FINANCIAL ACCOUNTING CHAPTER 8

Lakukan tugas rumah & ujian kamu dengan baik sekarang menggunakan Quizwiz!

How much accrued interest should be reported on the payee's December 31 balance sheet on a $5,000, 8%, 9-month note receivable issued on June 1?

Interest earned is calculated by multiplying the principal times the interest rate times the portion of the year that has passed since the note was issued ($5,000 × 8% × 7/12 = $233).

Eddy Corporation had net credit sales during the year of $800,000 and cost of goods sold of $500,000. The balance in receivables at the beginning of the year was $100,000 and at the end of the year was $150,000. How much is the accounts receivables turnover?

The accounts receivable turnover is computed by dividing net credit sales by average net accounts receivable. $800,000/[($100,000 + $150,000)/2] = 6.4.

Net credit sales are $800,000, average net receivables total $150,000, average inventory totals $200,000, and the allowance for doubtful accounts totals $8,000. How much is the average collection period?

The accounts receivable turnover is net credit sales ($800,000) divided by average net accounts receivable ($150,000), or 5.33 times. The average collection period is 365 divided by the accounts receivable turnover, which is 365/5.33 = 68.5 days.

Prall Corporation sells its goods on terms of 2/10, n/30. It has a receivables turnover ratio of 7.00. What is its average collection period (days)?

The average collection period is computed by dividing the number of days in the year by the accounts receivable turnover or 365/7 = 52 days

During 2014, Patterson Wholesale Company had net credit sales of $750,000. On January 1, 2014, Allowance for Doubtful Accounts had a credit balance of $18,000. During 2014, $30,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage-of-receivables basis). If the accounts receivable balance at December 31 was $200,000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2014?

After the write-offs are recorded, Allowance for Doubtful Accounts will have a debit balance of $12,000 ($18,000 credit beginning balance combined with a $30,000 debit for the write-offs). The desired balance, using the percentage of receivables basis, is a credit balance of $20,000 ($200,000 × 10%). In order to have an ending balance of $20,000, a credit entry of $32,000 must be made to Allowance for Doubtful Accounts. Thus, the amount of the adjusting entry must be $32,000.

RyTronics uses the percentage of receivables method for estimating bad debts expense. The Accounts Receivable balance is $100,000 at year-end and the total credit sales were $800,000. Management estimates that 4% of receivables will be uncollectible. What adjusting entry will be recorded if the Allowance for Doubtful Accounts has a credit balance of $800 before adjustment?

Allowance for Doubtful Accounts needs an ending credit balance of 4% of $100,000 or $4,000. To increase the current credit balance of $800 to the required amount of $4,000, the account requires a credit of $3,200. The entry to estimate bad debts is a debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts for $3,200.

Butte Co. loaned $25,000 to Beavis Co. on June 1, at 12% interest for 3 months. What adjusting entry will Butte Co. have to make on June 30 before preparing the financial statements on June 30?

Interest earned is calculated by multiplying the principal times the interest rate times the portion of the year that has passed since the note was issued. ($25,000 × 12% × 1/12 = $250).

Michael Co. accepts a $4,000, 3-month, 12% promissory note in settlement of an account with Tani Co. The entry to record this transaction is

On the date Michael accepts the note, Notes Receivable is debited for $4,000 and Accounts Receivable is credited for $4,000. Interest is accrued only with the passage of time.

On May 2, Wainwright Company receives a $3,000, 4-month, 10% note from Fulton Company as a settlement of its accounts receivable. What entry will Wainwright Company make when it receives the note on May 2?

On the date Wainwright accepts the note, it is recorded at face amount. Interest is accrued only with the passage of time. Notes Receivable will be debited for $3,000 and Accounts Receivable will be credited for $3,000.

An analysis and aging of the accounts receivable of Raja Company at December 31 reveal the following data: Accounts receivable $800,000 Allowance for doubtful accounts balance before adjustment (credit) 12,000 Amounts expected to become uncollectible 65,000 How much is the cash (net) realizable value of the accounts receivable at December 31, after adjustment?

The cash (net) realizable value of the accounts receivable is accounts receivable less the ending balance in the Allowance for Doubtful Accounts. In this case, accounts receivable is $800,000 and the ending balance in Allowance for Doubtful Accounts is $65,000. This results in cash (net) realizable value of $800,000 less $65,000, or $735,000.

Which one of the following is the correct presentation of Accounts Receivable and its contra account on the balance sheet? Accounts Receivable $642,000 Plus: Allowance for Doubtful Accounts 2,000 $644,000 Accounts Receivable $642,000 Less: Allowance for Doubtful Accounts (2,000) $640,000 Accounts Receivable $642,000 Less: Bad Debt Expense (17,000) $625,000 Accounts Receivable $642,000 Less: Bad Debt Expense (17,000) Less: Allowance for Doubtful Accounts (2,000) $623,000

The contra asset account is deducted from Accounts Receivable resulting in the cash (net) realizable value.

Good Stuff Retailers accepted $50,000 of Citibank Visa credit card charges for merchandise sold on July 1. Citibank charges 4% for its credit card use. Which of the following is/are the debit entry(ies) required to record this transaction by Good Stuff Retailers? Accounts Receivable $50,000 Accounts Receivable $48,000 and Service Charge Expense $2,000 Cash $50,000 Cash $48,000 and Service Charge Expense $2,000

The entry includes a credit to Sales for $50,000, a $48,000 debit to Cash, and a debit to Service Charge Expense for $2,000.

Kerrison Company sold $6,000 of merchandise to customers who charged their purchases with a bank credit card. Kerrison's bank charges it a 4% fee. Which one of the following is part of the journal entry to record the credit card sales? Credit to Sales for $5,760 Debit to Cash for $5,760 Debit to Cash for $6,000 Credit to Service Charge Expense for $240

The fee is 4% times $6,000, or $240. Kerrison will receive the difference between the face amount of the receivables and the fee, or $5,760. The journal entry includes a debit to cash for $5,760, a debit to Service Charge Expense for $240, and credit to sales for $6,000.

If a company uses the allowance method for uncollectible accounts, then the entry to record $800 of estimated uncollectibles is

The journal entry to record the estimate of uncollectible accounts is a debit to Bad Debts Expense and a credit to the Allowance for Doubtful Accounts.

A company holds a 120-day, 10%, $21,000 note which was not paid in full on the maturity date. Which of the following will the journal entry on the maturity date include?

The journal entry will decrease Notes Receivable for the value of the note, recognize interest revenue for the term of the note, and increase the Accounts Receivable account for the total owed by the maker. The journal entry is: Accounts Receivable 21,700 (debit) Notes Receivable 21,000 (credit) Interest Revenue 700 (credit) ($21,000 × 10% × 120/360 = $700)

Danta Company has a March 31 fiscal year end. What is the maturity value of a $25,000, 12%, 3-month note receivable dated March 1?

The maturity value is the face value plus interest for the term of the note. Interest earned is calculated by multiplying the principal times the interest rate times the length of the note. Interest = $25,000 × 12% × 3/12 = $750. Maturity value = $25,000 + $750 = $25,750.

What is the maturity value of a $25,000, 9%, 4-month note receivable issued on December 1 if the company has a fiscal year end on December 31?

The maturity value is the face value plus interest for the term of the note. Interest earned is calculated by multiplying the principal times the interest rate times the length of the note. Interest = $25,000 × 9% × 4/12 = $750. Maturity value = $25,000 + $750 = $25,750.

Obama Company has identified that Bill Clinton's receivable account of $100 is uncollectible. What is the journal entry needed to write off the account under the allowance method?

The proper journal entry debits Allowance for Doubtful Accounts and credits Accounts Receivable.

Laurel Company factors $300,000 of receivables to Hardy Factors. Hardy assesses a 3% fee on the amount of receivables sold. Laurel Co. factors its receivables to Hardy regularly. What journal entry does Laurel make when the factoring occurs? Cash 291,000 Loss on Sale of Receivables 9,000 Accounts Receivable 300,000 Cash 291,000 Service Charge Expense 9,000 Accounts Receivable 300,000 Cash 300,000 Gain on Sale of Receivables 9,000 Accounts Receivable 291,000 Cash 291,000 Accounts Receivable 291,000

This entry records the receipt of cash as a debit for $291,000, recognizes the service charge expense based on a percentage of the receivables as a debit to Service Charge Expense for $9,000, and reduces accounts receivable with a credit for the face value of the receivables that are sold, which is $300,000.

Schleis Co. holds Murphy Inc.'s $10,000, 120-day, 9% note. What is the entry to be made by Schleis Co. when the note is collected, assuming no interest has previously been accrued?

When Schleis receives payment, it will increase cash, reduce the notes receivable account, and recognize interest earned for the term of the note. Interest = $10,000 × 9% × 120/360 = $300. Total cash received = $10,000 + $300 = $10,300.


Set pelajaran terkait

Combo with "Chapter 18" and 1 other

View Set

PSYC 2600: Chapter 13: Prejudice

View Set