Intermediate Accounting Exam 3: Ch. 7 Cash and Receivables
Two methods used for recording sales discounts are the ____________ method and the ____________ method.
allowance; net
Jessica accepts a $50,000, 60-day non interest-bearing note receivable from a customer. The discount rate is 12%. The amount of proceeds of the note used to record the sales revenue is
$49,000 ($50,000 x 12% x 60/360) = $49,000
Jessica accepts a $50,000, 60-day noninterest-bearing note receivable from a customer. The discount rate is 12%. The amount of proceeds of the note used to record the sales revenue is
$50,000. ($50,000-($50,000 x .12% x 60/360) = $49,000
Lee accepts a $100,000, 90-day noninterest-bearing note receivable from a customer. The discount rate is 12%. The amount of proceeds of the note used to record the sales revenue is
$97,000 ($100,000 x .12 x 3/12)
If a company believes its sales returns will be material, an adjusting entry for expected returns should be made to which account?
allowance for sales returns
Which of the following is a contra account to accounts receivable?
Allowance for sales returns
On October 1, Light Corp. sold goods on account to Dark Corp. Light agreed to accept a $100,000, 8%, 6-month interest-bearing note from Dark in payment for the goods. The entry required on Light's books on December 31, would require which of the following entries?
Debit Interest Receivable $4000; credit Note Receivable $4000
On March 5, Oak Corp. provided services on account to Pine. Oak agreed to accept a $100,000, 8%, 6-month interest-bearing note from Pine in payment for the services. The entry required on Oak's books on March 5 would require which of the following entries.
Debit Notes Receivable $100,000; credit Service Revenue $100,000.
Warner Corp. sells goods on account for $10,000. The customer pays the invoice in full on April 15, but on April 20, the customer returns $3,000 of the merchandise and receives a refund. What entry will Warner make on April 20 when the goods are returned?
Debit Sales Returns; credit Cash
Adrian Corp. sells goods on account for $100,000 on May 1. On May 15, the customer returns $40,000 of the merchandise. The customer has not yet paid for any of the goods. What will Adrian record on May 15.
Debit to Sales Returns Credit to Accounts Receivable
On January 1, Song Corp. receives a $100,000, two-year, note receivable from a customer in exchange for payment of goods. The note has a 12% effective interest rate. On January 1, when Song receives the note from the customer, Song will record (Select all that apply.)
Debit to notes receivable $100,000 Credit to discount on note receivable ($20,281) Credit to sales revenue ($79,719)
Checks received from customers that have not been deposited yet are included where on a company's balance sheet?
In the current asset "cash" account.
A contra-asset account is used to reduce the carrying value of account's receivable to the amount of cash expected to be received under the __________ method of accounting for bad debts.
allowance
Coins, balances in checking accounts, checks received from customers and money orders received are all included in the _________ account on the balance sheet.
cash
An allowance for sales return account is classified as a(n)
contra account to inventory
Which of the following items are included in cash?
currency and coins checks from customers balance in checking accounts
On November 1, Orange Corp. sold goods on account to Apple. Orange agreed to accept is $40,000, 12%, 3-month interest-bearing note from Apple in payment for the goods. The entry required on Orange's books on December 31, at the end of the year includes a
debit interest Receivable, $800
On June 1, Tulip Corp. provided services on account to Daffodil. Tulip agreed to accept a $40,000, 10%, 3-month interest-bearing note from Daffodil in payment for the services. The entry required on Tulip's books on June 1 would include a
debit to Notes Receivable, $40,000
The gross method and net method are two ways to record __________ discounts.
sales