Accounting Chapter 7 Quiz

Utah Co. sold merchandise to Big Sky Corp. on December 1, 2016, for $9,000, and accepted a promissory note for payment in the same amount. The note has a term of 90 days and a stated interest rate of 8%. Utah's accounting period ends on December 31. What amount should Utah recognize as interest revenue on December 31, 2016 (if a 360 day year is assumed)?

$ 60

Genuine Parts received a promissory note from a customer on March 1, 2016. The face amount of the note is $8,000; the terms are 90 days and 9% interest. What is the total amount of interest that Genuine Parts will receive when the note is paid?

$180

What is the distinguishing characteristic between accounts receivable and notes receivable?

Notes receivable result from a written promise to pay within a specified amount of time

The data below is for Benton Corporation for 2016. Accounts Receivable—January 1, 2016 $334,000 Credit sales during 2016 850,000 Collections from credit customers during 2016 725,000 Customer accounts written off as uncollectible during 2016 12,000 Allowance for Doubtful Accounts [Credit Balance] (After write-off of uncollectible accounts) ​ 1,700 Estimated uncollectible accounts based on an aging analysis 13,200 If the aging approach is used to estimate bad debts, what should the balance in the Allowance for Doubtful Accounts be after the bad debts adjustment?

$13,200

Router Inc. lends $70,000 on a 120-day, 9% promissory note. The total interest that Router will receive at maturity is

$2,100

The data presented below is for Falconi, Inc. for 2016. Credit sales during the year $2,100,000 Accounts receivable—December 31, 2016 395,000 Allowance for doubtful accounts—December 31, 2016 20,000 Bad debt expense for the year 17,000 What amount will Falconi show on its year-end balance sheet for the net realizable value of its accounts receivable?

$375,000

The data presented below for Lynx Corp. is for the year ended December 31, 2016: Sales (100% on credit) $1,000,000 Sales returns 30,000 Accounts Receivable (December 31, 2016) 170,000 Allowance for Doubtful Accounts [Cr. Balance] (Before adjustment at December 31, 2016) 1,300 Estimated amount of uncollectible accounts based on aging analysis 14,000 If Lynx Corp. estimates its bad debts at 1% of net credit sales, what amount will be reported as bad debt expense for 2016?

$9,700

Espat Corp. reported net sales (all on credit) of $1,600,000 and cost of goods sold of $1,100,000 for 2016. Its beginning balance of Accounts Receivable was $150,000. The accounts receivable balance decreased by $10,000 during 2016. Rounded to two decimal places, what is Espat's accounts receivable turnover rate for 2016?

11.03

Comfort Shoes received a promissory note from a customer on April 1, 2016. The face amount of the note is $2,000; the terms are 12 months and 8% annual interest. At the maturity date, the customer pays for the note and interest. Comfort Shoes made the proper adjustment at the end of December for interest. The effect of recognizing the transaction on the maturity date is

A decrease to Notes Receivable

Where can the amounts needed to compute the accounts receivable turnover ratio be found?

Both (a) and (b).

The entry required to recognize the bad debts expense for 2016 will act to:

Decrease total assets and retained earnings

Which one of the following is not an accurate description of Allowance for Doubtful Accounts?

Income statement account

On July 1, 2016, Falcon Company received a $20,000 promissory note from Jordyn Company. The annual interest rate is 5%. Principal and interest are paid in cash at the maturity date of June 30, 2017. If Falcon's fiscal year ends September 30, 2016, an adjusting entry is needed to:

Increase interest receivable by $250

Discounting a note receivable

Is the process of selling a promissory note

If a company uses the allowance method of accounting for bad debts, which one of the following statements is true?

It will report accounts receivable in the balance sheet at their net realizable value

The party to a promissory note that agrees to repay money on the maturity date of the note is called the

Maker of the note

Utah Co. sold merchandise to Big Sky Corp. on December 1, 2016, for $9,000, and accepted a promissory note for payment in the same amount. The note has a term of 90 days and a stated interest rate of 8%. Utah's accounting period ends on December 31. What is the actual maturity date of the note?

March 1, 2017

Which one of the following statements is true?

The balance in the control account, Accounts Receivable, should be equal to the sum of the balances in the subsidiary ledger for accounts receivable.

Allowance for Doubtful Accounts represents:

The difference between the gross amount of accounts receivable and the net realizable value of accounts receivable

Which one of the approaches for the allowance method of accounting for bad debts emphasizes the net realizable value of accounts receivable on the balance sheet?

The percentage of accounts receivable approach

Which one of the approaches for the allowance method of accounting for bad debts emphasizes matching bad debts expense with revenue on the income statement?

The percentage of net credit sales approach

How will the payee of the promissory note record the note on its books?

The promissory note will be recorded as an asset.