Chapter 9 Smartbook

Net sales for a company are $250,000. Average accounts receivable are $10,000. The accounts receivable turnover for this company is _________.

25

Lani Co. uses the allowance method to account for bad debts. At the end of the year, their unadjusted trial balance shows an accounts receivable balance of $400,000; allowance for doubtful accounts balance of $400 (debit); and sales of $1,200,000. Based on history, Lani estimates that bad debts will be 1% of accounts receivable. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of:

4,400

Compute accounts receivable turnover for 20x1. Round your answer to one decimal place.

4.6 160,000/ ((38,000+32,000)/2) = 4.57 rounds to 4.6

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:

5,000

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:

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

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:

7,500

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 $5,000 x .06 x (120/360) = $100.

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:

Accounts Receivable for $3,025

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

Accounts Receivable.

Receivable

Amount due from another party

Principal

Amount that the signer agrees to pay back, not including interest

Accounts Receivable

Amounts due from customers for credit sales

Notes Receivable

An asset consisting of a written promise to receive a definite sum of money on demand or on specific future dates

A 60-day note is signed on February 15 (and it's not leap year). The due date of the note is:

April 16

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

Interest

Charge from using money loaned from one entity to another

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.

Credit to Accounts Receivable Debit to Cash

Maturity date

Day that the principal and interest must be paid

A 90-day note is signed on October 21. The due date of the note is:

January 19

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 in the amount of $5,000

Maker

One who signed the note and promised to pay at maturity

The advantages of using the allowance method to account for bad debts include which of the following?

Reports accounts receivable balance at the estimated amount to be collected /// Matches expenses in the same period with the related sales

Payee

The person to whom the note is payable

The two methods companies can use to convert receivables to cash before they are due includes selling them and pledging them.

True

Promissory Note

Written promise to pay a specified amount of money

The two most common receivables are ____________ receivables and _____________ receivables.

account(s), note(s)

In July, Lane Co. sells merchandise to Avery Co. on account. In August, Avery pays the balance in full. The entry that Lane will make to record the receipt of cash will include a credit to the Blank______ account.

accounts receivable

The (aging/percent) _______________ of accounts receivable method uses several percentages, based on how long an account is past due, to estimate the allowance.

aging

The __ method of estimating bad debts uses both past and current receivables information to estimate the allowance amount. Specifically, each receivable is classified by how long it is past its due date.

aging of receivables

On January 1, Franz Co. accepted a 30-day, 6% note in the amount of $5,000 from Bria Co., a customer. On January 31, the due date of the note, Bria honors the note and pays in full. The journal entry that Franz would make to record payment of this note would include a:

credit to Note Receivable for $5,000. /// debit to Cash for $5,025. /// credit to Interest Revenue for $25. $5,000 x .06 x 30/360=$25.

Zion Company sells merchandise on credit to BRC, Inc. in the amount of $1,200. The entry to record this sale would include a:

debit to Accounts Receivable. credit to Sales.

On July 10, Yao Co. collects $740 from Ean, Inc. from a prior credit sale. This entry would be recorded by Yao with a:

debit to Cash. credit to Accounts Receivable.

On November 1, Eli Co. received a $6,000, 60-day, 6% note from a customer as payment on his $6,000 overdue account. Eli's journal entry to record this transaction on November 1, would include a:

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

The __ method of accounting for bad debts records the loss from an uncollectible account receivable when it is determined to be uncollectible. No attempt is made to predict bad debts expense.

direct write-off

The direct write-off method of accounting for bad debts matches the estimated loss from uncollectible accounts receivable against the sales they helped produce.

false

The (maker/payee) of the note is the one that signed the note and promised to pay at maturity. The (maker/payee) of the note is the person to whom the note is payable.

maker/payee

Companies sometimes convert receivables to cash before they are due by selling them or using them as security for a loan. The reasons that a company may convert receivables before their due date include:

the company does not want to deal with collecting receivables. /// the company needs cash.

The direct write-off method of accounting for bad debts records the loss from an uncollectible account receivable when it is determined to be uncollectible. No attempt is made to predict bad debts.

true