Receivables Reporting – Test Bank – Edition 10

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Student name:__________

TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
1) A receivable is an amount due from another party.

⊚ true
⊚ false

2) Credit sales are recorded by crediting Accounts Receivable.

⊚ true
⊚ false

3) As long as a company accurately records total credit sales information, it is not necessary to have separate accounts for specific customers.

⊚ true
⊚ false

4) If a customer owes interest on accounts receivable, Interest Receivable is debited and Accounts Receivable is credited.

⊚ true
⊚ false

5) If a sale is made with a bank credit card, the seller debits Cash and credits Sales for the same amount.

⊚ true
⊚ false

6) An installment accounts receivable is classified as a non-current asset if the installment period is six months.

⊚ true
⊚ false

7) Companies can report credit card expense as a reduction in net sales or as a selling expense.

⊚ true
⊚ false

8) BizCom's customer, Redding, paid off an $8,300 balance on its account receivable. BizCom should record the transaction as a debit to Accounts Receivable—Redding and a credit to Cash.

⊚ true
⊚ false

9) The maturity date of a note is the date the note (principal and interest) must be repaid.

⊚ true
⊚ false

10) A promissory note is a written promise to pay a specified amount, usually with interest, either on demand or at a stated future date.

⊚ true
⊚ false

11) The formula for computing interest on a note is: Principal of the note × Annual interest rate × Time expressed in fraction of year.

⊚ true
⊚ false

12) The person that borrows money, signs a promissory note, and promises to pay later is called the maker of the note.

⊚ true
⊚ false

13) A company borrowed $10,000 by signing a six-month promissory note at 5% interest. The amount of interest to be paid at maturity is $25.

⊚ true
⊚ false

14) A company borrowed $16,000 by signing a 4-month promissory note at 12%. The amount of interest to be paid at maturity is $640.

⊚ true
⊚ false

15) Sellers generally prefer to receive notes receivable rather than accounts receivable when the credit period is long and the receivable is for a large amount.

⊚ true
⊚ false

16) Federal laws prohibit the selling of accounts receivable to factors.

⊚ true
⊚ false

17) A company can borrow money by pledging its receivables as security for a loan.

⊚ true
⊚ false

18) Since pledged accounts receivables only serve as collateral for a loan and are not sold, it is not necessary to disclose the pledging.

⊚ true
⊚ false

19) A company factored $30,000 of its accounts receivable and was charged a 2% factoring fee. The journal entry to record this transaction would include a debit to Cash of $30,000, a debit to Factoring Fee Expense of $600, and credit to Accounts Receivable of $30,600.

⊚ true
⊚ false

20) The quality of receivables refers to the likelihood of collection without loss.

⊚ true
⊚ false

21) Accounts receivable turnover measures how often, on average, receivables are collected during the period.

⊚ true
⊚ false

22) A high accounts receivable turnover in comparison with competitors suggests that the firm should tighten its credit policy.

⊚ true
⊚ false

23) The accounts receivable turnover is calculated by dividing average accounts receivable (net) by net sales.

⊚ true
⊚ false

24) A company had net sales of $550,000 and an average accounts receivable of $110,000. Its accounts receivable turnover equals 5.0.

⊚ true
⊚ false

25) A Company had net sales of $23,000, and its average account receivables were $5,700. Its accounts receivable turnover is 0.24.

⊚ true
⊚ false

26) The direct write-off method records the loss from an uncollectible account receivable when it is determined to be uncollectible.

⊚ true
⊚ false

27) The allowance method estimates bad debts expense at the end of each accounting period and records it with an adjusting entry.

⊚ true
⊚ false

28) Companies follow both the expense recognition principle and the materiality constraint when applying the direct write-off method.

⊚ true
⊚ false

29) The materiality constraint permits use of the direct write-off method when its results approximate that of the allowance method.

⊚ true
⊚ false

30) The advantage of the allowance method of accounting for bad debts is that it identifies the specific customers who will not pay their bills.

⊚ true
⊚ false

31) Companies use two methods to account for uncollectible accounts, the direct write-off method and the allowance method.

⊚ true
⊚ false

32) No attempt is made to estimate bad debts expense under the allowance method of accounting for uncollectible accounts receivable.

⊚ true
⊚ false

33) The direct write-off method of accounting for uncollectible accounts requires a prediction of bad debts expense at the end of each period.

⊚ true
⊚ false

34) When using the allowance method of accounting for uncollectible accounts, the entry to record the estimated bad debts expense is a debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts.

⊚ true
⊚ false

35) After adjustment, the balance in the Allowance for Doubtful Accounts has the effect of reducing Accounts Receivable to its realizable value.

⊚ true
⊚ false

36) When using the allowance method of accounting for uncollectible accounts, the entry to write off Jeannie’s uncollectible account is a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable—Jeannie.

⊚ true
⊚ false

37) The realizable value refers to the accounts receivable amount expected to be received.

⊚ true
⊚ false

38) Allowance for Doubtful Accounts is a contra asset; its balance is added to Accounts receivable.

⊚ true
⊚ false

39) The allowance method for bad debts matches the estimated loss from uncollectible accounts receivable against the sales they helped produce.

⊚ true
⊚ false

40) When using the allowance method of accounting for uncollectible accounts, the recovery of a bad debt would be recorded as a debit to Cash and a credit to Bad Debts Expense.

⊚ true
⊚ false

41) The aging of accounts receivable method involves classifying each account receivable by how long it is past its due date and estimating the percent of each uncollectible class.

⊚ true
⊚ false

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

⊚ true
⊚ false

43) The accounts receivable method to estimate bad debts obtains the estimated balance in the Allowance for Doubtful Accounts in one of two ways: (1) computing the percent uncollectible from total accounts receivable or (2) aging accounts receivable.

⊚ true
⊚ false

44) The percent of sales method for estimating bad debts assumes that a percent of a company's credit sales for the period is uncollectible.

⊚ true
⊚ false

45) The percent of sales method for estimating bad debts uses only income statement account balances to estimate bad debts.

⊚ true
⊚ false

46) The aging of accounts receivable method of determining bad debts expense is based on the knowledge that the longer a receivable is past due, the more likely it is to be collected.

⊚ true
⊚ false

47) A company has $80,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 6% of outstanding receivables are uncollectible. The current credit balance (before adjustments) in the allowance for doubtful accounts is $1,200. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for $4,800.

⊚ true
⊚ false

48) A company has $80,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 6% of outstanding receivables are uncollectible. The current debit balance (before adjustments) in the allowance for doubtful accounts is $1,200. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for $6,000.

⊚ true
⊚ false

49) A company using the percentage of sales method for estimating bad debts has sales of $350,000 and estimates that 1.0% of its sales are uncollectible. The estimated amount of bad debts expense is $3,500.

⊚ true
⊚ false

50) A company using the percentage of sales method for estimating bad debts has sales of $350,000 and estimates that 1.0% of its sales are uncollectible. The unadjusted balance in Allowance for Doubtful Accounts before the adjustment is a $300 credit. The estimated amount of bad debts expense is $3,200.

⊚ true
⊚ false

51) Allowance for Doubtful Accounts, a balance sheet account, is not closed at period end.

⊚ true
⊚ false

52) The period of a note is the time from the note’s (contract) date to its maturity date.

⊚ true
⊚ false

53) Notes receivable are classified as current liabilities regardless of the time to maturity.

⊚ true
⊚ false

54) A company received a $15,000, 90-day, 10% note receivable. The journal entry to record receipt of the note includes a debit to Notes Receivable.

⊚ true
⊚ false

55) Sellers sometimes ask for a note receivable to replace an account receivable when a customer requests more time to pay a past-due account.

⊚ true
⊚ false

56) A note that the maker does not pay at maturity is called a dishonored note.

⊚ true
⊚ false

57) When a note is dishonored, the amount of the note is added (debited) to Uncollectible Notes.

⊚ true
⊚ false

58) When a note receivable is dishonored, it is charged to an account receivable from its maker.

⊚ true
⊚ false

59) The notes receivable account of a business should include both the notes that have not yet matured and the dishonored notes.

⊚ true
⊚ false

60) The practice of placing dishonored notes receivable into accounts receivable keeps only notes that have not yet matured in the Notes Receivable account.

⊚ true
⊚ false

61) Accrued interest on outstanding notes receivable should be recorded at the end of each accounting period.

⊚ true
⊚ false

62) The journal entry to record a dishonored note includes a debit to Accounts Receivable, a credit to Notes Receivable, and a credit to Interest Revenue.

⊚ true
⊚ false

63) Dishonoring a note means the maker no longer has to pay.

⊚ true
⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question.
64) Which of the following is not revealed by maintaining separate accounts receivable information for each customer?

A) How much each customer has purchased on credit.
B) How much each customer has paid.
C) How much each customer still owes.
D) Which customers still owe money.
E) When the customer intends to pay outstanding balances.

65) A credit sale of $5,275 to a customer would result in which of the following?

A) A debit to the Accounts Receivable account in the general ledger and a debit to the customer's account in the accounts receivable subsidiary ledger.
B) A credit to the Accounts Receivable account in the general ledger and a credit to the customer's account in the accounts receivable subsidiary ledger.
C) A debit to the Accounts Receivable account in the general ledger and a credit to the customer's account in the accounts receivable subsidiary ledger.
D) A credit to the Accounts Receivable account in the general ledger and a debit to the customer's account in the accounts receivable subsidiary ledger.
E) A credit to Sales and a credit to the customer's account in the accounts receivable subsidiary ledger.

66) Which of the following is not a reason that sellers allow customers to use bank (or third-party) credit cards?

A) To be able to charge customers more due to fees and interest.
B) To avoid the risk of customers not paying.
C) To speed up receipt of cash from the credit sale.
D) To increase total sales.
E) To avoid having to decide who gets credit and how much.

67) Which of the following is not true regarding a bank (or third party) credit card expense?

A) Credit card expense may be classified as a "discount" deducted from sales to get net sales.
B) Credit card expense may be classified as a selling expense.
C) Credit card expense may be classified as an administrative expense.
D) Credit card expense is not recorded by the seller.
E) Credit card expense is a fee the seller pays for services provided by the card company.

68) A promissory note received from a customer in exchange for an account receivable is recorded by the payee as:

A) A cash equivalent.
B) An account receivable.
C) A note receivable.
D) A short-term investment.
E) A note payable.

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

A) Maker.
B) Payee.
C) Holder.
D) Receiver.
E) Owner.

70) A company pledges their receivables so they may

A) Collect a pledge fee.
B) Borrow money.
C) Charge a factoring fee.
D) Increase sales.
E) Recognize a sale.

71) A promissory note:

A) Is a short-term investment for the maker.
B) Is a written promise to pay a specified amount, usually with interest, either on demand or at a stated future date.
C) Is a liability to the payee.
D) Is another name for an installment receivable.
E) Cannot be used in payment of an account receivable.

72) The maturity date of a note receivable:

A) Is the day of the credit sale.
B) Is the day the note was signed.
C) Is the day the note must be repaid.
D) Is the date of the first payment.
E) Is the last day of the month.

73) The interest accrued on $4,800 at 7% for 75 days is: (Use 360 days a year.)

A) $34.
B) $39.
C) $168.
D) $392.
E) $70.

74) The interest accrued on $7,500 at 6% for 90 days is: (Use 360 days a year.)

A) $450.00.
B) $37.50.
C) $112.50.
D) $11.25.
E) $1,800.00.

75) A 90-day note issued on April 10 matures on:

A) July 9.
B) July 10.
C) July 11.
D) July 12.
E) July 13.

76) A company receives a 5%, 90-day note for $6,600. The total interest due on the maturity date is: (Use 360 days a year.)

A) $110.00.
B) $82.50.
C) $330.00.
D) $165.00.
E) $192.50.

77) A company receives a 10%, 120-day note for $1,500. The total interest due on the maturity date is: (Use 360 days a year.)

A) $50.00.
B) $150.00.
C) $75.00.
D) $37.50.
E) $87.50.

78) A company borrowed $29,000 by signing a 90-day promissory note at 12%. The total interest due on the maturity date is: (Use 360 days a year.)

A) $72.50
B) $435.00
C) $870.00
D) $1,305.00
E) $3,480.00

79) A company borrowed $10,000 by signing a 180-day promissory note at 9%. The total interest due on the maturity date is: (Use 360 days a year.)

A) $900
B) $75
C) $450
D) $300
E) $1,800

80) A company borrowed $29,000 by signing a 90-day promissory note at 12%. The total to be paid at maturity of the note is: (Use 360 days a year.)

A) $40,672.50
B) $41,035.00
C) $29,870.00
D) $41,905.00
E) $44,080.00

81) A company borrowed $10,000 by signing a 180-day promissory note at 9%. The total to be paid at maturity of the note is: (Use 360 days a year.)

A) $10,450
B) $10,900
C) $10,075
D) $11,800
E) $10,300

82) A finance company or bank that acquires ownership of another company's accounts receivable is called a:

A) Payer.
B) Pledger.
C) Factor.
D) Payee.
E) Pledgee.

83) Which of the following is not a benefit to factoring receivables?

A) Allows firms to receive cash earlier.
B) Passes ownership of the receivables to the factor.
C) There are no fees for factoring.
D) Seller avoids the cost of billing and accounting for receivables.
E) May pass the risk of bad debts to the factor.

84) A company factored $39,000 of its accounts receivable and was charged a 2% factoring fee. The journal entry to record this transaction would include a:

A) Debit to Cash of $38,220, a debit to Factoring Fee Expense of $780, and a credit to Accounts Receivable of $39,000.
B) Debit to Cash of $39,000 and a credit to Accounts Receivable of $39,000.
C) Debit to Cash of $39,780 and a credit to Accounts Receivable of $39,780.
D) Debit to Cash of $39,000, a credit to Factoring Fee Expense of $780, and a credit to Accounts Receivable of $38,220.
E) Debit to Cash of $39,000 and a credit to Notes Payable of $39,000.

85) A company factored $45,000 of its accounts receivable and was charged a 4% factoring fee. The journal entry to record this transaction would include a:

A) Debit to Cash of $45,000, a debit to Factoring Fee Expense of $1,800, and a credit to Accounts Receivable of $46,800.
B) Debit to Cash of $45,000 and a credit to Accounts Receivable of $45,000.
C) Debit to Cash of $43,200, a debit to Factoring Fee Expense of $1,800, and a credit to Accounts Receivable of $45,000.
D) Debit to Cash of $46,800 and a credit to Accounts Receivable of $46,800.
E) Debit to Cash of $45,000 and a credit to Notes Payable of $45,000.

86) The quality of receivables refers to:

A) The creditworthiness of sellers.
B) The method of collection.
C) The likelihood of collection without loss.
D) Sales turnover.
E) The interest rate.

87) The account receivable turnover measures:

A) How long it takes to sell accounts receivable to a factor.
B) How often, on average, receivables are collected during the period.
C) The relation of cash sales to credit sales.
D) How long it takes to sell merchandise inventory.
E) All of the options are correct.

88) Accounts receivable turnover is calculated by:

A) Dividing net sales by average accounts receivable.
B) Dividing net sales by average accounts receivable and multiplying by 365.
C) Dividing average accounts receivable by net sales.
D) Dividing average accounts receivable by net sales and multiplying by 365.
E) Dividing net income by average accounts receivable.

89) A company has net sales of $1,246,200 and average accounts receivable of $402,000. What is its accounts receivable turnover for the period?

A) 0.21
B) 5.20
C) 20.30
D) 73.40
E) 3.10

90) A company has net sales of $1,200,000 and average accounts receivable of $400,000. What is its accounts receivable turnover for the period?

A) 0.33
B) 5.00
C) 20.0
D) 73.0
E) 3.0

91) Pepperdine reported net sales of $8,500 million, net income of $126 million and average accounts receivable of $680 million. Its accounts receivable turnover is:

A) 37.8.
B) 12.5.
C) 68.3.
D) 7.1.
E) 51.7.

92) Axle Company's accounts receivable turnover was 9.9 for this year and 11.0 for last year. Betterman's turnover was 9.3 for this year and 9.3 for last year. These results imply that:

A) Betterman has the better turnover for both years.
B) Axle has the better turnover for both years.
C) Betterman's turnover is improving.
D) Axle's credit policies are too loose.
E) Betterman is collecting its receivables more quickly than Axle in both years.

93) A company had net sales of $540,000, total sales of $690,000, and an average accounts receivable of $83,000. Its accounts receivable turnover equals:

A) 0.78
B) 6.51
C) 0.12
D) 8.31
E) 0.15

94) A company had net sales of $600,000, total sales of $750,000, and an average accounts receivable of $75,000. Its accounts receivable turnover equals:

A) 0.13
B) 0.80
C) 7.75
D) 8.00
E) 10.00

95) A company had total sales of $960,000, net sales of $936,000, and an average accounts receivable of $117,000. Its accounts receivable turnover equals:

A) 8.0
B) 71.8
C) 63.6
D) 1.0
E) 8.2

96) A company had total sales of $600,000, net sales of $550,000, and an average accounts receivable of $88,000. Its accounts receivable turnover equals:

A) 6.25
B) 63.00
C) 54.80
D) 1.10
E) 6.30

97) The expense recognition principle, as applied to bad debts:

A) Requires that expenses be ignored if their effect on the financial statements is unimportant to users' business decisions.
B) Favors the use of the direct write-off method for bad debts.
C) Favors the use of the allowance method of accounting for bad debts.
D) Requires that bad debts be disclosed in the financial statements.
E) Requires that bad debts not be written off.

98) The materiality constraint, as applied to bad debts:

A) Permits the use of the direct write-off method when its results approximate that of the allowance method.
B) Requires use of the allowance method for bad debts.
C) Requires use of the direct write-off method.
D) Requires that bad debts not be written off.
E) Requires that expenses be reported in the same period as the sales they helped produce.

99) If the credit balance of the Allowance for Doubtful Accounts account exceeds the amount of a bad debt being written off, the entry to record the write-off against the allowance account results in:

A) An increase in the expenses of the current period.
B) An increase in current assets.
C) A reduction in equity.
D) No effect on the expenses of the current period.
E) A reduction in current liabilities.

100) On October 12 of the current year, a company determined that a customer's account receivable was uncollectible and that the account should be written off. Assuming the allowance method is used to account for bad debts, what effect will this write-off have on the company's net income and total assets?

A) Decrease in net income; no effect on total assets.
B) No effect on net income; no effect on total assets.
C) Decrease in net income; decrease in total assets.
D) Increase in net income; no effect on total assets.
E) No effect on net income; decrease in total assets.

101) On October 12 of the current year, a company determined that a customer's account receivable was uncollectible and that the account should be written off. Assuming the direct write-off method is used to account for bad debts, what effect will this write-off have on the company's net income and total assets?

A) Decrease in net income; no effect on total assets.
B) No effect on net income; no effect on total assets.
C) Decrease in net income; decrease in total assets.
D) Increase in net income; no effect on total assets.
E) No effect on net income; decrease in total assets.

102) Gideon Company uses the allowance method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $4,000 uncollectible account of its customer, A. Hopkins. The entry or entries Gideon makes to record the write off of the account on May 3 is:

A)

B)

C)

D)

E)

103) Gideon Company uses the allowance method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $2,000 uncollectible account of its customer, A. Hopkins. The entry or entries Gideon makes to record the write off of the account on May 3 is:

A)

B)

C)

D)

E)

104) Gideon Company uses the direct write-off method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $2,000 uncollectible account of its customer, A. Hopkins. The entry or entries Gideon makes to record the write off of the account on May 3 is:

A)

B)

C)

D)

E)

105) Gideon Company uses the allowance method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $2,000 uncollectible account of its customer, A. Hopkins. On July 10, Gideon received a check for the full amount of $2,000 from Hopkins. On July 10, the entry or entries Gideon makes to record the recovery of the bad debt is:

A)

B)

C)

D)

E)

106) Gideon Company uses the direct write-off method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $2,000 uncollectible account of its customer, A. Hopkins. On July 10, Gideon received a check for the full amount of $2,000 from Hopkins. On July 10, the entry or entries Gideon makes to record the recovery of the bad debt is:

A)

B)

C)

D)

E)

107) The allowance method that assumes a percent of a company’s credit sales for the period is uncollectible is:

A) The percent of sales method.
B) The percent of accounts receivable method.
C) The aging of accounts receivable method.
D) The direct write-off method.
E) The factoring method.

108) A method of estimating bad debts expense that involves classifying receivables by how long they are past due is called the:

A) Direct write-off method.
B) Aging of accounts receivable method.
C) Percentage of sales method.
D) Aging of investments method.
E) Percent of accounts receivable method.

109) Which of the following is an accounting method that (1) estimates and reports bad debts expense from credit sales during the period the sales are recorded, and (2) reports accounts receivable at the estimated amount of cash to be collected?

A) Allowance method of accounting for bad debts.
B) Aging of notes receivable method.
C) Adjustment method for uncollectible debts.
D) Direct write-off method of accounting for bad debts.
E) Cash basis method of accounting for bad debts.

110) On December 31 of the current year, the unadjusted trial balance of a company using the percent of receivables method to estimate bad debt included the following: Accounts Receivable, debit balance of $98,400; Allowance for Doubtful Accounts, credit balance of $1,081. What amount should be debited to Bad Debts Expense, assuming 5% of outstanding accounts receivable at the end of the current year are estimated to be uncollectible?

A) $1,081.
B) $3,839.
C) $4,920.
D) $6,001.
E) $2,947.

111) On December 31 of the current year, the unadjusted trial balance of a company using the percent of receivables method to estimate bad debt included the following: Accounts Receivable, debit balance of $95,250; Allowance for Doubtful Accounts, credit balance of $921. What amount should be debited to Bad Debts Expense, assuming 6% of outstanding accounts receivable at the end of the current year are estimated to be uncollectible?

A) $5,715.
B) $6,636.
C) $4,794.
D) $5,770.
E) $5,660.

112) At the end of the current year, using the aging of receivable method, management estimated that $27,000 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a debit balance of $750. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

A)

B)

C)

D)

E)

113) At the end of the current year, using the aging of receivable method, management estimated that $15,750 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a debit balance of $375. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

A)

B)

C)

D)

E)

114) At the end of the current year, using the aging of receivable method, management estimated that $25,750 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a credit balance of $475. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

A)

B)

C)

D)

E)

115) At the end of the current year, using the aging of receivable method, management estimated that $15,750 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a credit balance of $375. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

A)

B)

C)

D)

E)

116) A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts:

All sales are made on credit. Based on past experience, the company estimates that 0.3% of net sales are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

A) $2,939
B) $544
C) $1,879
D) $2,409
E) $1,604

117) A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts:

All sales are made on credit. Based on past experience, the company estimates that 0.6% of net sales are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

A) $1,275
B) $1,775
C) $4,500
D) $4,800
E) $5,500

118) A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts:

All sales are made on credit. Based on past experience, the company estimates that 0.5% of net sales are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

A) $1,310
B) $1,920
C) $3,860
D) $4,550
E) $5,080

119) A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts:

All sales are made on credit. Based on past experience, the company estimates that 0.6% of net sales are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

A) $1,275
B) $1,775
C) $1,500
D) $1,080
E) $2,500

120) A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts:

All sales are made on credit. Based on past experience, the company estimates 0.5% of net sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

A) Debit Bad Debts Expense $4,615; credit Allowance for Doubtful Accounts $4,615.
B) Debit Bad Debts Expense $3,985; credit Allowance for Doubtful Accounts $3,985.
C) Debit Bad Debts Expense $1,760; credit Allowance for Doubtful Accounts $1,760.
D) Debit Bad Debts Expense $2,390; credit Allowance for Doubtful Accounts $2,390.
E) Debit Bad Debts Expense $3,355; credit Allowance for Doubtful Accounts $3,355.

121) A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts:

All sales are made on credit. Based on past experience, the company estimates 0.6% of net sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

A) Debit Bad Debts Expense $1,800; credit Allowance for Doubtful Accounts $1,800.
B) Debit Bad Debts Expense $2,300; credit Allowance for Doubtful Accounts $2,300.
C) Debit Bad Debts Expense $4,000; credit Allowance for Doubtful Accounts $4,000.
D) Debit Bad Debts Expense $4,500; credit Allowance for Doubtful Accounts $4,500.
E) Debit Bad Debts Expense $5,000; credit Allowance for Doubtful Accounts $5,000.

122) A company has $98,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 6% of outstanding receivables are uncollectible. The current balance (before adjustments) in the allowance for doubtful accounts is a(n) $880 debit. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for:

A) $6,760
B) $5,000
C) $880
D) $5,880
E) None of these is correct.

123) A company has $90,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 4% of outstanding receivables are uncollectible. The current balance (before adjustments) in the allowance for doubtful accounts is an $800 debit. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for:

A) $3,600
B) $3,568
C) $3,632
D) $2,800
E) $4,400

124) A company has $94,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 4% of outstanding receivables are uncollectible. The current balance (before adjustments) in the allowance for doubtful accounts is a(n) $840 credit. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for:

A) $2,920
B) $3,726
C) $3,794
D) $3,760
E) $4,600

125) A company has $90,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 4% of outstanding receivables are uncollectible. The current balance (before adjustments) in the allowance for doubtful accounts is an $800 credit. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for:

A) $2,800
B) $3,568
C) $3,632
D) $3,600
E) $4,400

126) Jasper makes a $80,000, 90-day, 7% cash loan to Clayborn Company. Jasper's entry to record the transaction should be:

A) Debit Notes Receivable for $80,000; credit Cash $80,000.
B) Debit Accounts Receivable $80,000; credit Notes Receivable $80,000.
C) Debit Cash $80,000; credit Notes Receivable for $80,000.
D) Debit Notes Payable $80,000; credit Accounts Payable $80,000.
E) Debit Notes Receivable $80,000; credit Sales $80,000.

127) Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Company. Jasper's entry to record the transaction should be:

A) Debit Notes Receivable for $25,000; credit Cash $25,000.
B) Debit Accounts Receivable $25,000; credit Notes Receivable $25,000.
C) Debit Cash $25,000; credit Notes Receivable for $25,000.
D) Debit Notes Payable $25,000; credit Accounts Payable $25,000.
E) Debit Notes Receivable $25,000; credit Sales $25,000.

128) Jasper makes a $36,000, 90-day, 9.0% cash loan to Clayborn Company. The amount of interest that Jasper will collect on the loan is: (Use 360 days a year.)

A) $3,240.
B) $270.00.
C) $810.00.
D) $36.00.
E) $1,620.00.

129) Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Company. The amount of interest that Jasper will collect on the loan is: (Use 360 days a year.)

A) $1,750.
B) $145.83.
C) $437.50.
D) $19.44.
E) $875.00.

130) Jasper makes a $34,000, 90-day, 8.0% cash loan to Clayborn Company. Jasper's entry to record the collection of the note and interest at maturity should be: (Use 360 days a year.)

A) Debit Cash for $34,000; credit Notes Receivable $34,000.
B) Debit Cash $34,680.00; credit Interest Revenue $680.00; credit Notes Receivable $34,000.
C) Debit Cash $34,680.00; credit Notes Receivable for $34,680.00.
D) Debit Notes Payable $34,000; Debit Interest Expense $2,720; credit Cash $36,720.
E) Debit Cash $36,720; credit Interest Revenue $2,720, credit Notes Receivable $34,000.

131) Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Company. Jasper's entry to record the collection of the note and interest at maturity should be: (Use 360 days a year.)

A) Debit Cash for $25,000; credit Notes Receivable $25,000.
B) Debit Cash $25,437.50; credit Interest Revenue $437.50; credit Notes Receivable $25,000.
C) Debit Cash $25,437.50; credit Notes Receivable for $25,437.50.
D) Debit Notes Payable $25,000; Debit Interest Expense $1,750; credit Cash $26,750.
E) Debit Cash $26,750; credit Interest Revenue $1,750, credit Notes Receivable $25,000.

132) Duerr Company makes a $65,000, 90-day, 12% cash loan to Ryan Company. The note and interest to be collected at maturity is: (Use 360 days a year.)

A) $65,000.
B) $1,950.
C) $66,950.
D) $63,050.
E) $72,800.

133) Duerr Company makes a $60,000, 60-day, 12% cash loan to Ryan Company. The note and interest to be collected at maturity is: (Use 360 days a year.)

A) $60,000.
B) $1,200.
C) $61,200.
D) $58,800.
E) $67,200.

134) Lemming makes an $18,750, 120-day, 8% cash loan to Notions Company on November 1. Lemming's end-of-period adjusting entry on December 31 should be:

A) Debit Cash for $250; credit Notes Receivable $250.
B) Debit Interest Revenue $500; credit Notes Receivable $500.
C) Debit Interest Receivable $250; credit Interest Revenue $250.
D) Debit Interest Receivable $500; credit Interest Revenue $500.
E) Debit Notes Receivable $500; credit Interest Revenue $500.

135) The total amount of the note and interest due on the maturity date of a $10,500, 120-day 6%, note receivable is: (Use 360 days a year.)

A) $9,870.
B) $10,290.
C) $10,500.
D) $10,710.
E) $11,130.

136) The total amount of the note and interest due on the maturity date of a $6,000, 60-day 4%, note receivable is: (Use 360 days a year.)

A) $6,000.
B) $6,240.
C) $5,760.
D) $6,040.
E) $5,960.

137) Giorgio Italian Market bought $5,000 worth of merchandise from Food Suppliers and signed a 90-day, 10% promissory note for the $5,000. Food Supplier's journal entry to record the sales transaction is:

A) Debit Notes Receivable $5,125; credit Sales $5,125.
B) Debit Notes Receivable $5,000; credit Sales $5,000.
C) Debit Accounts Receivable $5,000; credit Sales $5,000.
D) Debit Accounts Receivable $5,125; credit Sales $5,125.
E) Debit Notes Receivable $5,000; debit Interest Receivable $125; credit Sales $5,125.

138) Giorgio Italian Market bought $4,000 worth of merchandise from Food Suppliers and signed a 90-day, 6% promissory note for the $4,000. Food Supplier's journal entry to record the sales transaction is:

A) Debit Accounts Receivable $4,000; credit Sales $4,000
B) Debit Notes Receivable $4,000; credit Sales $4,000
C) Debit Accounts Receivable $4,060; credit Sales $4,060
D) Debit Notes Receivable $4,060; credit Sales $4,060
E) Debit Notes Receivable $4,000; debit Interest Receivable $60; credit Sales $4,060

139) Giorgio Italian Market bought $6,800 worth of merchandise from Food Suppliers and signed a 90-day, 10% promissory note for the $6,800. Food Supplier's journal entry to record the collection on the maturity date is: (Use 360 days a year.)

A) Debit Cash $6,970; credit Notes Receivable $6,970
B) Debit Notes Receivable $6,800; credit Cash $6,800
C) Debit Cash $6,800; debit Interest Receivable $170; credit Sales $6,970
D) Debit Notes Receivable $6,970; credit Sales $6,970
E) Debit Cash $6,970; credit Interest Revenue $170; credit Notes Receivable $6,800

140) Giorgio Italian Market bought $4,000 worth of merchandise from Food Suppliers and signed a 90-day, 6% promissory note for the $4,000. Food Supplier's journal entry to record the collection on the maturity date is: (Use 360 days a year.)

A) Debit Cash $4,060; credit Notes Receivable $4,060
B) Debit Notes Receivable $4,000; credit Cash $4,000
C) Debit Cash $4,000; debit Interest Receivable $60; credit Sales $4,060
D) Debit Notes Receivable $4,060; credit Sales $4,060
E) Debit Cash $4,060; credit Interest Revenue $60; credit Notes Receivable $4,000

141) Jax Recording Studio purchased $8,200 in electronic components from Music World. Jax signed a 90-day, 10% promissory note for $8,200. Music World's journal entry to record the sales transaction is:

A) Debit Notes Receivable $8,200; credit Sales $8,200
B) Debit Accounts Receivable $8,200; credit Sales $8,200
C) Debit Accounts Receivable $8,405; credit Sales $8,405
D) Debit Notes Receivable $8,405; credit Sales $8,405
E) Debit Notes Receivable $8,405; debit Interest Receivable $205; credit Sales $8,200

142) Jax Recording Studio purchased $7,800 in electronic components from Music World. Jax signed a 60-day, 8% promissory note for $7,800. Music World's journal entry to record the sales transaction is:

A) Debit Accounts Receivable $7,800; credit Sales $7,800
B) Debit Accounts Receivable $7,904; credit Sales $7,904
C) Debit Notes Receivable $7,800; credit Sales $7,800
D) Debit Notes Receivable $7,904; credit Sales $7,904
E) Debit Notes Receivable $7,800; debit Interest Receivable $104; credit Sales $7,904

143) Jax Recording Studio purchased $7,800 in electronic components from Music World. Jax signed a 60-day, 8% promissory note for $7,800. Music World's journal entry to record the collection on the maturity date is:

A) Debit Cash $7,800; credit Accounts Receivable $7,800
B) Debit Accounts Receivable $7,904; credit Notes Receivable $7,800; credit Interest Receivable $104
C) Debit Notes Receivable $8,008; credit Cash $7,904; credit Interest Revenue $104
D) Debit Cash $7,904; credit Notes Receivable $7,800; credit Interest Revenue $104
E) Debit Cash $7,904; credit Notes Receivable $7,904

144) Honoring a note receivable indicates that the maker has:

A) Signed.
B) Paid in full.
C) Guaranteed.
D) Notarized.
E) Cosigned.

145) Failure by a promissory notes' maker to pay the amount due at maturity is known as:

A) Protesting a note.
B) Closing a note.
C) Dishonoring a note.
D) Discounting a note.
E) Depreciating a note.

146) Uniform Supply accepted a $14,800, 90-day, 6% note from Tracy Janitorial on October 17. What entry should Uniform Supply make on January 15 of the next year when the note is paid? (Assume reversing entries are not made.) (Use 360 days a year.)

A) Debit Cash $15,022; credit Interest Revenue $185; credit Interest Receivable $37; credit Notes Receivable $14,800.
B) Debit Cash $15,022; credit Interest Revenue $222; credit Notes Receivable $14,800.
C) Debit Cash $15,022; credit Interest Revenue $37; credit Interest Receivable $185; credit Notes Receivable $14,800.
D) Debit Notes Receivable $14,800; debit Interest Receivable $222; credit Sales $15,022.
E) Debit Cash $15,022; credit Notes Receivable $15,022.

147) Uniform Supply accepted a $4,800, 90-day, 10% note from Tracy Janitorial on October 17. What entry should Uniform Supply make on January 15 of the next year when the note is paid? (Assume reversing entries are not made.) (Use 360 days a year.)

A) Debit Notes Receivable $4,800; debit Interest Receivable $120; credit Sales $4,920.
B) Debit Cash $4,920; credit Notes Receivable $4,920.
C) Debit Cash $4,920; credit Interest Revenue $100; credit Interest Receivable $20; credit Notes Receivable $4,800.
D) Debit Cash $4,920; credit Interest Revenue $20; credit Interest Receivable $100; credit Notes Receivable $4,800.
E) Debit Cash $4,920; credit Interest Revenue $120; credit Notes Receivable $4,800.

148) Uniform Supply accepted a $4,800, 90-day, 10% note from Tracy Janitorial on October 17. What entry should Uniform Supply make on December 31, to record the accrued interest on the note?

A) Debit Cash $20; credit Notes Receivable $20.
B) Debit Cash $100; credit Notes Receivable $100.
C) Debit Interest Receivable $20; credit Interest Revenue $20.
D) Debit Interest Receivable $100; credit Interest Revenue $100.
E) Debit Cash $120; credit Interest Revenue $100; credit Interest Receivable $20.

149) Uniform Supply accepted a $5,200, 90-day, 12% note from Tracy Janitorial on October 17. If the note is dishonored, but Uniform Supply intends to continue collection efforts, what entry should Uniform Supply make on January 15 of the next year? (Assume no reversing entries are made.) (Use 360 days a year.)

A) Debit Accounts Receivable $5,356; credit Interest Revenue $26; credit Interest Receivable $130, credit Notes Receivable $5,200.
B) Debit Cash $5,356; credit Interest Revenue $130; credit Interest Receivable $26, credit Notes Receivable $5,200.
C) Debit Notes Receivable $5,200; debit Interest Receivable $156; credit Sales $5,356.
D) Debit Cash $5,356; credit Notes Receivable $5,356.
E) Debit Cash $5,356; credit Interest Revenue $26; credit Interest Receivable $130, credit Notes Receivable $5,200.

150) Uniform Supply accepted a $4,800, 90-day, 10% note from Tracy Janitorial on October 17. If the note is dishonored, but Uniform Supply intends to continue collection efforts, what entry should Uniform Supply make on January 15 of the next year? (Assume no reversing entries are made.) (Use 360 days a year.)

A) Debit Notes Receivable $4,800; debit Interest Receivable $120; credit Sales $4,920.
B) Debit Cash $4,920; credit Notes Receivable $4,920.
C) Debit Cash $4,920; credit Interest Revenue $100; credit Interest Receivable $20, credit Notes Receivable $4,800.
D) Debit Cash $4,920; credit Interest Revenue $20; credit Interest Receivable $100, credit Notes Receivable $4,800.
E) Debit Accounts Receivable $4,920; credit Interest Revenue $20; credit Interest Receivable $100, credit Notes Receivable $4,800.

151) Valley Spa purchased $11,400 in plumbing components from Tubman Company Valley Spa signed a 150-day, 10% promissory note for $11,400. If the note is dishonored, what is the amount due on the note? (Use 360 days a year.)

A) $11,400
B) $11,650
C) $475
D) $11,730
E) $11,875

152) Valley Spa purchased $7,800 in plumbing components from Tubman Company Valley Spa signed a 60-day, 10% promissory note for $7,800. If the note is dishonored, what is the amount due on the note? (Use 360 days a year.)

A) $130
B) $7,800
C) $7,930
D) $8,050
E) $8,130

153) Valley Spa purchased $10,800 in plumbing components from Tubman Company Valley Spa signed a 60-day, 14% promissory note for $10,800. If the note is dishonored, but Tubman intends to continue collection efforts, what is the journal entry made by Tubman to record the dishonored note? (Use 360 days a year.)

A) Debit Accounts Receivable $11,052; debit Bad Debt Expense $252; credit Notes Receivable $10,800.
B) Debit Bad Debt Expense $11,052; credit Accounts Receivable $11,052.
C) Debit Bad Debt Expense $10,800; credit Notes Receivable $10,800.
D) Debit Accounts Receivable—Valley Spa $10,800; credit Notes Receivable $10,800.
E) Debit Accounts Receivable—Valley Spa $11,052, credit Interest Revenue $252; credit Notes Receivable $10,800.

154) Valley Spa purchased $7,800 in plumbing components from Tubman Company Valley Spa signed a 60-day, 10% promissory note for $7,800. If the note is dishonored, but Tubman intends to continue collection efforts, what is the journal entry made by Tubman to record the dishonored note? (Use 360 days a year.)

A) Debit Accounts Receivable $7,930; debit Bad Debt Expense $130; credit Notes Receivable $8,060.
B) Debit Bad Debt Expense $7,930; credit Accounts Receivable $7,930.
C) Debit Bad Debt Expense $7,800; credit Notes Receivable $7,800.
D) Debit Accounts Receivable—Valley Spa $7,800; credit Notes Receivable $7,800.
E) Debit Accounts Receivable—Valley Spa $7,930, credit Interest Revenue $130; credit Notes Receivable $7,800.

155) Which of the following is not true about the Allowance for Doubtful Accounts?

A) It is a contra asset account.
B) It is used instead of reducing accounts receivable directly.
C) It is debited when uncollectible accounts are written off.
D) It is a liability account.
E) It is credited when bad debts expense is estimated and recorded.

156) Jervis sells $3,900 of its accounts receivable to Northern Bank in order to obtain necessary cash. Northern Bank charges a 3% factoring fee. What entry should Jervis make to record the transaction?

A) Debit Cash $3,783; debit Factoring Fee Expense $117; credit Accounts Receivable $3,900
B) Debit Accounts Receivable $3,783; debit Factoring Fee Expense $117; credit Cash $3,900.
C) Debit Cash $3,900; credit Factoring Fee Expense $117; credit Accounts Receivable $3,900
D) Debit Cash $3,783; credit Accounts Receivable $3,783
E) Debit Accounts Receivable $3,900; credit Factoring Fee Expense $117; credit Cash $3,783

157) Jervis sells $75,000 of its accounts receivable to Northern Bank in order to obtain necessary cash. Northern Bank charges a 5% factoring fee. What entry should Jervis make to record the transaction?

A) Debit Cash $71,250; debit Factoring Fee Expense $3,750; credit Accounts Receivable $75,000
B) Debit Accounts Receivable $71,250; debit Factoring Fee Expense $3,750; credit Cash $75,000
C) Debit Cash $75,000; credit Factoring Fee Expense $3,750; credit Accounts Receivable $75,000
D) Debit Cash $71,250; credit Accounts Receivable $71,250
E) Debit Accounts Receivable $75,000; credit Factoring Fee Expense $3,750; credit Cash $71,250

158) Jervis accepts all major bank credit cards, including those issued by Northern Bank (NB), which assesses a 5.0% charge on sales for using its card. On June 28, Jervis had $4,400 in Northern Bank (NB) Card credit sales. What entry should Jervis make on June 28 to record the deposit?

A) Debit Cash $4,400; credit Sales $4,400
B) Debit Accounts Receivable $4,400; credit Sales $4,400
C) Debit Cash $4,620.00; credit Credit Card Expense $220.00; credit Sales $4,400
D) Debit Cash $4,180.00; debit Credit Card Expense $220.00; credit Sales $4,400
E) Debit Accounts Receivable $4,180.00; debit Credit Card Expense $220.00; credit Sales $4,400

159) Jervis accepts all major bank credit cards, including those issued by Northern Bank (NB), which assesses a 3% charge on sales for using its card. On June 28, Jervis had $3,500 in Northern Bank (NB) Card credit sales. What entry should Jervis make on June 28 to record the deposit?

A) Debit Cash $3,500; credit Sales $3,500
B) Debit Accounts Receivable $3,500; credit Sales $3,500
C) Debit Cash $3,605; credit Credit Card Expense $105; credit Sales $3,500
D) Debit Cash $3,395; debit Credit Card Expense $105; credit Sales $3,500
E) Debit Accounts Receivable $3,395; debit Credit Card Expense $105; credit Sales $3,500

160) Brinker accepts all major bank credit cards, including First Savings Bank's, which assesses a 4% charge on sales for using its card. On May 26, Brinker had $6,300 in First Savings Bank Card credit sales. What entry should Brinker make on May 26 to record the deposit?

A) Debit Accounts Receivable $6,048; debit Credit Card Expense $252; credit Sales $6,300.
B) Debit Accounts Receivable $6,300; credit Sales $6,300.
C) Debit Cash $6,300; credit Sales $6,300.
D) Debit Cash $6,552; credit Credit Card Expense $252; credit Sales $6,300.
E) Debit Cash $6,048; debit Credit Card Expense $252; credit Sales $6,300.

161) Brinker accepts all major bank credit cards, including First Savings Bank's, which assesses a 2.5% charge on sales for using its card. On May 26, Brinker had $4,800 in First Savings Bank Card credit sales. What entry should Brinker make on May 26 to record the deposit?

A) Debit Accounts Receivable $4,800; credit Sales $4,800.
B) Debit Cash $4,680; debit Credit Card Expense $120; credit Sales $4,800.
C) Debit Cash $4,800; credit Sales $4,800.
D) Debit Cash $4,920; credit Credit Card Expense $120; credit Sales $4,800.
E) Debit Accounts Receivable $4,680; debit Credit Card Expense $120; credit Sales $4,800.

162) Craigmont uses the allowance method to account for uncollectible accounts. Its year-end unadjusted trial balance shows Accounts Receivable of $128,500, allowance for doubtful accounts of $905 (credit) and sales of $1,045,000. If uncollectible accounts are estimated to be 6% of accounts receivable, what is the amount of the bad debts expense adjusting entry?

A) $8,615
B) $7,710
C) $6,805
D) $6,990
E) $7,140

163) Craigmont uses the allowance method to account for uncollectible accounts. Its year-end unadjusted trial balance shows Accounts Receivable of $104,500, allowance for doubtful accounts of $665 (credit) and sales of $925,000. If uncollectible accounts are estimated to be 4% of accounts receivable, what is the amount of the bad debts expense adjusting entry?

A) $4,845
B) $4,180
C) $3,515
D) $3,700
E) $3,850

164) Craigmont uses the allowance method to account for uncollectible accounts. Its year-end unadjusted trial balance shows Accounts Receivable of $110,500, allowance for doubtful accounts of $725 (credit) and sales of $955,000. If uncollectible accounts are estimated to be 0.8% of sales, what is the amount of the bad debts expense adjusting entry?

A) $7,640
B) $6,915
C) $8,365
D) $7,765
E) $7,840

165) Craigmont uses the allowance method to account for uncollectible accounts. Its year-end unadjusted trial balance shows Accounts Receivable of $104,500, allowance for doubtful accounts of $665 (credit) and sales of $925,000. If uncollectible accounts are estimated to be 0.5% of sales, what is the amount of the bad debts expense adjusting entry?

A) $4,625
B) $3,960
C) $5,290
D) $4,750
E) $4,825

166) On July 9, Mifflin Company receives a $8,500, 90-day, 8% note from customer Payton Summers as payment on account. Compute the maturity date for the note.

A) October 8
B) October 7
C) November 8
D) November 7
E) November 6

167) On July 9, Mifflin Company receives a $7,200, 90-day, 8% note from customer Payton Summers as payment on account. Compute the amount due at maturity for the note and interest. (Use 360 days a year.)

A) $7,309
B) $7,296
C) $7,200
D) $7,344
E) $6,939

168) On July 9, Mifflin Company receives an $8,500, 90-day, 8% note from customer Payton Summers as payment on account. Compute the amount due at maturity for the note and interest. (Use 360 days a year.)

A) $8,628
B) $8,192
C) $8,613
D) $8,500
E) $8,670

169) On July 9, Mifflin Company receives a $9,000, 90-day, 10% note from customer Payton Summers to replace an account receivable. What entry should be made by Mifflin on July 9 to record receipt of the note?

A) Debit Notes Receivable $9,298; credit Interest Revenue $298; credit Accounts Receivable $9,000.
B) Debit Notes Receivable $9,225; credit Sales $9,225.
C) Debit Notes Receivable $9,000; credit Sales $9,000.
D) Debit Notes Receivable $9,000; credit Accounts Receivable $9,000.
E) Debit Accounts Receivable $9,000; credit Sales $9,000.

170) On July 9, Mifflin Company receives an $8,500, 90-day, 8% note from customer Payton Summers to replace an account receivable. What entry should be made by Mifflin on July 9 to record receipt of the note?

A) Debit Accounts Receivable $8,500; credit Sales $8,500.
B) Debit Notes Receivable $8,670; credit Sales $8,670.
C) Debit Notes Receivable $8,500; credit Accounts Receivable $8,500.
D) Debit Notes Receivable $8,500; credit Sales $8,500.
E) Debit Notes Receivable $8,725; credit Interest Revenue $225; credit Accounts Receivable $8,500.

171) On July 9, Mifflin Company receives an $8,700, 120-day, 6% note from customer Payton Summers to replace an account receivable. What entry should be made by Mifflin on the maturity date assuming the maker pays in full, and no adjusting entries have been made related to the note? (Use 360 days a year.)

A) Debit Cash $8,787; credit Interest Revenue $87; credit Notes Receivable $8,700.
B) Debit Cash $8,874; credit Interest Revenue $174; credit Notes Receivable $8,700.
C) Debit Cash $8,799; credit Interest Revenue $99; credit Notes Receivable $8,700.
D) Debit Cash $8,700; credit Notes Receivable $8,700.
E) Debit Notes Receivable $8,700; debit Interest Receivable $174; credit Sales $8,874.

172) On July 9, Mifflin Company receives an $8,500, 90-day, 8% note from customer Payton Summers to replace an account receivable. What entry should be made by Mifflin on the maturity date assuming the maker pays in full, and no adjusting entries have been made related to the note? (Use 360 days a year.)

A) Debit Notes Receivable $8,500; debit Interest Receivable $170; credit Sales $8,670.
B) Debit Cash $8,670; credit Interest Revenue $170; credit Notes Receivable $8,500.
C) Debit Cash $8,628; credit Interest Revenue $128; credit Notes Receivable $8,500.
D) Debit Cash $8,613; credit Interest Revenue $113; credit Notes Receivable $8,500.
E) Debit Cash $8,500; credit Notes Receivable $8,500.

173) On November 19, Nicholson Company receives a $19,200, 60-day, 5% note from a customer to replace an account receivable. What adjusting entry should be made by Nicholson on the December 31 year-end? (Use 360 days a year.)

A) Debit Interest Revenue $160; credit Interest Receivable $160.
B) Debit Interest Receivable $112; credit Interest Revenue $112.
C) Debit Interest Receivable $160; credit Interest Revenue $160.
D) Debit Notes Receivable $48; credit Interest Revenue $48.
E) Debit Notes Receivable $112; credit Interest Receivable $112.

174) On November 19, Nicholson Company receives a $15,000, 60-day, 8% note from a customer to replace an account receivable. What adjusting entry should be made by Nicholson on the December 31 year-end? (Use 360 days a year.)

A) Debit Interest Receivable $1,200; credit Interest Revenue $1,200.
B) Debit Interest Receivable $140; credit Interest Revenue $140.
C) Debit Notes Receivable $140; credit Interest Revenue $140.
D) Debit Notes Receivable $140; credit Interest Receivable $140.
E) Debit Interest Revenue $200; credit Interest Receivable $200.

175) On November 1, Orpheum Company accepted a $11,500, 90-day, 8% note from a customer to replace an account receivable. What entry should be made by Orpheum on the November 1 to record the acceptance of the note?

A) Debit Note Receivable $11,500; credit Cash $11,500.
B) Debit Note Receivable $11,500; credit Accounts Receivable $11,500.
C) Debit Note Receivable $11,500; credit Sales $11,500.
D) Debit Note Receivable $11,730; credit Accounts Receivable $11,500; credit Interest Revenue $230.
E) Debit Sales $11,500; credit Accounts Receivable $11,500.

176) On November 1, Orpheum Company accepted a $10,000, 90-day, 8% note from a customer to replace an account receivable. What entry should be made by Orpheum on the November 1 to record the acceptance of the note?

A) Debit Note Receivable $10,000; credit Cash $10,000.
B) Debit Note Receivable $10,000; credit Accounts Receivable $10,000.
C) Debit Note Receivable $10,000; credit Sales $10,000.
D) Debit Note Receivable $10,200; credit Accounts Receivable $10,000; credit Interest Revenue $200.
E) Debit Sales $10,000; credit Accounts Receivable $10,000.

177) The unadjusted trial balance at year-end for a company that uses the percent of receivables method to determine its bad debts expense, reports the following selected amounts:

All sales are made on credit. Based on past experience, the company estimates 3.5% of ending account receivable to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

A) Debit Bad Debts Expense $17,770; credit Allowance for Doubtful Accounts $17,770.
B) Debit Bad Debts Expense $7,770; credit Allowance for Doubtful Accounts $7,770.
C) Debit Bad Debts Expense $13,785; credit Allowance for Doubtful Accounts $13,785.
D) Debit Bad Debts Expense $15,155; credit Allowance for Doubtful Accounts $15,155.
E) Debit Bad Debts Expense $16,525; credit Allowance for Doubtful Accounts $16,525.

178) The unadjusted trial balance at year-end for a company that uses the percent of receivables method to determine its bad debts expense, reports the following selected amounts:

All sales are made on credit. Based on past experience, the company estimates 3.5% of ending account receivable to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

A) Debit Bad Debts Expense $13,975; credit Allowance for Doubtful Accounts $13,975.
B) Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225.
C) Debit Bad Debts Expense $16,475; credit Allowance for Doubtful Accounts $16,475.
D) Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350.
E) Debit Bad Debts Expense $17,350; credit Allowance for Doubtful Accounts $17,350.

179) The unadjusted trial balance at year-end for a company that uses the percent of receivables method to determine its bad debts expense reports the following selected amounts:

All sales are made on credit. Based on past experience, the company estimates 2.5% of ending account receivable to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

A) Debit Bad Debts Expense $9,865; credit Allowance for Doubtful Accounts $9,865.
B) Debit Bad Debts Expense $11,275; credit Allowance for Doubtful Accounts $11,275.
C) Debit Bad Debts Expense $12,685; credit Allowance for Doubtful Accounts $12,685.
D) Debit Bad Debts Expense $5,650; credit Allowance for Doubtful Accounts $5,650.
E) Debit Bad Debts Expense $15,650; credit Allowance for Doubtful Accounts $15,650.

180) The unadjusted trial balance at year-end for a company that uses the percent of receivables method to determine its bad debts expense reports the following selected amounts:

All sales are made on credit. Based on past experience, the company estimates 3.5% of ending account receivable to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

A) Debit Bad Debts Expense $13,975; credit Allowance for Doubtful Accounts $13,975.
B) Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225.
C) Debit Bad Debts Expense $16,475; credit Allowance for Doubtful Accounts $16,475.
D) Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350.
E) Debit Bad Debts Expense $17,350; credit Allowance for Doubtful Accounts $17,350.

181) The following selected amounts are reported on the year-end unadjusted trial balance report for a company that uses the percent of sales method to determine its bad debts expense.

All sales are made on credit. Based on past experience, the company estimates 2.0% of sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

A) Debit Bad Debts Expense $43,460; credit Allowance for Doubtful Accounts $43,460.
B) Debit Bad Debts Expense $9,980; credit Allowance for Doubtful Accounts $9,980.
C) Debit Bad Debts Expense $40,940; credit Allowance for Doubtful Accounts $40,940.
D) Debit Bad Debts Expense $8,720; credit Allowance for Doubtful Accounts $8,720.
E) Debit Bad Debts Expense $42,200; credit Allowance for Doubtful Accounts $42,200.

182) The following selected amounts are reported on the year-end unadjusted trial balance report for a company that uses the percent of sales method to determine its bad debts expense.

All sales are made on credit. Based on past experience, the company estimates 1% of sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

A) Debit Bad Debts Expense $19,750; credit Allowance for Doubtful Accounts $19,750.
B) Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225.
C) Debit Bad Debts Expense $22,250; credit Allowance for Doubtful Accounts $22,250.
D) Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350.
E) Debit Bad Debts Expense $21,000; credit Allowance for Doubtful Accounts $21,000.

183) On February 1, a customer's account balance of $4,100 was deemed to be uncollectible. What entry should be recorded on February 1 to record the write-off assuming the company uses the allowance method?

A) Debit Allowance for Doubtful Accounts $4,100; credit Bad Debts Expense $4,100.
B) Debit Accounts Receivable $4,100; credit Allowance for Doubtful Accounts $4,100.
C) Debit Allowance for Doubtful Accounts $4,100; credit Accounts Receivable $4,100.
D) Debit Bad Debts Expense $4,100; credit Allowance for Doubtful Accounts $4,100.
E) Debit Bad Debts Expense $4,100; credit Accounts Receivable $4,100.

184) On February 1, a customer's account balance of $2,300 was deemed to be uncollectible. What entry should be recorded on February 1 to record the write-off assuming the company uses the allowance method?

A) Debit Bad Debts Expense $2,300; credit Accounts Receivable $2,300.
B) Debit Allowance for Doubtful Accounts $2,300; credit Bad Debts Expense $2,300.
C) Debit Allowance for Doubtful Accounts $2,300; credit Accounts Receivable $2,300.
D) Debit Bad Debts Expense $2,300; credit Allowance for Doubtful Accounts $2,300.
E) Debit Accounts Receivable $250; credit Allowance for Doubtful Accounts $2,300.

185) Which of the following statements regarding the allowance method is false?

A) The allowance method estimates bad debts expense at the end of each accounting period and records it with an adjusting entry.
B) The Allowance for Doubtful Accounts is a contra asset account.
C) The Allowance for Doubtful Accounts is subtracted from Accounts Receivable to report receivables at realizable value.
D) The allowance method does not record bad debt expense until a customer’s account receivable is determined to be uncollectible.
E) The write-off for an uncollectible account does not impact the income statement.

186) Using the allowance method for bad debts, the end of the period adjusting entry for estimated bad debts is:

A) Debit Bad Debts Expense and credit Accounts Receivable.
B) Debit Allowance for Doubtful Accounts and credit Accounts Receivable.
C) Debit Accounts Receivable and credit Allowance for Doubtful Accounts.
D) Debit Allowance for Doubtful Accounts and credit Bad Debts Expense.
E) Debit Bad Debts Expense and credit Allowance for Doubtful Accounts.

187) Using the allowance method for bad debts expense, the Allowance for Doubtful Accounts is decreased:

A) When the estimate of bad debts is expensed.
B) When a specific customer account is written off.
C) When a specific customer account is collected.
D) When a sale to a credit customer is made.
E) When all supplier accounts are considered collectible.

188) Winkler Company borrows $97,000 and pledges its receivables as security. The journal entry to record this transaction would be:

A) Debit Cash of $97,000 and credit Accounts Receivable $97,000.
B) Debit Cash of $97,000 and credit Accounts Payable $97,000.
C) Debit Note Receivable $97,000 and credit Accounts Receivable $97,000.
D) Debit Cash $97,000 and credit Notes Payable $97,000.
E) Debit Accounts Receivable $97,000 and credit Notes Payable $97,000.

189) Winkler Company borrows $85,000 and pledges its receivables as security. The journal entry to record this transaction would be:

A) Debit Cash of $85,000 and credit Accounts Receivable $85,000.
B) Debit Cash of $85,000 and credit Accounts Payable $85,000.
C) Debit Note Receivable $85,000 and credit Accounts Receivable $85,000.
D) Debit Cash $85,000 and credit Notes Payable $85,000.
E) Debit Accounts Receivable $85,000 and credit Notes Payable $85,000.

190) Mullis Company sold merchandise on account to a customer for $745, terms n/30. The journal entry to record this sale transaction would be:

A) Debit Cash of $745 and credit Sales $745.
B) Debit Cash of $745 and credit Accounts Receivable $745.
C) Debit Accounts Receivable $745 and credit Sales $745.
D) Debit Accounts Receivable $745 and credit Cash $745.
E) Debit Sales $745 and credit Accounts Receivable $745.

191) Mullis Company sold merchandise on account to a customer for $625, terms n/30. The journal entry to record this sale transaction would be:

A) Debit Cash of $625 and credit Sales $625.
B) Debit Cash of $625 and credit Accounts Receivable $625.
C) Debit Accounts Receivable $625 and credit Sales $625.
D) Debit Accounts Receivable $625 and credit Cash $625.
E) Debit Sales $625 and credit Accounts Receivable $625.

192) Mullis Company sold merchandise on account to a customer for $625, terms n/30. The journal entry to record the collection on account would be:

A) Debit Cash of $625 and credit Sales $625.
B) Debit Cash of $625 and credit Accounts Receivable $625.
C) Debit Accounts Receivable $625 and credit Sales $625.
D) Debit Accounts Receivable $625 and credit Cash $625.
E) Debit Sales $625 and credit Accounts Receivable $625.

193) MacKenzie Company sold $340 of merchandise to a customer who used a Regional Bank credit card. Regional Bank charges a 2.5% fee for sales on its credit cards. The journal entry to record this sale transaction would be:

A) Debit Cash of $340 and credit Sales $340.
B) Debit Cash of $340 and credit Accounts Receivable $340.
C) Debit Accounts Receivable $340 and credit Sales $340.
D) Debit Cash $331.50; debit Credit Card Expense $8.50 and credit Sales $340.
E) Debit Cash $331.50 and credit Sales $331.50.

194) MacKenzie Company sold $300 of merchandise to a customer who used a Regional Bank credit card. Regional Bank charges a 1.5% fee for sales on its credit cards. The journal entry to record this sale transaction would be:

A) Debit Cash of $300 and credit Sales $300.
B) Debit Cash of $300 and credit Accounts Receivable $300.
C) Debit Accounts Receivable $300 and credit Sales $300.
D) Debit Cash $295.50; debit Credit Card Expense $4.50 and credit Sales $300.
E) Debit Cash $295.50 and credit Sales $295.50.

195) MacKenzie Company sold $480 of merchandise to a customer who used a Regional Bank credit card. Regional Bank charges a 4.0% fee for sales on its credit cards. The journal entry to record this sale transaction would be:

A) Debit Cash of $480 and credit Sales $480.
B) Debit Cash of $480 and credit Accounts Receivable—Regional $480.
C) Debit Accounts Receivable—Regional $460.80; debit Credit Card Expense $19.20 and credit Sales $480.
D) Debit Cash $460.80; debit Credit Card Expense $19.20 and credit Sales $480.
E) Debit Cash $460.80 and credit Sales $460.80.

196) MacKenzie Company sold $180 of merchandise to a customer who used a Regional Bank credit card. Regional Bank charges a 4% fee for sales on its credit cards. The journal entry to record this sale transaction would be:

A) Debit Cash of $180 and credit Sales $180.
B) Debit Cash of $180 and credit Accounts Receivable—Regional $180.
C) Debit Accounts Receivable—Regional $172.80; debit Credit Card Expense $7.20 and credit Sales $180.
D) Debit Cash $172.80; debit Credit Card Expense $7.20 and credit Sales $180.
E) Debit Cash $172.80 and credit Sales $172.80.

197) Kenai Company sold $600 of merchandise to a customer who used a National Bank credit card. National Bank charges a 3% fee for sales on its credit cards. The journal entry to record the sale would be:

A) Debit Cash of $618 and credit Accounts Receivable—National $618.
B) Debit Cash of $618; credit Credit Card Expense $18 and credit Sales $600.
C) Debit Accounts Receivable—National $582; debit Credit Card Expense $18 and credit Sales $600.
D) Debit Cash $582; debit Credit Card Expense $18 and credit Sales $600.
E) Debit Cash $582 and credit Sales $582.

198) Frederick Company borrows $63,000 from First City Bank and pledges its receivables as security. Which of the following is true regarding this transaction:

A) First City Bank is the factor in this transaction.
B) Frederick Company must disclose the pledging of receivables in its financial statement footnotes.
C) Frederick Company no longer has the risk of bad debts.
D) First City Bank takes ownership of the receivables at the time of the pledge.
E) No journal entry is required for this event.

199) Majesty Productions accepted a $7,200, 120-day, 6% note from Swartz Studio on March 1. On the date the note matures, Swartz is unable to pay, but Majesty intends to continue collection efforts. What entry should Majesty record on the maturity date for this dishonored note?

A) Debit Accounts Receivable $7,200; credit Notes Receivable $7,200.
B) Debit Accounts Receivable $7,200; credit Allowance for Doubtful Accounts $7,200.
C) Debit Bad Debt Expense $7,344; credit Notes Receivable $7,344.
D) Debit Accounts Receivable $7,344; credit Interest Revenue $144; credit Notes Receivable $7,200.
E) Debit Accounts Receivable $7,056; debit Interest Revenue $144; credit Notes Receivable $7,200.

Answer Key

Test name: John Wild Ch07 Algorithmic and Static

1) TRUE

2) FALSE

3) FALSE

4) FALSE

5) FALSE

6) FALSE

7) TRUE

8) FALSE

9) TRUE

10) TRUE

11) TRUE

12) TRUE

13) FALSE

14) TRUE

15) TRUE

16) FALSE

17) TRUE

18) FALSE

19) FALSE

20) TRUE

21) TRUE

22) FALSE

23) FALSE

24) TRUE

25) FALSE

26) TRUE

27) TRUE

28) FALSE

29) TRUE

30) FALSE

31) TRUE

32) FALSE

33) FALSE

34) TRUE

35) TRUE

36) TRUE

37) TRUE

38) FALSE

39) TRUE

40) FALSE

41) TRUE

42) FALSE

43) TRUE

44) TRUE

45) TRUE

46) FALSE

47) FALSE

48) TRUE

49) TRUE

50) FALSE

51) TRUE

52) TRUE

53) FALSE

54) TRUE

55) TRUE

56) TRUE

57) FALSE

58) TRUE

59) FALSE

60) TRUE

61) FALSE

62) TRUE

63) FALSE

64) E

65) A

66) A

67) D

68) C

69) A

70) B

71) B

72) C

73) E

74) C

75) A

76) B

77) A

78) C

79) C

80) C

81) A

82) C

83) C

84) A

85) C

86) C

87) B

88) A

89) E

90) E

91) B

92) B

93) B

94) D

95) A

96) A

97) C

98) A

99) D

100) B

101) C

102) D

103) D

104) D

105) A

106) C

107) A

108) B

109) A

110) B

111) C

112) C

113) C

114) C

115) C

116) D

117) D

118) D

119) D

120) B

121) D

122) A

123) E

124) A

125) A

126) A

127) A

128) C

129) C

130) B

131) B

132) C

133) C

134) C

135) D

136) D

137) B

138) B

139) E

140) E

141) A

142) C

143) D

144) B

145) C

146) C

147) D

148) D

149) A

150) E

151) E

152) C

153) E

154) E

155) D

156) A

157) A

158) D

159) D

160) E

161) B

162) C

163) C

164) A

165) A

166) B

167) D

168) E

169) D

170) C

171) B

172) B

173) B

174) B

175) B

176) B

177) E

178) C

179) A

180) A

181) E

182) E

183) C

184) C

185) D

186) E

187) B

188) D

189) D

190) C

191) C

192) B

193) D

194) D

195) D

196) D

197) D

198) B

199) D