ACCT211 chapter 7

A 60-day note is signed on February 15 (and it's not leap year). The due date of the note is:

April 16

The (maker/payee) of the note is the one that signed the note and promised to pay at maturity. The (maker/payee)maker of the note is the person to whom the note is payable.

Blank 1: maker Blank 2: payee

On January 1, JC Co. accepted a 60-day, 6%, note in the amount of $10,000 from a customer. On March 2, the due date of the note, the customer honors the note and pays in full. The journal entry that JC would make to record the receipt of payment of this note would include a debit to:

Cash in the amount of $10,100

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.

Match the following terms to the appropriate definitions.

Promissory note matches Written promise to pay a specified amount of money Principal matches Amount that the signer agrees to pay back, not including interest Interest matches Charge from using money loaned from one entity to another Maker matches One who signed the note and promised to pay at maturity Payee matches The person to whom the note is payable Maturity date matches Day that the principal and interest must be paid

The ________ 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

The of accounts receivable method uses several percentages to estimate the allowance.

aging

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

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: (Check all that apply.)

debit to Notes Receivable for $6,000. credit to Accounts Receivable for $6,000.

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

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

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 include:

the company does not want to deal with collecting receivables. the company needs cash.

The two methods companies can use to convert receivables to cash before they are due includes selling them and pledging them.

true