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Exam 7: Accounting for Receivables

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Question 71

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A company pledges their receivables so they may

A) Collect a pledge fee.
B) Borrow money.
C) Charge a factoring fee.
D) Increase sales.
E) Recognize a sale.

F) C) and D)
G) B) and D)

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Question 72

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White Company allows customers to make purchases on credit.The terms of all credit sales are 2/10,n/30,and all sales are recorded at the gross price.Other customers can use a bank credit card where the bank deducts a 4% service charge for credit card sales and credits the bank account of White immediately when credit card receipts are deposited.White uses the perpetual inventory method.Prepare journal entries to record the following selected transactions and events.

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Question 73

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A high accounts receivable turnover in comparison with competitors suggests that the firm should tighten its credit policy.

On February 1,a customer's account balance of $2,300 was deemed to be uncollectible.What entry should be recorded on February 1 to record the write-off assuming the company uses the allowance method?

Gideon Company uses the allowance method of accounting for uncollectible accounts.On May 3,the Gideon Company wrote off the $2,000 uncollectible account of its customer,A.Hopkins.On July 10,Gideon received a check for the full amount of $2,000 from Hopkins.On July 10,the entry or entries Gideon makes to record the recovery of the bad debt is:

On October 12 of the current year,a company determined that a customer's account receivable was uncollectible and that the account should be written off.Assuming the allowance method is used to account for bad debts,what effect will this write-off have on the company's net income and total assets?

The percent of sales method of estimating bad debts focuses more on the realizable value of accounts receivable than on expense recognition.

The accounts receivable turnover is calculated by dividing average accounts receivable by net sales.

The ________ of a note is the day the principle plus interest of a note must be repaid.

A company borrowed $10,000 by signing a 180-day promissory note at 9%.The total to be paid at maturity of the note is: (Use 360 days a year.)

Majesty Productions accepted a $7,200,120-day,6% note from Swartz Studio on March 1.On the date the note matures,Swartz is unable to pay,but Majesty intends to continue collection efforts.What entry should Majesty record on the maturity date for this dishonored note?

At the end of the current year,using the aging of receivable method,management estimated that $15,750 of the accounts receivable balance would be uncollectible.Prior to any year-end adjustments,the Allowance for Doubtful Accounts had a debit balance of $375.What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

The quality of receivables refers to:

The realizable value refers to the accounts receivable amount expected to be received.

Orman Co.sold $80,000 of accounts receivable to First Savings and incurred a 3% factoring fee.Prepare the journal entry for Orman Co.to record the sale.

No attempt is made to estimate bad debts expense under the allowance method of accounting for uncollectible accounts receivable.

Frederick Company borrows $63,000 from First City Bank and pledges its receivables as security.Which of the following is true regarding this transaction:

Explain how to record the receipt (acceptance)of a note receivable.

After adjustment,the balance in the Allowance for Doubtful Accounts has the effect of reducing Accounts Receivable to its estimated realizable value.

A note that the maker does not pay at maturity is called a dishonored note.