Principles of Accounting - Chapter Five Study Guide

The company sold merchandise to a customer on December 1 of the current year for $120,000. The company accepted a promissory note as payment. The note has a term of 3 months and an annual interest rate of 10%. The company's accounting period ends on December 31. What amount should the company recognize as interest revenue on December 31 of the current year?

$1,000

Beginning accounts receivable were $200,000, and ending accounts receivable were $300,000. Assuming cash collections totaled $1,100,000, what were the credit sales?

$1,200,000

A company's accounts receivable balance after posting net collections from customers for the current year is $150,000. Management feels that uncollected accounts should be based on the following aging of accounts receivable and uncollected percentages. There is $100,000 that is 1-30 days past due at 2%, and there is $50,000 that is 31-60 days past due at 10%. The net realizable value of the accounts receivable is

$143,000.

On December 15, the accounts receivable balance was $50,000 and the balance in the allowance for doubtful accounts was $5,000. That morning, a $1,000 uncollected account was written off. The net realizable value of accounts receivable immediately after the write-off is:

$45,000

A company needs to record 6 months of accrued interest on a 4-year, 12%, $12,000 promissory note payable. How much interest expense should be accrued?

$720

Food To Go is a local catering service. Conceptually, when should Food To Go recognize revenue from its catering service?

At the date the meals are served.

Which one of the following best describes the allowance for doubtful accounts?

Contra-account

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

Notes receivable generally specify an interest rate and a maturity date at which any interest and principal must be repaid.

College Store accepts MasterCard for payments of purchases made by students. The credit card drafts are deposited directly in a bank account. MasterCard charges a 1.55% collection fee. Credit card drafts totaling $10,000 are deposited during August. Recording the sales and deposits will result in an increase in

Service Charge Expense for $155.

The "principal" of a note receivable refers to

the amount of cash borrowed.