exam 2

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:

$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.

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:

3,025 Reason: Interest = $3,000x.05x(60/360)=$25. Accounts receivable is debited for $3,025, for the note plus the interest.

On March 14, Zest Co. accepted a 120-day, 6% note in the amount of $5,000 from AZC Co., a customer. On the due date of the note, AZC dishonors the note and fails to pay. The journal entry that Zest would make to record the failure to pay this note on the due date would include a debit to:

Accounts Receivable - AZC for $5,100 Reason: Interest = $5,000 x .06 x (120/360) = $100.

accounts payable

Amounts to be paid in the future for goods or services already acquired; money business owes to suppliers

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:

Bad debt expense:= Sales X Estimated uncollectible in percentage= $500,000 X 1%= $5,000

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

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:

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).

Flash Co. uses the allowance method to account for bad debts. At the end of the year, 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:

Reason: When allowance method is based on sales, do not take into account previous balance in the allowance account. $1,500,000x.005=$7,500.

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:

Reason:$40,000 x 2%=800-300=$500

Ace Company sells merchandise to a customer in the amount of $200 on credit, terms n/30. The entry to record this sale would include a debit to the ____________ account:

accounts receivable

To record a sale on account, the company should debit:

accounts receivable

The company completed a five-day project for Alex's Engineering Company and billed it $5,300, which is the total price of $6,740 less the advance payment of $1,440. The company debited Unearned Computer Services Revenue for $1,440.

accounts receivable- alex's engineering company debit 5,300 unearned computer services revenue 1,440 computer services revenue 1,440

January 13The company sold merchandise with a retail value of $4,600 and a cost of $3,470 to Liu Corporation, invoice dated January 13.

accounts receivable- liu corporation debit 4600 sales credit 4600

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:

allowance for doubtful accounts

To record a customer's check in full payment for a sale that was made the prior month, the company should debit the ____________ account.

cash

January 9 The company received $2,748 cash from Gomez Company as full payment on its account.

cash debit 2,748 accounts receivable-gomez company credit 2,748

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.)

credit to Interest Revenue for $25. Reason: $1,000 x (180/360) x .05 = $25 interest. debit to Accounts Receivable - Ali for $1,025. Reason: $1,000 x (180/360) x .05 = $25 interest. credit to Notes Receivable for $1,000.

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).

debit bad debts expense for $1000 credit to allowance for doubtful debts

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.)

debit to Notes Receivable for $6,000. credit to Accounts Receivable for $6,000.

Iron Company collects cash in full from a customer who purchased merchandise last month on credit. To record the receipt of cash, Iron Company should make the following entries in the general journal. (Check all that apply.)

debit to cash credit to accounts receivable

January 26The company purchased $9,600 of merchandise from Kansas Corporation with terms of 1/10, n/30, FOB destination, invoice dated January 26.

merchandise inventory 9600 accounts payable 9600

January 7 The company purchased $6,800 of merchandise from Kansas Corporation with terms of 1/10, n/30, FOB shipping point, invoice dated January 7.

merchandise inventory debit 6,800 accounts payable credit 6,800

Accounts Receivable

money owed to business by customers

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 $5000

January 4 The company paid cash to Lyn Addie for five days' work at the rate of $145 per day. Four of the five days relate to wages payable that were accrued in the prior year.

wages expense debit 145 wages payable debit 580 cash credit 725