Chapter 7 notes

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

April 16 February/28th-February/15th =13 days + 31 days for March=44 days; 60 total days-44 days= 16.

The expected proceeds from accounts receivable, determined by taking accounts receivable less the allowance for doubtful accounts, is called:

realizable value

A _________________ is an amount due from another party.

receivable

Promissory note

Written promise to pay a specified amount of money correct toggle button unavailable Written promise to pay a specified amount of money

Conroy Company uses the allowance method to account for bad debts. During 2010, Conroy determined that a balance of $200 for Alegia Co. was uncollectible and wrote the balance off. What is the total decrease to net income related to this entry?

$0

On January 1, Franz Co. accepted a 30-day, 6% note in the amount of $5,000 from Bria Co., a customer. On January 31, the due date of the note, Bria honors the note and pays in full. The journal entry that Franz would make to record payment of this note would include a: (Check all that apply.)

- debit to Cash for $5,025. - credit to Interest Revenue for $25. - credit to Note Receivable for $5,000.

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 :

-Debit to notes receivable for $6,000 -credit to accounts receivable for $6,000

Finish Co. uses the allowance method to account for bad debts. At the end of 2010, Finish Co.'s unadjusted trial balance shows an accounts receivable balance of $30,000; allowance for doubtful accounts balance of $200 (credit); and sales of $600,000. Based on history, Finish estimates that bad debts will be 1% of sales. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of:

6,000 $600,000 x 1%=$6,000. When the allowance method is based on sales, the prior balance in the Allowance for Doubtful Accounts account is not taken into consideration.

Flash Co. uses the allowance method to account for bad debts. At the end of 2010, Flash Co.'s unadjusted trial balance shows an accounts receivable balance of $45,000; allowance for doubtful accounts balance of $400 (debit); and sales of $1,500,000. Based on history, Flash estimates that bad debts will be 0.5% of sales. The entry to record estimated bad debts will include an debit to Bad Debts Expense in the amount of:

7,500

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

Aging

The (allowance/direct write-off) method of accounting for bad debts matches the estimated loss from uncollectible accounts receivables against the sales they helped produce.

Allowance

Receivable

Amount due from another party

principal

Amount that the signer agrees to pay back, not including interest

Accounts receivable

Amounts due from customers for credit sales

Notes Receivable

An asset consisting of a written promise to receive a definite sum of money on demand or on specific future dates

If an account receivable balance previously written off using the direct write-off method is later collected in full, the entry to record the payment must include a credit to:

Bad debit expense

On August 1, Harris Co. determines that it cannot collect $200 from its customer, L. Dash. Harris Co. uses the direct write-off method, so they will record the write-off of this account by debiting:

Bad debt expense

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

Interest

Charge from using money loaned from one entity to another

he allowance for doubtful accounts is a(n) (current/contra/opposite)asset account and has a normal credit balance.

Contra

Maturity date

Day that the principal and interest must be paid

DonCo, Inc. sold merchandise on January 14, and accepted a 90-day, 5% promissory note in the amount of $5,000. On January 14, the entry to record this transaction would include a debit to:

Notes Receivable in the amount of $5,000

True or false: 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 The allowance method estimates bad debt expense before an uncollectible account receivable has been determined to be uncollectible.

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.

A 90-day note is signed on October 21. The due date of the note is:

Jan 19

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

Maker payee

Maker

One who signed the note and promised to pay at maturity

The advantages of using the allowance method to account for bad debts include which of the following? (Check all that apply.)

Reports accounts receivable balance at net realizable value Matches expenses with related sales

Payee

The person to whom the note is payable

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

Bad debts are:

also called uncollectible accounts. accounts of customers who do not pay. an expense of selling on credit.

Bad debts

are accounts of customers who do not pay what they have promised to pay. It's considered an expense of selling on credit.

Lina Co. uses the allowance method to account for bad debts. On January 28, Lina determines that a $200 balance from ZRT, Inc. is uncollectible and writes the balance off. The journal entry to write this balance off will include a: (Check all that apply.)

credit to Accounts Receivable - ZRT. debit to Allowance for Doubtful Accounts.

Zino Company determines that a customer balance of $200,from Hollis Co. is uncollectible. Zino uses the allowance method to account for bad debts. The entry to write off the uncollectible balance will include a:

debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable.

On February 15, Symth Co. determines that it cannot collect $500 owed by its customer, A. Winds. Symth records the loss using the direct write-off method. This entry to record the write-off on February 15 would include a: (Check all that apply.)

debit to Bad Debts Expense. credit to Accounts Receivable - A. Winds.

A. Stine Co. previously wrote off a $200 bad debt from Thorn Co. using the direct write-off method. On October 1, Stine unexpectedly receives a check in the amount of $200 from Thorn Co. The entry to record this receipt of $200 will include a: (Check all that apply.)

debit to Cash. credit to Bad Debts Expense.

The allowance for doubtful accounts is a contra asset account that equals:

total uncollectiable receviable