Accounting 1- Chapters 7-?

ch 7: 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 $140 $10 $120

$20

ch 7: True or false: A note is honored when it is paid in full. True False

true

Ch 7: 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:

$4,400

Ch 7: Leo Co. uses the allowance method to account for bad debts. At the end of the year, Leo Co.'s accounts receivable balance is $25,000; allowance for doubtful accounts balance of $100 (credit); and sales of $500,000. Based on history, Leo 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. -$10,000 -$400 -$9,900 -$600 -$10,100 -$500

$400 Reason: $25,000 x 2% = $500 desired ending balance in the allowance account. Subtract the beginning credit balance to determine the amount of the adjusting entry. $500-$100 = $400.

ch 7: 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. $200 $50 $25 $225

$50 Reason: $5,000 x 4% x 90/360

Ch 7: 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. -No journal entry is made under the allowance method until specific accounts are determined to be uncollectible -Debit to Allowance for Doubtful Accounts -Credit to Allowance for Doubtful Accounts -Debit to Bad Debts Expense for $1,000

-Credit to allowance for doubtful accounts -Debit to bad debts expense for $1,000

Ch 7: Match the following terms to the appropriate definitions Terms: Promissory note principal interest maker payee maturity date Definitions: -One who signed the note and promised to pay at maturity -day that the principal and interest must be paid -the person to whom the note is payable -amount that the signer agrees to pay back, not including interest -charge from using money loaned from one entity to another -written promise to pay a specified amount of money

-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

ch 7: 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 Accounts Receivable for $6,060. -credit to Accounts Receivable for $6,000. -debit to Notes Receivable for $6,000. -credit to Notes Receivable for $6,060.

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

Ch 7: On December 31, DVS Company estimates that $2,500 of its accounts receivable balance is uncollectible. DVS uses the allowance method to account for bad debts. The entry to record this adjusting entry would include a: (Check all that apply.) Multiple select question. -credit to Accounts Receivable for $2,500. -debit to Allowance for Doubtful Accounts for $2,500. -debit to Bad Debts Expense for $2,500. -credit to Allowance for Doubtful Accounts for $2,500

-debit to bad debts expense for $2,500 -credit to allowance for doubtful accounts for $2,500

ch 7: 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. Interest Revenue for $5. Notes Receivable for $1,000. Cash for $1,010. Interest Revenue for $10. Interest Receivable for $5.

-interest revenue for $5 -notes receivable for $1,000 -interest receivable for $5

Ch 7: 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. -Uncollectible Accounts Expense -Allowance for Doubtful Accounts -Bad Debts Expense -Accounts Receivable

Allowance for Doubtful Accounts

ch. 7: 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. a. April 14 b. April 16 c. April 15

April 16 Reason: Feb 28th - Feb 15th = 13 days + 31 days for March = 44 days; 60 total days - 44 days = 16; therefore, April 16

ch 7: A 90-day note is signed on October 21. The due date of the note is: Multiple choice question. -January 20 -January 18 -January 21 -January 19

January 19

ch 7: 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. Accounts Receivable for $3,000 Cash for $3,150 Cash for $3,000 Accounts Receivable for $3,150 Accounts Receivable for $3,025 Cash for $3,025

accounts receivable reason: $3,000 x .05 x (60/360) = $25. the note is dishonored so they did not receive cash. Accounts receivable is debited for $3,025

Ch 7: The ____________ of accounts receivable method uses several percentages to estimate the allowance.

aging

ch 7: The _____________________ of accounts receivable method uses several percentages to estimate the allowance.

aging

ch 7: 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. -allowance -percentage of sales -bad debts -aging of accounts receivable

aging of accounts receivable

Ch 7: 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. -percentage of receivables -percentage of sales -aging of receivables

aging of receivables

Ch 7: 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. a. Bad Debts Expense b. Allowance for Doubtful Accounts c. Allowance for Bad Debts d. No adjusting entry is needed

allowance for doubtful accounts

ch 7: 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 -Allowance for Doubtful Accounts -Bad Debts Expense -Uncollectible Accounts Expense

allowance for doubtful accounts

ch 7: When a note's maker does not pay at maturity, the note is considered ______________

dishonored

ch 7: 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:

interest receivable for $20.

ch 7: 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: Multiple choice question. Cash for $10,000. Interest Receivable for $200. Interest Revenue for $200. Note Receivable for $10,200.

interest revenue for $200

ch 7: 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.

maker;payee

Ch 7: The ____________ constraint is permitted under GAAP when its results approximate those under the allowance method. Multiple choice question. -materiality -matching -revenue-recognition -full disclosure

materiality

ch 7: 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. Cash in the amount of $5,000 Accounts Receivable in the amount of $5,000 Sales in the amount of $5,000 Notes Receivable in the amount of $5,000

notes receivable in the amount $5,000

Ch 7: 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. -percentage of accounts receivable -aging of receivables -percentage of sales

percentage of sales

ch 7: To compute interest due on a maturity date, use the formula:

principal x interest rate x time expressed in fraction of year

ch 7: To compute interest due on a maturity date, multiply (principal/note) times (interest/dividends) times time expressed in fraction of year.

principal, interest