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Exam 8: Reporting and Analyzing Receivables

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Question 51

Multiple Choice

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The following information is related to December 31, 2013 balances. $\begin{array}{lc}\text {- Accounts receivable } & \$ 700,000 \\\text {- Allowance for doubtful accounts (credit) } & (60,000) \\\text {- Cash realizable value } & 640,000\end{array}$ During 2014 sales on account were $195,000 and collections on account were $115,000. Also, during 2014 the company wrote off $11,000 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that bad debts should be estimated at $72,000. Bad debt expense for 2014 is:

A) $23,000.
B) $12,000.
C) $72,000.
D) $ 1,000.

E) A) and C)
F) All of the above

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Question 52

Multiple Choice

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A note receivable is a negotiable instrument which

A) eliminates the need for a bad debts allowance.
B) can be transferred to another party by endorsement.
C) takes the place of checks in a business firm.
D) can only be collected by a bank.

E) B) and C)
F) All of the above

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Question 53

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In computing the maturity date of a note, the date the note is issued is included but the due date is omitted.

IFRS sometimes refers to allowances as

Bad Debt Expense is considered

Accounts receivable are the result of cash and credit sales.

When an account is written off using the allowance method, accounts receivable

Using the allowance method, the uncollectible accounts for the year is estimated to be $40,000. If the balance for the Allowance for Doubtful Accounts is a $9,000 debit before adjustment, what is the amount of bad debt expense for the period?

Jenkins Company dishonors a note at maturity. What are the options available to the lender?

In reviewing the accounts receivable, the cash receivable value is $21,000 before the write-off of a $1,500 account. What is the cash receivable value after the write-off?

IFRS requires loans and receivables to be recorded at

When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when

When a note is dishonored, the payee's entry includes a

Doane Company receives a $7,000, 3-month, 6% promissory note from Ray Company in settlement of an open accounts receivable. What entry will Doane Company make upon receiving the note?

Finney had the following transactions during March 2012. 1. Finney sold and delivered $14,000 of merchandise to LJ Enterprises, terms 2/10, n30. 2. LJ Enterprises also ordered an additional $5,000 worth of goods on the last day of the month. 3. Finney lent $1,000 to its company president who promised to repay the loan on the 15^th day of the next month. 4. Finney sold old storage sheds to Alt Traders on 3/31. Alt Traders gave a $2,500 promissory note to Finney agreeing to pay for the sheds in 3 months. 5. Other current assets totaled $50,000. Finney received no cash arising from the above transactions during March. Based only on the above transactions, and ingnoring beginning balances, compute the percentage Accounts Receivable is of the total current assets as of month end.

A high accounts receivable turnover ratio indicates

Your roommate is uncertain about the advantages of a promissory note. Compare the advantages of a note receivable with those of an account receivable.

Which one of the following is not a principle of sound accounts receivable management?

To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a

The Garvey Sign Company uses the allowance method in accounting for uncollectible accounts. Past experience indicates that 6% of accounts receivable will eventually be uncollectible. Selected account balances at December 31, 2013, and December 31, 2014, appear below: $\begin{array}{lrr}&12 / 31 / 2013&12 / 31 / 2014\\\text { Net Credit Sales } & \$ 400,000 & \$ 500,000 \\\text { Accounts Receivable } & 80,000 & 100,000 \\\text { Allowance for Doubtful Accounts } & 4,000 & ?\end{array}$ Instructions (a) Record the following events in 2014. Aug. 10 Determined that the account of Kurt West for $900 is uncollectible. Sept. 12 Determined that the account of Jill Lynch for $3,000 is uncollectible. Oct. 10 Received a check for $300 as payment on account from Kurt West, whose account had previously been written off as uncollectible. (b) Prepare the adjusting journal entry to record the bad debt provision for the year ended December 31, 2014. (c) What is the balance of Allowance for Doubtful Accounts at December 31, 2014?