131.
Under IFRS, the term
provision
:
132.
Winkler Company borrows $85,000 and pledges its receivables as security. The journal
entry to record this transaction would be:
133.
Mullis Company sold merchandise on account to a customer for $625, terms n/30. The
journal entry to record this sale transaction would be:
134.
Mullis Company sold merchandise on account to a customer for $625, terms n/30. The
journal entry to record the collection on account would be:
135.
MacKenzie Company sold $300 of merchandise to a customer who used a Regional Bank
credit card. Regional Bank deducts a 1.5% service charge for sales on its credit cards and
credits MacKenzie’s account immediately when sales are made. The journal entry to
record this sale transaction would be:
136.
MacKenzie Company sold $180 of merchandise to a customer who used a Regional Bank
credit card. Regional Bank deducts a 4% service charge for sales on its credit cards.
MacKenzie electronically remits the credit card sales receipts to the credit card company
and receives payment in approximately 5 days. The journal entry to record this sale
transaction would be:
137.
MacKenzie Company sold $180 of merchandise to a customer who used a Regional Bank
credit card. Regional Bank deducts a 4% service charge for sales on its credit cards.
MacKenzie electronically remits the credit card sales receipts to the credit card company
and receives payment in approximately 5 days. The journal entry to record the collection
from the credit card company would be:
138.
Frederick Company borrows $63,000 from First City Bank and pledges its receivables as
security. Which of the following is
true
regarding this transaction:
139.
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?
140.
Amounts owed by customers from credit sales for which payment is required in periodic
amounts over an extended time period are referred to as:
141.
Stacey Corp. uses the direct write-off method to account for bad debts. On May 26 the
company determines that a customer account with a balance of $750 is uncollectible. The
journal entry to record this loss is:
142.
Driver Company expects that $17,500 of its $437,500 Accounts Receivable balance is
uncollectible. The Allowance for Doubtful Accounts before adjustment has a debit balance
of $2,400. The amount of the adjusting entry needed by Driver is:
143.
Clayborn Company expects that $12,600 of its $420,000 Accounts Receivable balance is
uncollectible. The Allowance for Doubtful Accounts before adjustment has a credit
balance of $1,400. The amount of the adjusting entry needed by Clayborn is:
144.
Jones Cement Company has an Accounts Receivable balance on December 31 of
$217,000, Sales for the year of $3,633,000, and an Allowance for Doubtful Accounts
balance after adjustment of $4,340. The Realizable value of Jones’ Accounts Receivables
is:
Matching Questions
145.
Match each of the following terms with the appropriate definitions.
The party who signs a note and promises
2. Maker of a
The uncollectible accounts of credit
customers who do not pay what they have
3. Realizable
A process of classifying accounts
receivable by how long it is past its due date
for the purpose of estimating the amount of
4. Matching
The charge a borrower pays for using
5. Allowance for
doubtful
A written promise to pay a specified
amount of money, usually with interest,
either on demand or at a definite future
The party to whom the promissory note
7. Promissory
Amounts due from customers for credit
8. Accounts
A contra asset account with a balance
approximating the amount of accounts
9. Aging of
accounts
The expected proceeds from converting
10. Payee of a
The accounting principle that requires
expenses to be reported in the same period
146.
Match each of the following terms with the appropriate definitions.
1. Full disclosure
A method of accounting for bad debts
that matches the estimated loss from
uncollectible accounts receivable against
2. Allowance
Amounts owed by customers from credit
sales for which payment is required in
periodic payments over an extended period
3. Factoring
accounts
The amount that the signer of a note
agrees to pay back when the note matures,
4. Dishonoring a
The accounting principle that requires
financial statements (including the notes) to
report all relevant information about
5. Materiality
The accounting constraint that states
that an amount can be ignored if its effect
on the financial statements is unimportant
6. Accounts
receivable
A method of accounting for bad debts
that records the loss from an uncollectible
account receivable immediately upon
7. Installment
accounts
Refers to a note maker’s inability or
8. Principal of a
A measure of both the quality and
liquidity of accounts receivable that
indicates how often, on average, receivables
period.
9. Pledging
accounts
Selling all or a portion of accounts
10. Direct write-
Committing accounts receivable as
Short Answer Questions
147.
Describe how accounts receivable arise and how they accounted for, including the use of a
subsidiary ledger and an allowance account.
148.
Define a note receivable and explain how to calculate the interest due on a short-term
note receivable.
149.
Explain the options a company may use to convert its receivables to cash before they are
due.
150.
What is the accounts receivable turnover ratio? How is it calculated and how is it used to
assess financial condition?
151.
Describe the differences in how the direct write-off method and the allowance method are
applied in accounting for uncollectible accounts receivables.
152.
The allowance method of accounting for bad debts requires an estimate of bad debt
expense at the end of each accounting period. The two common methods to determine the
estimate amount are the percent of sales method and the percent of receivables method.
Explain the basic differences between the two methods.
153.
Explain how to record the receipt (acceptance) of a note receivable.
154.
Explain the difference between honoring and dishonoring a note receivable.
155.
What are some of the considerations management should make when assessing the
accounts receivable turnover ratio?
Essay Questions
156.
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, less a 2.5% service charge. Assume that on April 13, the company sold $20,000
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.
157.
Gemstone Products allows customers to use bank credit cards to charge purchases. The
bank used by Gemstone Products processes all bank credit cards in exchange for a 3%
processing fee and all credit card receipts deposited are credited to the company account
on the day of deposit. Assume that on January 18, Gemstone Products sold and deposited
$18,000 worth of bank credit card receipts. Prepare the general journal entry to record this
transaction.