n

A disadvantage of factoring is that the company selling its receivables immediately receives cash.

False

The accounts receivable turnover ratio is computed by dividing total gross sales by the average net receivables during the year.

False

When using the analysis of receivables method for estimating uncollectible receivables, the amount computed in the analysis is usually the amount that would be recorded in the end-of-period adjusting entry.

False

On October 1, Black Company receives a 9% interest-bearing note from Reese Company to settle a $20,000 account receivable. The note is due in six months. At December 31, Black should record interest revenue of

$450

The allowance method of estimating uncollectible accounts receivable based on an analysis of receivables shows that $640 of accounts receivable are uncollectible. The Allowance for Doubtful Accounts has a debit balance of $110. The adjusting entry at the end of the year will include a credit to Allowance for Doubtful Accounts in the amount of:

$750

The following journal entries would be used in one of the two methods of accounting for uncollectible receivables. Identify the method used.

Direct Write-Off Method Direct Write-Off Method

Paper Company receives a $6,000, 3-month, 6% promissory note from Dame Company in settlement of an open accounts receivable. What entry will Paper Company make upon receiving the note?

Notes Receivable—Dame Company6,000 Accounts Receivable—Dame Company6,000

The direct write-off method records bad debt expense in the year the specific account receivable is determined to be uncollectible.

True

The direct write-off method of accounting for uncollectible accounts

is often used by small companies and companies with few receivables

Under the allowance method, when a year-end adjustment is made for estimated uncollectible accounts

not total assets are unchanged.