000 at 15%.Calculate the total interest earned on the note.(Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar. )

The acid-test ratio is also known as the quick ratio.

When using the allowance method,the receipt of a payment on receivables that have been written-off requires an entry to reverse the write-off to the Allowance for Bad Debts account and an entry to record the receipt of cash.

The following information is from the 2019 records of Albert Book Shop: Bad debts expense is estimated by the aging-of-receivables method.Management estimates that $5200 of accounts receivable will be uncollectible.Calculate the amount of bad debts expense for 2019.

On June 16,2018,Evergreen Company wrote off the $200 receivable from customer M.Simmons.On October 14,2018,Evergreen unexpectedly receives $200 cash from M.Simmons.How should Evergreen record the $200 payment from M.Simmons? Evergreen uses the allowance method.

A company reports net accounts receivable of $152,000 on its December 31,2019 balance sheet.The Allowance for Bad Debts has a credit balance of $20,000.What is the balance of Accounts Receivable?

The three major types of receivables are accounts receivable,notes receivable,and other receivables.

Trendy Calendars is a new business.During its first year of operations,credit sales were $40,000,and collections of credit sales were $36,000.One account,$650,was written off.Using the aging-of-receivables method,management calculates $200 as its estimate of uncollectible amounts at year end.Prepare the journal entry to record bad debts expense.Omit explanation.

Notes receivable ________.

When accounting for uncollectible accounts under IFRS,the allowance method is used to accomplish the matching of bad debt expense to the sales of the period but not to report receivables at net realizable value.

Calculate the interest on a 270-day,9% note for $45,000.(Use a 360-day year to compute interest.Round your answer to the nearest dollar. )

A company has net credit sales of $94,000,beginning net accounts receivable of $23,000 and ending net accounts receivable of $18,000.Calculate the days' sales in receivables.(Use 365 days in calculations as needed.Round any intermediate calculations to two decimal places,and your final answer to the nearest whole day. )

On November 1,2018,Downtown Jewelers accepted a 3-month,15% note for $6,000 in settlement of an overdue account receivable.The accounting period ends on December 31.Prepare the journal entry to record the accrued interest at the year end.Omit explanation.

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

When using the allowance method,the write-off of a receivable ________.

When using the allowance method,Allowance for Bad Debts is debited when an account receivable is written off.

During June 2019,Andy Company had the following transactions: 1.Sales of $185,000 ($142,000 on account,$43,000 for cash). 2.Collections on account,$128,000 3.Write-offs of uncollectible receivables,$1,900 4.Recovery of receivable previously written off,$600. Additional information: Ignore Cost of Goods Sold Andy uses the allowance method for uncollectibles. Andy estimates that 4.50% of its accounts receivable will be uncollectible. On June 1,2019,the Accounts Receivable balance was $25,000 and the Allowance for Bad Debts had a normal account balance of $1,125. Requirements: a.Prepare the journal entries for the June 2019 transactions.Because the transactions represent a summary of events,use June 30 for all dates.Omit explanations. b.Prepare the June 30,2019 adjusting journal entry.Omit explanation. c.What is the net realizable value of Accounts Receivable on June 30,2019 (after the adjusting journal entry has been posted)? Show computations and label your work.