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Exam 7: Accounts and Notes Receivable

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Question 21

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Electron borrowed $75,000 cash from TechCom by signing a promissory note.TechCom's entry to record the transaction should include a:

A) Debit to Notes Receivable for $75,000.
B) Debit to Accounts Receivable for $75,000.
C) Credit to Notes Receivable for $75,000.
D) Debit Notes Payable for $75,000.
E) Credit to Sales for $75,000.

F) A) and B)
G) C) and E)

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Question 22

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A promissory note is a written promise to pay a specified amount of money either on demand or at a definite future date.

A) True
B) False

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Question 23

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A promissory note received from a customer in exchange for an account receivable:

A company had an accounts receivable turnover ratio of 12 and net sales of $744,000 for a given period.What was the average amount of accounts receivables for this period?

The following series of transactions occurred during 2014 and 2015 when Linwood Co.sold merchandise to John Moore.Linwood's annual accounting period ends on December 31. $\begin{array}{|l|l|}\hline 10 / 01 / 14 & \text { Sold } \$ 12,000 \text { of merchandise to John Moore, terms } 2 / 10, n / 30 . \\\hline 11 / 15 / 14 & \begin{array}{l}\text { Moore reports that he cannot pay the account until early next year. He agrees to } \\\text { exchange the account for a 120-day, } 12 \% \text { note receivable. }\end{array} \\\hline \text { 12/31/14 } & \text { Prepared the adjusting journal entry to record accrued interest on the note. } \\\hline 03 / 15 / 15 & \begin{array}{l}\text { Linwood receives a check from Moore for the maturity value (with interest) of } \\\text { the note. }\end{array} \\\hline \text { 03/22/15 } & \begin{array}{l}\text { Linwood receives notification that Moore's check is being returned for non- } \\\text { sufficient funds (NSF). }\end{array} \\\hline 12 / 31 / 15 & \text { Linwood writes off Moore's account as uncollectible. }\\\hline\end{array}$ Prepare Linwood Co.'s journal entries to record the above transactions assuming they use the allowance method of accounting for uncollectible accounts.

The person who signs a note receivable and promises to pay the principal and interest is the:

Prepare general journal entries for the following transactions of this company for the current year: Dec. 13 $\quad$ Accepted a $\$ 8,000,60$ -day, 9\% note dated December 13 in granting Faith Renee a time extension on her past-due account receivable. $\quad$ $\quad$ 31 $\quad$ Prepared an adjusting entry to record the accrued interest on the Renee note.

If a 90-day note receivable is dated June 12,what is the maturity date of the note?

The percent of sales method of estimating bad debts is focused more on realizable value of accounts receivable than matching.

Crystal Products allows customers to use bank credit cards to charge purchases.The bank used by Crystal Products processes all bank credit cards in exchange for a 3% processing fee.All credit card receipts deposited are credited to the company account on the day of deposit.Assume that on January 18,Crystal Products sold and deposited $19,000 worth of bank credit card receipts.Prepare the general journal entry to record this transaction.

The direct write-off method of accounting for bad debts records the loss from an uncollectible account receivable when the company determines it to be uncollectible.

On August 1,2013,Ace Corporation accepted a note receivable in place of an outstanding accounts receivable in the amount of $123,965.The note is due in 90 days and has an interest rate of 8%.What would be the total amount collected at the maturity date?

Failure by a promissory note's maker to pay the amount due at maturity is known as:

The materiality constraint:

The buyer who pays cash for an account receivable is referred to as a:

The Connecting Company uses the percent of sales method of accounting for uncollectible accounts receivable.During the current year,the following transactions occurred: $\begin{array}{|l|l|}\hline\text { Sept. } 7 & \begin{array}{l}\text { Connecting Company determined that the } \$ 8,100 \text { account receivable of the Helena } \\\text { Company was uncollectible and wrote it off. }\end{array} \\\hline \text { Oct. 15 } & \begin{array}{l}\text { Connecting Company determined that the } \$ 2,500 \text { account receivable of the Tree } \\\text { Company was uncollectible and wrote it off. }\end{array}\\\hline \text { Nov. } 9 & \begin{array}{l}\text { Helena Company paid } \$ 6,000 \text { of the amount owed to the Connecting Company. } \\\text { Connecting Company does not expect further collections from the Helena } \\\text { Company. }\end{array} \\\hline \text { Dec. 31 } & \begin{array}{l}\text { Connecting Company estimates that } 0.5 \% \text { of its } \$ 1,900,000 \text { of credit sales would be } \\\text { uncollectible. }\end{array}\\\hline\end{array}$ 1.Prepare the general journal entries to record these transactions. If the balance of the allowance for uncollectible accounts was an $8,000 credit on January 1 of the current year,determine the balance of the allowance for doubtful accounts at December 31 of the current year.Assume that the transactions above are the only transactions affecting the allowance for doubtful accounts during the year.

A company receives a 7.5%,six-month note for $8,900.The total interest due on the maturity date is:

A company allows its customers to use bank credit cards to charge purchases.When customers use the credit cards,the net amount is deposited in the company's checking account.The company also is charged a 2.5% service charge for these credit card sales.Assume that on April 13,the company sold $25,000 worth of merchandise to customers who used credit cards.Prepare the company's journal entry to record the credit card sales for April 13 assuming the company deposited the receipts that same day.

A company receives a 10%,90-day note for $1,500.The total interest due upon the maturity date is:

A payee of a note will always honor a note and pay it in full.