105) A company uses the percent of sales method to determine its bad debts expense. At the end
of the current year, the company’s unadjusted trial balance reported the following selected
amounts:
Accounts receivable
$
35,000
debit
Allowance for uncollectible accounts
500
credit
Net Sales
180,000
credit
All sales are made on credit. Based on past experience, the company estimates that 0.6% of net
credit sales are uncollectible. What amount should be debited to Bad Debts Expense when the
year-end adjusting entry is prepared?
A) $1,275
B) $1,775
C) $1,500
D) $1,080
E) $2,500
106) A company uses the percent of sales method to determine its bad debts expense. At the end
of the current year, the company’s unadjusted trial balance reported the following selected
amounts:
Accounts receivable
$
375,000
debit
Allowance for uncollectible accounts
500
debit
Net Sales
800,000
credit
All sales are made on credit. Based on past experience, the company estimates 0.6% of net credit
sales to be uncollectible. What adjusting entry should the company make at the end of the current
year to record its estimated bad debts expense?
A) Debit Bad Debts Expense $2,130; credit Allowance for Doubtful Accounts $2,130.
B) Debit Bad Debts Expense $2,630; credit Allowance for Doubtful Accounts $2,630.
C) Debit Bad Debts Expense $4,300; credit Allowance for Doubtful Accounts $4,300.
D) Debit Bad Debts Expense $4,800; credit Allowance for Doubtful Accounts $4,800.
E) Debit Bad Debts Expense $5,300; credit Allowance for Doubtful Accounts $5,300.
107) A company has $90,000 in outstanding accounts receivable and it uses the allowance
method to account for uncollectible accounts. Experience suggests that 4% of outstanding
receivables are uncollectible. The current balance (before adjustments) in the allowance for
doubtful accounts is an $800 debit. The journal entry to record the adjustment to the allowance
account includes a debit to Bad Debts Expense for:
A) $3,600
B) $3,568
C) $3,632
D) $2,800
E) $4,400
108) A company has $90,000 in outstanding accounts receivable and it uses the allowance
method to account for uncollectible accounts. Experience suggests that 4% of outstanding
receivables are uncollectible. The current balance (before adjustments) in the allowance for
doubtful accounts is an $800 credit. The journal entry to record the adjustment to the allowance
account includes a debit to Bad Debts Expense for:
A) $2,800
B) $3,568
C) $3,632
D) $3,600
E) $4,400
109) Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. Jasper’s entry to record the
transaction should be:
A) Debit Notes Receivable for $25,000; credit Cash $25,000.
B) Debit Accounts Receivable $25,000; credit Notes Receivable $25,000.
C) Debit Cash $25,000; credit Notes Receivable for $25,000.
D) Debit Notes Payable $25,000; credit Accounts Payable $25,000.
E) Debit Notes Receivable $25,000; credit Sales $25,000.
110) Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. The amount of interest that
Jasper will collect on the loan is: (Use 360 days a year.)
A) $1,750.
B) $145.83.
C) $437.50.
D) $19.44.
E) $875.00.
111) Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. Jasper’s entry to record the
collection of the note and interest at maturity should be: (Use 360 days a year.)
A) Debit Cash for $25,000; credit Notes Receivable $25,000.
B) Debit Cash $25,437.50; credit Interest Revenue $437.50; credit Notes Receivable $25,000.
C) Debit Cash $25,437.50; credit Notes Receivable for $25,437.50.
D) Debit Notes Payable $25,000; Debit Interest Expense $1,750; credit Cash $26,750.
E) Debit Cash $26,750; credit Interest Revenue $1,750, credit Notes Receivable $25,000.
112) Duerr Company makes a $60,000, 60-day, 12% cash loan to Ryan Co. The note and interest
to be collected at maturity is: (Use 360 days a year.)
A) $60,000.
B) $1,200.
C) $61,200.
D) $58,800.
E) $67,200.
113) Lemming makes an $18,750, 120-day, 8% cash loan to Notions Co. on November 1.
Lemming’s end-of-period adjusting entry on December 31 should be:
A) Debit Cash for $250; credit Notes Receivable $250.
B) Debit Interest Revenue $500; credit Notes Receivable $500.
C) Debit Interest Receivable $250; credit Interest Revenue $250.
D) Debit Interest Receivable $500; credit Interest Revenue $500.
E) Debit Notes Receivable $500; credit Interest Revenue $500.
114) The total amount of the note and interest due on the maturity date of a $6,000, 60-day 4%,
note receivable is: (Use 360 days a year.)
A) $6,000.
B) $6,240.
C) $5,760.
D) $6,040.
E) $5,960.
115) Giorgio Italian Market bought $4,000 worth of merchandise from Food Suppliers and
signed a 90-day, 6% promissory note for the $4,000. Food Supplier’s journal entry to record the
sales transaction is:
A) Debit Accounts Receivable $4,000; credit Sales $4,000
B) Debit Notes Receivable $4,000; credit Sales $4,000
C) Debit Accounts Receivable $4,060; credit Sales $4,060
D) Debit Notes Receivable $4,060; credit Sales $4,060
E) Debit Notes Receivable $4,000; debit Interest Receivable $60; credit Sales $4,060
116) Giorgio Italian Market bought $4,000 worth of merchandise from Food Suppliers and
signed a 90-day, 6% promissory note for the $4,000. Food Supplier’s journal entry to record the
collection on the maturity date is: (Use 360 days a year.)
A) Debit Cash $4,060; credit Notes Receivable $4,060
B) Debit Notes Receivable $4,000; credit Cash $4,000
C) Debit Cash $4,000; debit Interest Receivable $60; credit Sales $4,060
D) Debit Notes Receivable $4,060; credit Sales $4,060
E) Debit Cash $4,060; credit Interest Revenue $60; credit Notes Receivable $4,000
117) Jax Recording Studio purchased $7,800 in electronic components from Music World. Jax
signed a 60-day, 8% promissory note for $7,800. Music World’s journal entry to record the sales
transaction is:
A) Debit Accounts Receivable $7,800; credit Sales $7,800
B) Debit Accounts Receivable $7,904; credit Sales $7,904
C) Debit Notes Receivable $7,800; credit Sales $7,800
D) Debit Notes Receivable $7,904; credit Sales $7,904
E) Debit Notes Receivable $7,800; debit Interest Receivable $104; credit Sales $7,904
118) Jax Recording Studio purchased $7,800 in electronic components from Music World. Jax
signed a 60-day, 8% promissory note for $7,800. Music World’s journal entry to record the
collection on the maturity date is:
A) Debit Cash $7,800; credit Accounts Receivable $7,800
B) Debit Accounts Receivable $7,904; credit Notes Receivable $7,800; credit Interest
Receivable $104
C) Debit Notes Receivable $8,008; credit Cash $7,904; credit Interest Revenue $104
D) Debit Cash $7,904; credit Notes Receivable $7,800; credit Interest Revenue $104
E) Debit Cash $7,904; credit Notes Receivable $7,904
119) Honoring a note receivable indicates that the maker has:
A) Signed.
B) Paid in full.
C) Guaranteed.
D) Notarized.
E) Cosigned.
120) Failure by a promissory notes’ maker to pay the amount due at maturity is known as:
A) Protesting a note.
B) Closing a note.
C) Dishonoring a note.
D) Discounting a note.
E) Depreciating a note.
121) Uniform Supply accepted a $4,800, 90-day, 10% note from Tracy Janitorial on October 17.
What entry should Uniform Supply make on January 15 of the next year when the note is paid?
(Assume reversing entries are not made.) (Use 360 days a year.)
A) Debit Notes Receivable $4,800; debit Interest Receivable $120; credit Sales $4,920.
B) Debit Cash $4,920; credit Notes Receivable $4,920.
C) Debit Cash $4,920; credit Interest Revenue $100; credit Interest Receivable $20; credit Notes
Receivable $4,800.
D) Debit Cash $4,920; credit Interest Revenue $20; credit Interest Receivable $100; credit Notes
Receivable $4,800.
E) Debit Cash $4,920; credit Interest Revenue $120; credit Notes Receivable $4,800.
122) Uniform Supply accepted a $4,800, 90-day, 10% note from Tracy Janitorial on October 17.
What entry should Uniform Supply make on December 31, to record the accrued interest on the
note?
A) Debit Cash $20; credit Notes Receivable $20.
B) Debit Cash $100; credit Notes Receivable $100.
C) Debit Interest Receivable $20; credit Interest Revenue $20.
D) Debit Interest Receivable $100; credit Interest Revenue $100.
E) Debit Cash $120; credit Interest Revenue $100; credit Interest Receivable $20.
123) Uniform Supply accepted a $4,800, 90-day, 10% note from Tracy Janitorial on October 17.
If the note is dishonored, but Uniform Supply intends to continue collection efforts, what entry
should Uniform Supply make on January 15 of the next year? (Assume no reversing entries are
made.) (Use 360 days a year.)
A) Debit Notes Receivable $4,800; debit Interest Receivable $120; credit Sales $4,920.
B) Debit Cash $4,920; credit Notes Receivable $4,920.
C) Debit Cash $4,920; credit Interest Revenue $100; credit Interest Receivable $20, credit Notes
Receivable $4,800.
D) Debit Cash $4,920; credit Interest Revenue $20; credit Interest Receivable $100, credit Notes
Receivable $4,800.
E) Debit Accounts Receivable $4,920; credit Interest Revenue $20; credit Interest Receivable
$100, credit Notes Receivable $4,800.
124) Valley Spa purchased $7,800 in plumbing components from Tubman Co. Valley Spa
Studios signed a 60-day, 10% promissory note for $7,800. If the note is dishonored, what is the
amount due on the note? (Use 360 days a year.)
A) $130
B) $7,800
C) $7,930
D) $8,050
E) $8,130
125) Valley Spa purchased $7,800 in plumbing components from Tubman Co. Valley Spa signed
a 60-day, 10% promissory note for $7,800. If the note is dishonored, but Tubman intends to
continue collection efforts, what is the journal entry to record the dishonored note? (Use 360
days a year.)
A) Debit Accounts Receivable $7,930; debit Bad Debt Expense $130; credit Notes Receivable
$8,060.
B) Debit Bad Debt Expense $7,930; credit Accounts Receivable $7,930.
C) Debit Bad Debt Expense $7,800; credit Notes Receivable $7,800.
D) Debit Accounts Receivable—Valley Spa $7,800; credit Notes Receivable $7,800.
E) Debit Accounts Receivable—Valley Spa $7,930, credit Interest Revenue $130; credit Notes
Receivable $7,800.
126) Which of the following is not true about the Allowance for Doubtful Accounts?
A) It is a contra asset account.
B) It is used instead of reducing accounts receivable directly.
C) It is debited when uncollectible accounts are written off.
D) It is a liability account.
E) It is credited when bad debts expense is estimated and recorded.
127) Jervis sells $75,000 of its accounts receivable to Northern Bank in order to obtain necessary
cash. Northern Bank charges a 5% factoring fee. What entry should Jervis make to record the
transaction?
A) Debit Cash $71,250; debit Factoring Fee Expense $3,750; credit Accounts Receivable
$75,000
B) Debit Accounts Receivable $71,250; debit Factoring Fee Expense $3,750; credit Cash
$75,000
C) Debit Cash $75,000; credit Factoring Fee Expense $3,750; credit Accounts Receivable
$75,000
D) Debit Cash $71,250; credit Accounts Receivable $71,250
E) Debit Accounts Receivable $75,000; credit Factoring Fee Expense $3,750; credit Cash
$71,250
128) Jervis accepts all major bank credit cards, including those issued by Northern Bank (NB),
which assesses a 3% charge on sales for using its card. On June 28, Jervis had $3,500 in NB
Card credit sales. What entry should Jervis make on June 28 to record the deposit?
A) Debit Cash $3,500; credit Sales $3,500
B) Debit Accounts Receivable $3,500; credit Sales $3,500
C) Debit Cash $3,605; credit Credit Card Expense $105; credit Sales $3,500
D) Debit Cash $3,395; debit Credit Card Expense $105; credit Sales $3,500
E) Debit Accounts Receivable $3,395; debit Credit Card Expense $105; credit Sales $3,500
129) Brinker accepts all major bank credit cards, including First Savings Bank’s, which assesses
a 2.5% charge on sales for using its card. On May 26, Brinker had $4,800 in First Savings Bank
Card credit sales. What entry should Brinker make on May 26 to record the deposit?
A) Debit Accounts Receivable $4,800; credit Sales $4,800.
B) Debit Cash $4,680; debit Credit Card Expense $120; credit Sales $4,800.
C) Debit Cash $4,800; credit Sales $4,800.
D) Debit Cash $4,920; credit Credit Card Expense $120; credit Sales $4,800.
E) Debit Accounts Receivable $4,680; debit Credit Card Expense $120; credit Sales $4,800.
130) Craigmont uses the allowance method to account for uncollectible accounts. Its year-end
unadjusted trial balance shows Accounts Receivable of $104,500, allowance for doubtful
accounts of $665 (credit) and sales of $925,000. If uncollectible accounts are estimated to be 4%
of accounts receivable, what is the amount of the bad debts expense adjusting entry?
A) $4,845
B) $4,180
C) $3,515
D) $3,700
E) $3,850
131) Craigmont uses the allowance method to account for uncollectible accounts. Its year-end
unadjusted trial balance shows Accounts Receivable of $104,500, allowance for doubtful
accounts of $665 (credit) and sales of $925,000. If uncollectible accounts are estimated to be
0.5% of sales, what is the amount of the bad debts expense adjusting entry?
A) $4,625
B) $3,960
C) $5,290
D) $4,750
E) $4,825
132) On July 9, Mifflin Company receives a $8,500, 90-day, 8% note from customer Payton
Summers as payment on account. Compute the maturity date for the note.
A) October 8
B) October 7
C) November 8
D) November 7
E) November 6
133) On July 9, Mifflin Company receives an $8,500, 90-day, 8% note from customer Payton
Summers as payment on account. Compute the amount due at maturity for the note and interest.
(Use 360 days a year.)
A) $8,628
B) $8,192
C) $8,613
D) $8,500
E) $8,670
134) On July 9, Mifflin Company receives an $8,500, 90-day, 8% note from customer Payton
Summers as payment on account. What entry should be made on July 9 to record receipt of the
note?
A) Debit Accounts Receivable $8,500; credit Sales $8,500.
B) Debit Notes Receivable $8,670; credit Sales $8,670.
C) Debit Notes Receivable $8,500; credit Accounts Receivable $8,500.
D) Debit Notes Receivable $8,500; credit Sales $8,500.
E) Debit Notes Receivable $8,725; credit Interest Revenue $225; credit Accounts Receivable
$8,500.
135) On July 9, Mifflin Company receives an $8,500, 90-day, 8% note from customer Payton
Summers as payment on account. What entry should be made on the maturity date assuming the
maker pays in full, and no adjusting entries have been made related to the note? (Use 360 days a
year.)
A) Debit Notes Receivable $8,500; debit Interest Receivable $170; credit Sales $8,670.
B) Debit Cash $8,670; credit Interest Revenue $170; credit Notes Receivable $8,500.
C) Debit Cash $8,628; credit Interest Revenue $128; credit Notes Receivable $8,500.
D) Debit Cash $8,613; credit Interest Revenue $113; credit Notes Receivable $8,500.
E) Debit Cash $8,500; credit Notes Receivable $8,500.
136) On November 19, Nicholson Company receives a $15,000, 60-day, 8% note from a
customer as payment on account. What adjusting entry should be made on the December 31
year-end? (Use 360 days a year.)
A) Debit Interest Receivable $1,200; credit Interest Revenue $1,200.
B) Debit Interest Receivable $140; credit Interest Revenue $140.
C) Debit Notes Receivable $140; credit Interest Revenue $140.
D) Debit Notes Receivable $140; credit Interest Receivable $140.
E) Debit Interest Revenue $200; credit Interest Receivable $200.
137) On November 1, Orpheum Company accepted a $10,000, 90-day, 8% note from a customer
to settle his account. What entry should be made on the November 1 to record the acceptance of
the note?
A) Debit Note Receivable $10,000; credit Cash $10,000.
B) Debit Note Receivable $10,000; credit Accounts Receivable $10,000.
C) Debit Note Receivable $10,000; credit Sales $10,000.
D) Debit Note Receivable $10,200; credit Accounts Receivable $10,000; credit Interest Revenue
$200.
E) Debit Sales $10,000; credit Accounts Receivable $10,000.
138) The unadjusted trial balance at year-end for a company that uses the percent of receivables
method to determine its bad debts expense, reports the following selected amounts:
Accounts receivable
$
Debit
Allowance for Doubtful Accounts
Debit
Net Sales
Credit
All sales are made on credit. Based on past experience, the company estimates 3.5% of ending
account receivable to be uncollectible. What adjusting entry should the company make at the end
of the current year to record its estimated bad debts expense?
A) Debit Bad Debts Expense $13,975; credit Allowance for Doubtful Accounts $13,975.
B) Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225.
C) Debit Bad Debts Expense $16,475; credit Allowance for Doubtful Accounts $16,475.
D) Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350.
E) Debit Bad Debts Expense $17,350; credit Allowance for Doubtful Accounts $17,350.
139) The unadjusted trial balance at year-end for a company that uses the percent of receivables
method to determine its bad debts expense reports the following selected amounts:
Accounts receivable
$
Debit
Allowance for Doubtful Accounts
Credit
Net Sales
Credit
All sales are made on credit. Based on past experience, the company estimates 3.5% of ending
account receivable to be uncollectible. What adjusting entry should the company make at the end
of the current year to record its estimated bad debts expense?
A) Debit Bad Debts Expense $13,975; credit Allowance for Doubtful Accounts $13,975.
B) Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225.
C) Debit Bad Debts Expense $16,475; credit Allowance for Doubtful Accounts $16,475.
D) Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350.
E) Debit Bad Debts Expense $17,350; credit Allowance for Doubtful Accounts $17,350.