Act Test 3 Chapter 8

Schofield Retailers accepted $50,000 of Silver Bank MasterCard credit card charges for merchandise sold on August 1. Silver Bank charges 4% for its credit card use. The entry to record this transaction by Schofield Retailers will include a credit to Sales of $50,000 and a debit to

A. Cash for $48,000 and Service Charge Expense for $2,000

The interest on a $4,000, 10%, 1 year note receivable is

B. 400 (4000 * .10 * 1)

The interest on a $8,000 6% 60-day note receivable is

B. 80. 8000 * .06 * (60/360)

When an account becomes uncollectible and must be written off

B. Accounts Receivable should be credited

You have just received notice that a customer of yours with an account receivable balance of $100 has gone bankrupt and will not make any future payments. Assuming you use the allowance method, the entry you make is to

B. debit Allowance for Doubtful Accounts and credit Accounts Recievable

To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a

B. debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts

The receivable that is usually evidenced by a formal instrument of credit is an

B. note receivable

An aging of company's accounts receivable indicates that $4,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 credit balance, the adjustment to record bad debts for the period will require a

C. debit to Bad Debts Expense for $2,800

On April 5 Donna's Boutique accepted a Visa card for a $500 purchase. Visa charges a 2% service fee. The entry to record this transaction would include a

C. debit to Service Charge Expense of $10 (500 * .02)

Under the allowance method, Bad Debt Expense is recorded

C. for an amount that the company estimates it will not collect

The maturity value of a $30,000 9% 40 day note receivable dated July 3 is

D. 30,00 (30,000 * .09 * (40/360)

The interest rate for a three-month loan would normally be stated in terms of which of the following rates of interest?

D. Annual

The account Allowance for Doubtful Accounts is classified as a

D. Contra account to Accounts recorded

Two methods of accounting for uncollectible accounts are the

D. direct write-off method and the allowance method