98)
The allowance method based on the idea that a given percent of a company’s credit sales for the
period is uncollectible is:
A)
The percent of accounts receivable method.
B)
Factoring method.
C)
The percent of sales method.
D)
Direct write-off method.
E)
The aging of accounts receivable method.
99)
A method of estimating bad debts expense that involves a detailed examination of outstanding
accounts and the length of time past due is the:
A)
Percent of accounts receivable method.
B)
Percentage of sales method.
C)
Aging of investments method.
D)
Direct write-off method.
E)
Aging of accounts receivable method.
100)
Which of the following is an accounting procedure that (1) estimates and reports bad debts expense
from credit sales during the period the sales are recorded, and (2) reports accounts receivable at the
estimated amount of cash to be collected?
A)
Adjustment method for uncollectible debts.
B)
Direct write-off method of accounting for bad debts.
C)
Allowance method of accounting for bad debts.
D)
Cash basis method of accounting for bad debts.
E)
Aging of notes receivable.
43
101)
On December 31 of the current year, the unadjusted trial balance of a company using the percent of
receivables method to estimate bad debt included the following: Accounts Receivable, debit
balance of $95,250; Allowance for Doubtful Accounts, credit balance of $921. What amount
should be debited to Bad Debts Expense, assuming 6% of outstanding accounts receivable at the
end of the current year are estimated to be uncollectible?
A) $6,636. B) $5,715. C) $5,660. D) $4,794. E) $5,770.
102)
A company ages its accounts receivables to determine its end of period adjustment for bad debts.
At the end of the current year, 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?
A)
Accounts Receivable
16,125
Allowance for Doubtful Accounts
16,125
B)
Accounts Receivable
15,750
Bad Debts Expense
375
Sales
16,125
C)
Bad Debts Expense
16,125
Allowance for Doubtful Accounts
16,125
D)
Bad Debts Expense
15,375
Allowance for Doubtful Accounts
15,375
E)
Bad Debts Expense
15,750
Allowance for Doubtful Accounts
15,750
45
103)
A company ages its accounts receivables to determine its end of period adjustment for bad debts.
At the end of the current year, 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 credit balance of $375. What adjusting entry should the company make at the end
of the current year to record its estimated bad debts expense?
A)
Accounts Receivable
16,125
Allowance for Doubtful Accounts
16,125
B)
Accounts Receivable
15,750
Bad Debts Expense
375
Sales
16,125
C)
Bad Debts Expense
16,125
Allowance for Doubtful Accounts
16,125
D)
Bad Debts Expense
15,375
Allowance for Doubtful Accounts
15,375
E)
Bad Debts Expense
15,750
Allowance for Doubtful Accounts
15,750
104)
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 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) $4,800 B) $5,500 C) $4,500 D) $1,275 E) $1,775
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 $375,000 debit
Allowance for uncollectible accounts 500 credit
Net Sales 800,000 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) $5,500 B) $1,275 C) $1,775 D) $4,800 E) $4,500
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 $4,300; credit Allowance for Doubtful Accounts $4,300.
B)
Debit Bad Debts Expense $4,800; credit Allowance for Doubtful Accounts $4,800.
C)
Debit Bad Debts Expense $5,300; credit Allowance for Doubtful Accounts $5,300.
D)
Debit Bad Debts Expense $2,630; credit Allowance for Doubtful Accounts $2,630.
E)
Debit Bad Debts Expense $2,130; credit Allowance for Doubtful Accounts $2,130.
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) $3,632 B) $3,568 C) $3,600 D) $4,400 E) $2,800
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) $3,568 B) $4,400 C) $3,632 D) $3,600 E) $2,800
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 $25,000; credit Sales $25,000.
B)
Debit Accounts Receivable $25,000; credit Notes Receivable $25,000.
C)
Debit Notes Payable $25,000; credit Accounts Payable $25,000.
D)
Debit Notes Receivable for $25,000; credit Cash $25,000.
E)
Debit Cash $25,000; credit Notes Receivable for $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) $437.50. B) $875.00. C) $145.83. D) $19.44. E) $1,750.
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 $25,437.50; credit Notes Receivable for $25,437.50.
B)
Debit Cash $26,750; credit Interest Revenue $1,750, credit Notes Receivable $25,000.
C)
Debit Cash $25,437.50; credit Interest Revenue $437.50; credit Notes Receivable $25,000.
D)
Debit Cash for $25,000; credit Notes Receivable $25,000.
E)
Debit Notes Payable $25,000; Debit Interest Expense $1,750; credit Cash $26,750.
112)
Duerr company makes a $60,000, 60-day, 12% cash loan to Ryan Co. The maturity value of the
loan is: (Use 360 days a year.)
A) $60,000. B) $58,800. C) $1,200. D) $61,200. 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 Interest Receivable $500; credit Interest Revenue $500.
B)
Debit Cash for $250; credit Notes Receivable $250.
C)
Debit Interest Revenue $500; credit Notes Receivable $500.
D)
Debit Interest Receivable $250; credit Interest Revenue $250.
E)
Debit Notes Receivable $500; credit Interest Revenue $500.
114)
The amount due on the maturity date of a $6,000, 60-day 4%, note receivable is: (Use 360 days a
year.)
A) $6,240. B) $5,760. C) $6,000. 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 Notes Receivable $4,000; debit Interest Receivable $60; credit Sales $4,060
B)
Debit Notes Receivable $4,060; credit Sales $4,060
C)
Debit Accounts Receivable $4,060; credit Sales $4,060
D)
Debit Notes Receivable $4,000; credit Sales $4,000
E)
Debit Accounts Receivable $4,000; credit Sales $4,000
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 Notes Receivable $4,000; credit Cash $4,000
B)
Debit Notes Receivable $4,060; credit Sales $4,060
C)
Debit Cash $4,000; debit Interest Receivable $60; credit Sales $4,060
D)
Debit Cash $4,060; credit Notes Receivable $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 Notes Receivable $7,800; debit Interest Receivable $104; credit Sales $7,904
B)
Debit Notes Receivable $7,904; credit Sales $7,904
C)
Debit Notes Receivable $7,800; credit Sales $7,800
D)
Debit Accounts Receivable $7,800; credit Sales $7,800
E)
Debit Accounts Receivable $7,904; 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 Notes Receivable $8,008; credit Cash $7,904; credit Interest Revenue $104
B)
Debit Cash $7,904; credit Notes Receivable $7,904
C)
Debit Accounts Receivable $7,904; credit Notes Receivable $7,800; credit Interest
Receivable $104
D)
Debit Cash $7,800; credit Accounts Receivable $7,800
E)
Debit Cash $7,904; credit Notes Receivable $7,800; credit Interest Revenue $104
119)
Honoring a note receivable indicates that the maker has:
A)
Paid in full.
B)
Notarized.
C)
Guaranteed.
D)
Cosigned.
E)
Signed.
120)
Failure by a promissory notes’ maker to pay the amount due at maturity is known as:
A)
Protesting a note.
B)
Dishonoring a note.
C)
Closing a note.
D)
Depreciating a note.
E)
Discounting 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 Cash $4,920; credit Interest Revenue $100; credit Interest Receivable $20; credit Notes
Receivable $4,800.
B)
Debit Notes Receivable $4,800; debit Interest Receivable $120; credit Sales $4,920.
C)
Debit Cash $4,920; credit Notes Receivable $4,920.
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 Interest Receivable $20; credit Interest Revenue $20.
B)
Debit Cash $100; credit Notes Receivable $100.
C)
Debit Interest Receivable $100; credit Interest Revenue $100.
D)
Debit Cash $120; credit Interest Revenue $100; credit Interest Receivable $20.
E)
Debit Cash $20; credit Notes 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 Cash $4,920; credit Interest Revenue $100; credit Interest Receivable $20, credit Notes
Receivable $4,800.
B)
Debit Notes Receivable $4,800; debit Interest Receivable $120; credit Sales $4,920.
C)
Debit Accounts Receivable $4,920; credit Interest Revenue $20; credit Interest Receivable
$100, credit Notes Receivable $4,800.
D)
Debit Cash $4,920; credit Notes Receivable $4,920.
E)
Debit Cash $4,920; credit Interest Revenue $20; credit Interest Receivable $100, credit Notes
Receivable $4,800.