Chapter 9 - SmartBook questions
Conroy Company uses the allowance method to account for bad debts. During the year, Conroy determined that a balance of $200 from Alegia Co. was uncollectible and wrote the balance off. What is the total decrease to net income related to this entry? Multiple choice question. $200 Cannot be determined $0
$0 Reason: The decrease in net income occurs when bad debts is estimated (allowance account is increased). This entry reduces accounts receivable using the allowance account.
On August 21, Alix Company receives a $2,000, 60-day, 6% note from a customer as payment on her account. How much interest will be due on October 20, the due date? Multiple choice question. $20 $10 $140 $120
$20 Reason: $2,000 x 6% x 60/360
On June 30, Nance Company receives a $5,000, 90-day, 4% note from a customer as payment on her account. How much interest will be due on the note's maturity date? Multiple choice question. $25 $50 $200 $225
$50 Reason: $5,000 x 4% x 90/360
Match the definitions to the appropriate terms. Instructions 1. Accounts receivable 2. Notes receivable 3. Receivable
1. Amounts due from customers for credit sales 2. An asset consisting of a written promise to receive a definite sum of money on demand or on specific future dates 3. matches Choice, Amount due from another party Amount due from another party
The allowance for doubtful accounts is a(n) (current/contra/opposite) ________________asset account and has a normal credit balance. Listen to the complete question
: contra
On September 1, Horn Co. accepted a 60-day, 5% note in the amount of $3,000 from a customer. On the due date of the note, the customer dishonors the note and fails to pay. The journal entry that Horn would make on the due date would include debit to: Multiple choice question. Cash for $3,025 Accounts Receivable for $3,000 Accounts Receivable for $3,025 Accounts Receivable for $3,150 Cash for $3,000 Cash for $3,150
Accounts Receivable for $3,025 Reason: Interest = $3,000x.05x(60/360)=$25. The note is dishonored so they did not receive cash. Accounts receivable is debited for $3,025.
Acel Co. uses the allowance method to account for bad debts. In January, Acel determined that it could not collect $400 from CTR, Inc. and wrote the balance off. On October 21, Acel received a check for $400 from CTR. The entries to record the receipt of cash on October 21 would include a debit to: Select two answers. Multiple select question. Accounts Receivable. Allowance for Doubtful Accounts. Cash. Bad Debt Expense.
Accounts Receivable. Cash.
A company has $150,000 of credit sales during the year and estimates that $1,000 of its accounts receivable will be uncollectible. The adjusting entry will include a credit to: Multiple choice question. Bad Debts Expense No adjusting entry is needed Allowance for Bad Debts Allowance for Doubtful Accounts
Allowance for Doubtful Accounts
A 60-day note is signed on February 15 (and it's not leap year). The due date of the note is: Multiple choice question. April 14 April 16 April 15
April 16 Reason: February 28th - February 15th = 13 days + 31 days for March = 44 days; 60 total days - 44 days = 16; therefore, April 16.
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: Multiple choice question. Accounts Receivable - L. Dash. Cash. Bad Debt Expense. Sales.
Bad Debt Expense.
Net sales for a company are $250,000. Average accounts receivable are $10,000. The accounts receivable turnover for this company is _____________.
Blank 1: 25
The __________________________ of accounts receivable method uses several percentages to estimate the allowance.
Blank 1: aging
The direct write-off method records bad debts expense only when an account becomes uncollectible, which is not always in the same period as the sale. For this reason, the direct write-off method violates the __________ principle. Multiple choice question. going concern revenue recognition full disclosure expense recognition
Correct Answer expense recognition
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. True false question. True False
False
True or false: The direct write-off method of accounting for bad debts matches the estimated loss from uncollectible accounts receivable against the sales they helped produce. True false question. True False
False
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: Multiple choice question. Accounts Receivable in the amount of $5,000 Notes Receivable in the amount of $5,000 Sales in the amount of $5,000 Cash in the amount of $5,000
Notes Receivable in the amount of $5,000
True or false: A note is honored when it is paid in full. True false
True
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. Multiple choice question. accounts receivable turnover total asset turnover inventory turnover
accounts receivable turnover
The __________ method, also referred to as balance sheet method, uses balance sheet relations to estimate bad debts—mainly, the relationship between accounts receivable and the allowance account. Multiple choice question. bad debts allowance aging of accounts receivable percentage of sales
aging of accounts receivable
The __________ method, also referred to as balance sheet method, uses balance sheet relations to estimate bad debts—mainly, the relationship between accounts receivable and the allowance account. Multiple choice question. aging of accounts receivable allowance bad debts percentage of sales
aging of accounts receivable Reason: The aging of accounts receivable method is one of the ways of computing the adjusting entry under the allowance method. The other way of computing the adjusting entry is based on percent of sales.
Accounts receivable turnover is calculated using the following formula: Multiple choice question. total accounts receivable/sales net sales/average accounts receivable, net sales/total accounts receivable average accounts receivable/net sales
net sales/average accounts receivable, net
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. Multiple choice question. percentage of receivables direct write-off allowance percentage of sales
direct write-off
The __________ constraint is permitted under GAAP when its results approximate those under the allowance method. Multiple choice question. materiality revenue-recognition full disclosure matching
materiality
The ________ method of estimating allowance for doubtful accounts is based on the idea that a given percent of a company's credit sales for the period are uncollectible. Multiple choice question. aging of receivables percentage of sales percentage of accounts receivable
percentage of sales
When a company's receivables are used as security for a loan, the company is said to have _____ its receivables. Multiple choice question. pledged sold secured factored
pledged
To compute interest due on a maturity date, use the formula: Multiple choice question. (principal x interest rate)/time expressed in fraction of year (principal x time expressed in fraction of year)/interest rate principal x interest rate x time expressed in fraction of year principal/interest rate x time expressed in fraction of year
principal x interest rate x time expressed in fraction of year
A _________________ is an amount due from another party. Multiple choice question. payable return receivable sale
receivable
Finish Co. uses the allowance method to account for bad debts. At the end of the year, 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: Multiple choice question. $5,800 $100 $500 $6,000 $6,200
$6,000 Reason: $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.
On December 31, Lee Company estimates that $1,000 of its accounts receivable balance is uncollectible. Lee Company uses the allowance method to account for bad debts. The adjusting entry to record this estimate will include a credit to: Multiple choice question. Bad Debts Expense Accounts Receivable Allowance for Doubtful Accounts Account for Bad Debts Expense
Allowance for Doubtful Accounts
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. Multiple choice question. percentage of receivables percentage of sales aging of receivables
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.) Multiple select question. debit to Notes Receivable for $6,000. debit to Accounts Receivable for $6,060. credit to Accounts Receivable for $6,000. credit to Notes Receivable for $6,060.
debit to Notes Receivable for $6,000. credit to Accounts Receivable for $6,000. Reason: You will debit Notes Receivable for $6,000 and credit Accounts Receivable for $6,000.
The expected proceeds from accounts receivable, determined by taking accounts receivable less the allowance for doubtful accounts, is called: Multiple choice question. contra receivables accounts receivable turnover realizable value total receivables
realizable value
A company sells merchandise to a customer on credit. The journal entry to record this transaction would include a debit entry to the Accounts ______________________account.
receivable
When an account previously written off is later collected, two journal entries are required. The first journal entry is to _____ the account, and the second journal entry is to record _____ of payment. Multiple choice question. receipt, reinstate reinstate, receipt write-off, reinstate collect, reinstate
reinstate, receipt
The allowance for doubtful accounts is a contra asset account that equals: Multiple choice question. total uncollectible accounts total short-term assets total accounts receivable
total uncollectible accounts
Lani Co. uses the allowance method to account for bad debts. At the end of the year, their unadjusted trial balance shows an accounts receivable balance of $400,000; allowance for doubtful accounts balance of $400 (debit); and sales of $1,200,000. Based on history, Lani estimates that bad debts will be 1% of accounts receivable. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of: Multiple choice question. $4,400 $4,000 $12,400 $12,000 $3,600 $11,600
$4,400 Reason: $400,000 x 1% = 4,000 + 400 debit balance = $4,400
Yates Co. uses the allowance method to account for bad debts. At the end of the period, Yate's unadjusted trial balance shows an accounts receivable balance of $10,000; allowance for doubtful accounts balance of $400 (credit); and sales of $500,000. Based on history, Yates 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: Multiple choice question. $5,400 $600 $5,000 $1,400 $4,600
$5,000 Reason: Since this is based on a percentage of sales, you should simply multiply $500,000 x .01 = $5,000.
Ana Co. uses the allowance method to account for bad debts. At the end of the period, Ana's unadjusted trial balance shows an accounts receivable balance of $40,000; allowance for doubtful accounts balance of $300 (credit); and sales of $500,000. Based on history, Ana estimates that bad debts will be 2% of accounts receivable. The entry to record estimated bad debts will include a debit to bad debts expense in the amount of: Multiple choice question. $1,100 $10,000 $9,700 $500 $10,300 $800
$500 Reason: $40,000 x 2%=800-300=$500
The following financial information is available for Siu Co. Net Sales - 160,000 Accounts Receivable - 38,0002009 Net Sales - 155,000 Accounts Receivable - 32,000 Compute accounts receivable turnover for 2010. Round your answer to one decimal place. Multiple choice question. 4.2 4.6 4.5 4.8
4.6 Reason: 160,000/ ((38,000+32,000)/2)
At year-end, Avis Company estimates that $2,000 of its accounts receivable balance is uncollectible. Avis uses the allowance method to account for bad debts. The entry to record this adjusting entry would include a credit to: Multiple choice question. Accounts Receivable Uncollectible Accounts Expense Allowance for Doubtful Accounts Bad Debts Expense
Allowance for Doubtful Accounts
Avia Company determines that a customer balance of $400 from Allia, Inc. is uncollectible. Avia uses the allowance method to account for bad debts. The entry to write off the uncollectible balance will include a debit to: Multiple choice question. Cash Accounts Receivable - Allia Bad Debts Expense Allowance for Doubtful Accounts
Allowance for Doubtful Accounts
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: Multiple choice question. Bad Debts Expense Sales Cash Accounts Payable
Bad Debts Expense Reason: Two entries are required: one to reinstate the account by debiting accounts receivable and crediting bad debts expense. The second entry is to debit cash and credit accounts receivable.
On August 1, Hanes Co. determines that it cannot collect $150 from a customer. Hanes uses the direct write-off method. Hanes will record the write-off of this account by debiting: Multiple choice question. Cash for $150. Allowance for Doubtful Accounts for $150. Accounts Receivable for $150. Bad Debts Expense for $150.
Bad Debts Expense for $150.
When a note's maker does not pay at maturity, the note is considered _____________________.
Blank 1: dishonored
The direct write-off method records bad debts expense only when an account becomes uncollectible, which is not always in the same period as the sale. For this reason, the direct write-off method violates the _______________. ____________________principle. Listen to the complete question
Blank 1: expense or matching Blank 2: recognition
Avi Co. raises cash by borrowing $10,000 and pledging $12,000 accounts receivables as security for the loan. Avi will record a journal entry in the amount of the $10,000 note payable, and also record a (debit/credit/footnote) __________ to the financial statements, indicating that $12,000 of accounts receivables have been pledged.
Blank 1: footnote
The principal and interest of a note are due on its maturity date. If the maker of the note pays the note in full, the maker is said to have (honored/dishonored) _____________ the note.
Blank 1: honored or honor
The principal and interest of a note are due on its maturity date. If the maker of the note pays the note in full, the maker is said to have (honored/dishonored) ___________________ the note.
Blank 1: honored or honor
The __________________(maker/payee) 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.
Blank 1: maker Blank 2: payee
T. Hillcrest Co. sold $500 of merchandise on a bank credit card with a 5% fee. The entry to record this sales transaction would include debit(s) to: Multiple choice question. Sales for $500 Cash for $475 and to Credit Card Expense for $25 Cash for $500 and Credit Card Expense for $25 Accounts Receivable for $500
Cash for $475 and to Credit Card Expense for $25
Tricon Co. sells $10,000 of its accounts receivables and is charged a 5% factoring fee. It records this sale with a debit to: Multiple choice question. Accounts Receivable for $9,500. Cash for $10,500. Accounts Receivable for $10,000. Cash for $10,000. Cash for $9,500. Accounts Receivable for $10,500.
Cash for $9,500. Reason: Cash is debited for $9,500. $10,000 x .05=$500. $10,000-500=$9,500.
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: Multiple choice question. Notes Receivable in the amount of $10,100 Notes Receivable in the amount of $10,000 Cash in the amount of $10,100 Cash in the amount of $10,000
Cash in the amount of $10,100
Simon Co. sold $500 of merchandise on their own store credit cards. The entry to record this sales transaction on the date of the sale would include a debit to: Multiple choice question. Cash for $500 Interest revenue for $500 Sales for $500 Accounts Receivable for $500
Correct Answer Accounts Receivable for $500
Dea Company sold $1,000 of merchandise to a customer who used Dea Company's credit card. The entry to record this transaction on the date of the sale would include: (Check all that apply.) Multiple select question. Sales in the amount of $1,000. Accounts Receivable in the amount of $1,000. Interest Revenue in the amount of $40. Cash in the amount of $1,000.
Correct Answer Accounts Receivable in the amount of $1,000. Sales in the amount of $1,000.
To record a sale on account, the company should debit: Accounts Payable. Sales. Unearned Sales. Accounts Receivable.
Correct Answer Accounts Receivable.
A company has $150,000 of credit sales during the year and estimates that $1,000 of its accounts receivable will be uncollectible. The adjusting entry will include a credit to: Multiple choice question. Bad Debts Expense No adjusting entry is needed Allowance for Bad Debts Allowance for Doubtful Accounts
Correct Answer Allowance for Doubtful Accounts
Thomas Co. sold $1,000 worth of merchandise on a bank credit card with a 3% fee. The entry to record the sales transaction would include a debit to Cash in the amount of $__________.
Correct Answer Blank 1: 970
(Bad/Invalid)___________________(collectible/debts)______________________ are accounts of customers who do not pay what they have promised to pay. It's considered an expense of selling on credit. Listen to the complete question
Correct Answer Blank 1: Bad Blank 2: Debts
The two most common receivables are ___________ receivables and ______________receivables.
Correct Answer Blank 1: accounts or account Blank 2: notes or note
Companies sometimes convert receivables to cash before they are due. When a company sells its receivables, the buyer is called a ___________________(pledgor/factor). When a company uses receivables as security for a loan, it is called ____________________(pledging/factoring).
Correct Answer Blank 1: factor Blank 2: pledging or pledge
To record a customer's check in full payment for a sale that was made the prior month, the company should debit the ____________ account. Unearned Sales Accounts Payable Accounts Receivable Cash Sales
Correct Answer Cash
JD Co. had $1,000 of credit cards sales. The net cash receipts were deposited immediately into JD Company's bank account less a 3% fee. The entry to record this sales transaction would include the following debit entries. (Check all that apply.) Multiple select question. Cash for $970 Cash for $1,000 Credit Card Expense for $30 Accounts Receivable for $1,000 Sales for $970 Accounts Receivable for $970
Correct Answer Cash for $970 Credit Card Expense for $30
A company estimates that $1,000 of its accounts receivable is uncollectible at the end of the period and will make the following adjusting entry: (Check all that apply). Multiple select question. Credit to Allowance for Doubtful Accounts Debit to Bad Debts Expense for $1,000 Debit to Allowance for Doubtful Accounts No journal entry is made under the allowance method until specific accounts are determined to be uncollectible
Correct Answer Credit to Allowance for Doubtful Accounts Debit to Bad Debts Expense for $1,000
On November 1, Alice Co. accepted a 90-day, 6%, $2,000 note due January 30. On December 31, the appropriate adjusting entry was made. On January 30 of the next year, the note was honored and paid in full. The entry to record receipt of payment on January 30 would include a credit to: (Check all that apply.) Multiple select question. Interest Revenue for $30. Interest Revenue for $10. Notes Receivable for $2,000 Interest Revenue for $20. Interest Receivable for $20. Cash for $2,030.
Correct Answer Interest Revenue for $10. Notes Receivable for $2,000 Interest Receivable for $20. Reason: On 12/31, a journal entry was made to debit interest receivable and credit interest revenue for $20 ($2,000 x 6% x 60/360). Cash will be debited for $2,030.
The advantages of using the allowance method to account for bad debts include which of the following? (Check all that apply.) Multiple select question. Matches expenses in the same period with the related sales Requires no accounting estimates Reports accounts receivable balance at the estimated amount to be collected
Correct Answer Matches expenses in the same period with the related sales Reports accounts receivable balance at the estimated amount to be collected
On December 1, Christy Co. accepted a 60-day, 6%, $1,000 note due January 30. On December 31, the appropriate year-end adjusting entry was made. On January 30, the note was honored and paid in full. The entry to record receipt of payment on January 30 (assuming no reversing entry was made) would include a credit to: (Check all that apply.) Multiple select question. Cash for $1,010. Notes Receivable for $1,000. Interest Revenue for $10. Interest Receivable for $5. Interest Revenue for $5.
Correct Answer Notes Receivable for $1,000. Interest Receivable for $5. Interest Revenue for $5.
To compute interest due on a maturity date, you should multiply which of the following factors? (Check all that apply.) Multiple select question. Principal Time expressed in fraction of year Interest rate Maturity value
Correct Answer Principal Time expressed in fraction of year Interest rate
Bad debts are: accounts of customers who do not pay. amounts the company owes to creditors. also called uncollectible accounts. an expense of selling on credit. also called collectible accounts.
Correct Answer accounts of customers who do not pay. also called uncollectible accounts. an expense of selling on credit.
A(n) ____________ is a supplementary record created to maintain a separate account for each customer. accounts receivable ledger accounts payable ledger specific ledger general ledger
Correct Answer accounts receivable ledger
Bad debts are: Multiple select question. also called uncollectible accounts. accounts of customers who do not pay. also called collectible accounts. an expense of selling on credit. amounts the company owes to creditors.
Correct Answer also called uncollectible accounts. accounts of customers who do not pay. an expense of selling on credit.
On July 10, Yao Co. collects $740 from Ean, Inc. from a prior credit sale. This entry would be recorded by Yao with a: (Check all that apply.) debit to Accounts Receivable. debit to Sales. credit to Sales. credit to Accounts Receivable. credit to Cash. debit to Cash.
Correct Answer credit to Accounts Receivable. debit to Cash.
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.) Multiple select question. credit to Interest Revenue for $25. debit to Cash for $5,025. debit to Interest Revenue for $25. credit to Note Receivable for $5,000. credit to Note Receivable for $5,025.
Correct Answer credit to Interest Revenue for $25. debit to Cash for $5,025. credit to Note Receivable for $5,000.
On March 14, Ian Co. accepted a 180-day, 5% note in the amount of $1,000 from Ali Co., a customer. On the due date of the note, Ali dishonors the note. The journal entry that Ian would record on the due date would include a: (Check all that apply.) Multiple select question. credit to Notes Receivable for $1,000. credit to Interest Revenue for $25. debit to Interest Revenue for $25. debit to Notes Receivable for $1,025. credit to Accounts Receivable - Ali for $1,000. debit to Accounts Receivable - Ali for $1,025.
Correct Answer credit to Notes Receivable for $1,000. credit to Interest Revenue for $25. debit to Accounts Receivable - Ali for $1,025. Reason: $1,000 x (180/360) x .05 = $25 interest. When a note is dishonored, the full amount due (note receivable plus the interest) is debited to accounts receivable.
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.) Multiple select question. debit to Bad Debts Expense. debit to Allowance for Doubtful Accounts. credit to Accounts Receivable - ZRT. debit to Accounts Receivable - ZRT. credit to Bad Debts Expense. credit to Allowance for Doubtful Accounts.
Correct Answer debit to Allowance for Doubtful Accounts. credit to Accounts Receivable - ZRT. Reason: Under the allowance method, the journal entry to write off an account is with a debit to Allowance for Doubtful Accounts. The credit is to the Accounts Receivable account.
P. Jameson Co. sold $500 of merchandise on Master Card credit sales. The net cash receipts from the sale are immediately deposited in the seller's bank account. Master Card charges a 4% fee. The journal entry to record this sales transaction would include a: (Check all that apply). Multiple select question. debit to Cash for $485. credit to Credit Card Expense for $20. debit to Cash for $480. credit to Accounts Receivable for $500. credit to Sales for $500. debit to Credit Card Expense for $20.
Correct Answer debit to Cash for $480. credit to Sales for $500. debit to Credit Card Expense for $20.
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: (Check all that apply.) Multiple select question. the company does not want to deal with collecting receivables. to quickly increase profit. to satisfy customer's needs. the company needs cash.
Correct Answer the company does not want to deal with collecting receivables. the company needs cash.
Companies allow customers to pay for products using third-party credit cards because: (Check all that apply.) Multiple select question. the seller avoids the risk of customer non-payment. there is no cost to the seller to allow third-party credit cards. a variety of payment options typically increase sales volume. cash is received from the credit card company faster than from a credit customer. the seller does not have to evaluate customer credit.
Correct Answer the seller avoids the risk of customer non-payment. a variety of payment options typically increase sales volume. cash is received from the credit card company faster than from a credit customer. the seller does not have to evaluate customer credit.
Companies allow customers to pay for products using third-party credit cards because: (Check all that apply.) Multiple select question. the seller avoids the risk of customer non-payment. cash is received from the credit card company faster than from a credit customer. a variety of payment options typically increase sales volume. the seller does not have to evaluate customer credit. there is no cost to the seller to allow third-party credit cards.
Correct Answer the seller avoids the risk of customer non-payment. cash is received from the credit card company faster than from a credit customer. a variety of payment options typically increase sales volume. the seller does not have to evaluate customer credit.
An accounts receivable ledger: (Check all that apply.) Multiple select question. records journal entries that affect accounts receivable. is necessary only when a company does not keep a general ledger. is a supplementary record to maintain an account for each customer.
Correct Answer: records journal entries that affect accounts receivable. is a supplementary record to maintain an account for each customer.
True or false: When the maker of a note pays at maturity, the note is said to be dishonored. True false question.TrueFalse
False
Kaiven Company accepted a $12,000, 60-day, 6% note on December 21 from Diaz Co, granting a time extension on his past-due account receivable. The adjusting entry on December 31 would include a debit to: Multiple choice question. Interest Revenue for $120. Interest Receivable for $120. Interest Receivable for $20. Interest Revenue for $20.
Interest Receivable for $20. Reason: Need to record interest from December 21 to December 31 which is 10 days. $12,000 x .06 x (10/360) = $20.
Lion Company accepted a $15,000, 30-day, 6% note on December 16 from Diaz Co, granting a time extension on his past-due account receivable. The adjusting entry on December 31 for Lion Company would include a credit to: Multiple choice question. Interest Receivable for $75. Interest Receivable for $37.50. Interest Revenue for $75. Interest Revenue for $37.50.
Interest Revenue for $37.50. Reason: The adjusting entry for Lion Company is to credit interest revenue for $37.50 [$15,000 x .06 x (15/360)]. Interest receivable would be debited.
A 90-day note is signed on October 21. The due date of the note is: Multiple choice question. January 19 January 21 January 20 January 18
January 19 Reason: 90 days = 31-21=10 days in October + 30 days in November + 31 days in December + 19 days in January. Always start with the number of days in the first month and subtract the date of the note. (October: 31-21 = 10).
Match the following terms to the appropriate definitions. Instructions
Promissory note - Written promise to pay a specified amount of money Principal - Amount that the signer agrees to pay back, not including interest Interest - Charge from using money loaned from one entity to another Maker - One who signed the note and promised to pay at maturity Payee - The person to whom the note is payable Maturity date - Day that the principal and interest must be paid
True or false: The two methods companies can use to convert receivables to cash before they are due includes selling them and pledging them.
True Reason: The two methods companies can use to convert receivables to cash before they are due includes selling them and using them as security for a loan, called pledging.
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.) Multiple select question. credit to Cash. debit to Bad Debts Expense. credit to Bad Debts Expense. debit to Cash.
credit to Bad Debts Expense. debit to Cash.
The direct write-off method records bad debts expense only when an account becomes uncollectible, which is not always in the same period as the sale. For this reason, the direct write-off method violates the __________ principle. Multiple choice question. full disclosure revenue recognition expense recognition going concern
expense recognition
The __________ constraint is permitted under GAAP when its results approximate those under the allowance method. Multiple choice question. revenue-recognition full disclosure matching materiality
materiality
The __________constraint is permitted under GAAP when the results approximate those using the allowance method. Listen to the complete question
materiality
