Chapter 9--Receivables

Student: ___________________________________________________________________________

1. Notes Receivable and Accounts Receivable can also be called trade receivables.
True False

2. Receivables not currently collectible are reported in the investments section of the balance sheet.
True False

3. Trade receivables occur when two companies trade or exchange notes receivables.
True False

4. Other receivables include non trade receivables such as loans to company officers.
True False

5. Both Accounts Receivable and Notes Receivable represent claims that are expected to be collected in cash.
True False

6. When companies sell their receivables to other companies, the transaction is called factoring.
True False

7. Of the two methods of accounting for uncollectible receivables, the allowance method provides in advance
for uncollectible receivables.
True False

8. Generally accepted accounting principles do not normally allow the use of the direct write-off method of
accounting for uncollectible accounts.
True False
9. The direct write-off method records Bad Debt Expense in the year the specific account receivable is
determined to be uncollectible.
True False

10. When using the direct write-off method off accounting for uncollectible receivables, the account Allowance
for Doubtful Accounts is debited when a specific account is determined to be uncollectible.
True False

11. When an account receivable that has been written off is subsequently collected, the account receivable is
said to be reinstated.
True False

12. Although Allowance for Doubtful Accounts normally has a credit balance, it may have either a debit or a
credit balance before adjusting entries are recorded at the end of the accounting period.
True False

13. Allowance for Doubtful Accounts is a liability account.

True False

14. When using the estimate based on sales method, the entry to record uncollectible accounts expense includes
a credit to the Accounts Receivable account.
True False

15. The difference between the balance in Accounts Receivable and the balance in the Allowance for Doubtful
Accounts is called the net realizable value.
True False

16. When the allowance method for accounting for uncollectible receivables is used, net income is reduced
when a specific receivable is written off.
True False
17. At the end of a period, (before adjustment), Allowance for Doubtful Accounts has a credit balance of $250.
The net credit sales for the period total $500,000. If the company estimates uncollectible accounts expense at
1% of net credit sales, the amount of bad debt expense to be recorded in an adjusting entry is $4,750.
True False

18. At the end of a period (before adjustment), Allowance for Doubtful Accounts has a debit balance of $500.
Net credit sales for the period totaled $800,000. If bad debt expense is estimated at 1% of net credit sales, the
amount of bad debt expense to be recorded in the adjusting entry is $8,500.
True False

19. At the end of a period (before adjustment), Allowance for Doubtful Accounts has a debit balance of $2,000.
The Accounts Receivable balance is analyzed by aging the accounts and the amount estimated to be
uncollectible is $15,000. The amount to be recorded in the adjusting entry for the bad debt expense is $15,000.
True False

20. At the end of a period (before adjustment), Allowance for Doubtful Accounts has a credit balance of
$5,000. The Accounts Receivable balance is analyzed by aging the accounts and the amount estimated to be
uncollectible is $50,000. The amount to be recorded in the adjusting entry for the Bad Debt Expense is
$45,000.
True False

21. When using the analysis of receivables method for estimating uncollectible receivables, the amount
computed in the analysis is usually the amount that would be recorded in the end-of-period adjusting entry.
True False

22. The balance in the Allowance for Doubtful Accounts account at the end of the year includes the total of all
accounts written-off since the beginning year.
True False

23. When accounting for uncollectible receivables and using the percentage of sales method, the matching
principle is violated.
True False
24. A primary difference between the direct write-off and allowance method is whether or not bad debts is based
on a percentage of sales.
True False

25. The due date of a 60-day note dated July 10 is September 10.
True False

26. The maturity value of a 12%, 60-day note for $5,000 is $5,600.
True False

27. The maturity value of a note receivable is always the same as its face value.
True False

28. The interest on a 6%, 60-day note for $5,000 is $300.

True False

29. The party promising to pay a note at maturity is the maker.

True False

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

31. If a promissory note is dishonored, the payee should still record interest revenue.
True False

32. The equation for computing interest on an interest-bearing note is as follows: interest equals maturity value
times interest rate times time.
True False

33. If the maker of a note fails to pay the debt on the due date, the note is said to be dishonored.
True False
34. When a note is received from a customer on account, it is recorded by debiting Notes Receivable and
crediting Accounts Receivable.
True False

35. When a note is written to settle an open account, no entry is necessary.

True False

36. The balance of the Allowance for Doubtful Accounts is added to Accounts Receivable on the balance sheet.
True False

37. Receivables that are expected to be collected in cash in eighteen months or less are reported in the Current
Asset section of the balance sheet.
True False

38. The accounts receivables turnover ratio is computed by dividing total gross sales by the average net
receivables during the year.
True False

39. The accounts receivable turnover measures the length of time in days it takes to collect a receivable.
True False

40. The number of days’ sales in receivables is an estimate of the length of time the accounts receivables have
been outstanding.
True False

41. A note receivable due in 18 months is listed on the balance sheet under the caption
A. long-term liabilities
B. fixed assets
C. current assets
D. investments
42. The receivable that is usually evidenced by a formal instrument of credit is a(n)
A. trade receivable.
B. note receivable.
C. accounts receivable.
D. income tax receivable.

43. Which of the following receivables would not be classified as an "other receivable”?
A. Advance to an employee
B. Interest receivable
C. Refundable income tax
D. Notes receivable

44. Notes or accounts receivables that result from sales transactions are often called
A. non-trade receivables.
B. trade receivables.
C. merchandise receivables.
D. sales receivables.

45. The term "receivables" includes all

A. money claims against other entities.
B. merchandise to be collected from individuals or companies.
C. cash to be paid to creditors.
D. cash to be paid to debtors.

46. When does an account become uncollectible?

A. when accounts receivable is converted into notes receivable
B. when discount is availed on notes receivable
C. there is no general rule for when an account becomes uncollectible
D. at the end of the fiscal year

47. The two methods of accounting for uncollectible receivables are the allowance method and the
A. equity method
B. direct write-off method
C. interest method
D. cost method
48. The direct write-off method of accounting for uncollectible accounts
A. emphasizes balance sheet relationships.
B. is often used by small companies and companies with few receivables.
C. emphasizes cash realizable value.
D. emphasizes the matching of expenses with revenues.

49. Under the direct write-off method of accounting for uncollectible accounts, Bad Debts Expense is debited
A. at the end of each accounting period.
B. when a credit sale is past due.
C. whenever a pre-determined amount of credit sales have been made.
D. when an account is determined to be worthless.

50. An alternative name for Bad Debt Expense is

A. Collection Expense.
B. Credit Loss Expense.
C. Uncollectible Accounts Expense.
D. Deadbeat Expense.

51. Two methods of accounting for uncollectible accounts are the

A. direct write-off method and the allowance method.
B. allowance method and the accrual method.
C. allowance method and the net realizable method.
D. direct write-off method and the accrual method.

52. If the direct write-off method of accounting for uncollectible receivables is used, what general ledger
account is credited to write off a customer's account as uncollectible?
A. Uncollectible Accounts Expense
B. Accounts Receivable
C. Allowance for Doubtful Accounts
D. Interest Expense

53. One of the weaknesses of the direct write-off method is that it

A. understates accounts receivable on the balance sheet
B. violates the matching principle
C. is too difficult to use for many companies
D. is based on estimates
54. The Lowery Co. uses the direct write-off method of accounting for uncollectible accounts receivable.
Lowery has a customer whose accounts receivable balance has been determined to likely be uncollectible. The
entry to write off this account would be which of the following?:
A. debit Allowance for Doubtful Accounts; credit Accounts Receivable
B. debit Sales Returns and Allowance, credit Accounts Receivable
C. debit Bad Debt Expense; credit Allowance for Doubtful Accounts
D. debit Bad Debt Expense; credit Accounts Receivable

55. If the direct write-off method of accounting for uncollectible receivables is used, what general ledger
account is debited to write off a customer's account as uncollectible?
A. Uncollectible Accounts Receivable
B. Accounts Receivable
C. Allowance for Doubtful Accounts
D. Bad Debts Expense

56. If the allowance method of accounting for uncollectible receivables is used, what general ledger account is
debited to write off a customer's account as uncollectible?
A. Uncollectible Accounts Expense
B. Allowance for Doubtful Accounts
C. Accounts Receivable
D. Interest Expense

57. After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance of
$340,000 and Allowance for Doubtful Accounts has a balance of $51,000. What is the net realizable value of
the accounts receivable?
A. $51,000
B. $289,000
C. $340,000
D. $391,000

58. If the allowance method of accounting for uncollectible receivables is used, what general ledger account is
credited to write off a customer's account as uncollectible?
A. Uncollectible Accounts Expense
B. Accounts Receivable
C. Allowance for Doubtful Accounts
D. Interest Expense
59. On the balance sheet, the amount shown for the Allowance for Doubtful Accounts is equal to the
A. Uncollectible accounts expense for the year
B. total of the accounts receivables written-off during the year
C. total estimated uncollectible accounts as of the end of the year
D. sum of all accounts that are past due.

60. What is the type of account and normal balance of Allowance for Doubtful Accounts?
A. Contra asset, credit
B. Asset, debit
C. Asset, credit
D. Contra asset, debit

61. When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited
when
A. a customer's account becomes past due.
B. an account becomes bad and is written off.
C. a sale is made.
D. management estimates the amount of uncollectibles.

62. A debit balance in the Allowance for Doubtful Accounts

A. is the normal balance for that account.
B. indicates that actual bad debt write-offs have been less than what was estimated.
C. cannot occur if the percentage of receivables method of estimating bad debts is used.
D. indicates that actual bad debt write-offs have exceeded previous provisions for bad debts.

63. To record estimated uncollectible receivables using the allowance method, the adjusting entry would be a
A. debit to Bad Debs Expense and a credit to Allowance for Doubtful Accounts.
B. debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts.
C. debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable.
D. debit to Loss on Credit Sales and a credit to Accounts Receivable.

64. Under the allowance method, when a year-end adjustment is made for estimated uncollectible accounts
A. Liabilities decrease.
B. Net Income is unchanged.
C. Total Assets are unchanged.
D. Total Assets decrease.
65. Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is
$390,000 and credit sales are $1,300,000. An aging of accounts receivable shows that approximately 5% of the
outstanding receivables will be uncollectible. What adjusting entry will Tanning Company make if the
Allowance for Doubtful Accounts has a credit balance of $2,500 before adjustment?
A. Bad Debt Expense 17,000
Allowance for Doubtful Accounts 17,000
B. Bad Debt Expense 19,500
Allowance for Doubtful Accounts 19,500
C. Bad Debt Expense 22,000
Allowance for Doubtful Accounts 22,000
D. Bad Debt Expense 65,000
Allowance for Doubtful Accounts 65,000

66. You have just received notice that a customer of yours with an Account Receivable balance of $100 has
gone bankrupt and will not make any future payments. Assuming you use the allowance method, the entry you
make is to
A. debit Bad Debt Expense and credit Allowance for Doubtful Accounts.
B. debit Bad Debt Expense and credit Accounts Receivable.
C. debit Allowance for Doubtful Accounts and credit Accounts Receivable.
D. debit Allowance for Doubtful Accounts and credit Bad Debt Expense

67. The balance in Allowance for Doubtful Accounts will directly impact the end of period adjustment for the
bad debt expense when using which of the following methods?
A. Allowance method
B. Direct write-off method
C. Accrual method
D. declining value method

68. An aging of a company's accounts receivable indicates the estimate of uncollectible receivables totals
$7,900. If Allowance for Doubtful Accounts has a $700 credit balance, the adjustment to record the bad debt
expense for the period will require a
A. debit to Bad Debt Expense for $8,600.
B. debit to Bad Debt Expense for $7,900.
C. debit to Bad Debt Expense for $7,200.
D. credit to Allowance for Doubtful Accounts for $700.
69. An aging of a company's accounts receivable indicates that the estimate of uncollectible accounts totals
$6,400. If Allowance for Doubtful Accounts has a $1,300 debit balance, the adjustment to record the bad debt
expense for the period will require a
A. debit to Bad Debt Expense for $7,700.
B. debit to Bad Debt Expense for $6,400.
C. debit to Bad Debt expense for $5,100
D. credit to Allowance for Doubtful Accounts for $1,300.

70. An aging of a company's accounts receivable indicates that estimate of the uncollectible accounts totals
$4,000. If Allowance for Doubtful Accounts has a $800 credit balance, the adjustment to record the bad debt
expense for the period will require a
A. debit to Allowance for Doubtful Accounts for $3,200.
B. debit to Bad Debt Expense for $3,200.
C. debit to Allowance for Doubtful Accounts for $4,000.
D. credit to Allowance for Doubtful Accounts for $4,000.

71. The collection of an account that had been previously written off under the allowance method of accounting
for uncollectibles
A. will increase net income in the period it is collected.
B. will decrease net income in the period it is collected.
C. does not affect net income in the period it is collected.
D. requires a correcting entry for the period in which the account was written off.

72. Allowance for Doubtful Accounts has a credit balance of $2,100 at the end of the year (before adjustment),
and an analysis of customers' accounts indicates uncollectible receivables of $19,700. Which of the following
entries records the proper adjustment for Bad Debt Expense?
A. debit Allowance for Doubtful Accounts, $17,600; credit Bad Debt Expense, $17,600
B. debit Allowance for Doubtful Accounts, $21,800; credit Bad Debt Expense, $21,800
C. debit Bad Debt Expense $21,800; credit Allowance for Doubtful Accounts, $21,800
D. debit Bad Debt Expense, $17,600; credit Allowance for Doubtful Accounts, $17,600

73. Allowance for Doubtful Accounts has a debit balance of $1,100 at the end of the year (before adjustment),
and an analysis of customers' accounts indicates uncollectible receivables of $12,900. Which of the following
entries records the proper adjustment for Bad Debt Expense?
A. debit Bad Debt Expense, $14,000; credit Allowance for Doubtful Accounts, $14,000
B. debit Allowance for Doubtful Accounts, $14,000; credit Bad Debt Expense, $14,000
C. debit Allowance for Doubtful Accounts, $11,800; credit Bad Debt Expense, $11,800
D. debit Bad Debt Expense, $11,800; credit Allowance for Doubtful Accounts, $11,800
74. Allowance for Doubtful Accounts has a debit balance of $600 at the end of the year (before adjustment), and
an analysis of accounts in the customers ledger indicates uncollectible receivables of $13,000. Which of the
following entries records the proper adjusting entry for bad debt expense?
A. debit Bad Debt Expense, $600; credit Allowance for Doubtful Accounts, $600
B. debit Bad Debt Expense, $12,400; credit Allowance for Doubtful Accounts, $12,400
C. debit Allowance for Doubtful Accounts, $600; credit Bad Debt Expense, $600
D. debit Bad Debt Expense, $13,600; credit Allowance for Doubtful Accounts, $13,600

75. At the beginning of the year, the balance in the Allowance for Doubtful Accounts is a credit of $760.
During the year, $120 of previously written-off accounts were reinstated and accounts totaling $740 are written-
off as uncollectible. The end of the year balance (before adjustment) in the Allowance for Doubtful Accounts
should be
A. $760
B. $120
C. $140
D. $740

76. Using the allowance method of accounting for uncollectible receivables, the entry to reinstate a specific
receivable previously written off would include a
A. credit to Bad Debt Expense
B. credit to Accounts Receivable
C. debit to Allowance for Doubtful Accounts
D. debit to Accounts Receivable

77. Dalton Company uses the allowance method to account for uncollectible receivables. Dalton has
determined that the Irish Company account is uncollectible. To write-off this account, Dalton should debit
A. Bad Debt Expense and credit Accounts Receivable
B. Bad Debt Expense and credit Allowance for Doubtful Accounts
C. Allowance for Doubtful Accounts and credit Accounts Receivable
D. Accounts receivable and credit Allowance for Doubtful Accounts

78. In accounting for uncollectible receivables, the balance in Allowance for Doubtful Accounts will directly
impact the amount of the adjustment when applying which method?
A. direct write-off method
B. percentage of sales method
C. Analysis of receivables method
D. both (b) and (c)
79. Abbott Company uses the allowance method of accounting for uncollectible accounts. Abbott estimates that
3% of net credit sales will be uncollectible. On January 1, 2010, the Allowance for Doubtful Accounts had a
credit balance of $2,400. During 2010, Abbott wrote-off accounts receivable totaling $1,800 and made credit
sales of $100,000. There were no Sales Returns or Sales Discounts during the year. After the adjusting entry,
the December 31, 2010, balance in the Bad Debt Expense would be
A. $1,200
B. $3,000
C. $3,600
D. $7,200

80. A company uses the allowance method to account for uncollectible accounts receivables. When the firm
writes off a specific customer's account receivable
A. total current assets are reduced
B. total expenses for the period are increased
C. net realizable value of accounts receivable increases
D. there is no effect on total current assets or total expenses

81. Allowance for Doubtful Accounts has a credit balance of $1,300 at the end of the year (before adjustment).
The company prepares an analysis of customers' accounts to estimate the amount of uncollectible accounts of
$41,900. Which of the following adjusting entries would be made to record the Bad Debt Expense for the
year?
A. debit Allowance for Doubtful Accounts, $40,600; credit Bad Debt Expense, $40,600
B. debit Allowance for Doubtful Accounts $43,200; credit Bad Debt Expense, $43,200
C. debit Bad Debt Expense, $43,200; credit Allowance for Doubtful Accounts, $43,200
D. debit Bad Debt Expense, $40,600; credit Allowance for Doubtful Accounts, $40,600

82. Allowance for Doubtful Accounts has a debit balance of $2,300 at the end of the year (before adjustment).
The company prepares an analysis of customers' accounts and estimates the amount of uncollectible accounts to
be $31,900. Which of the following adjusting entries is needed to record the Bad Debt Expense for the year?
A. debit Bad Debt Expense, $34,200; credit Allowance for Doubtful Accounts, $34,200
B. debit Allowance for Doubtful Accounts, $34,200; credit Bad Debt Expense, $34,200
C. debit Allowance for Doubtful Accounts, $29,600; credit Bad Debt Expense, $29,600
D. debit Bad Debt Expense, $29,600; credit Allowance for Doubtful Accounts, $29,600

83. Allowance for Doubtful Accounts has a debit balance of $2,500 at the end of the year (before adjustment),
and bad debt expense is estimated at 4% of net credit sales. If net credit sales are $800,000, the amount of the
adjusting entry to record the estimate of the uncollectible accounts is
A. $29,500
B. $34,500
C. $32,000
D. cannot be determined
84. Allowance for Doubtful Accounts has a credit balance of $800 at the end of the year (before adjustment),
and an analysis of accounts in the customer ledger indicates the estimated amount of uncollectible accounts
should be $16,000. Based on the estimate above, which of the following adjusting entries should be made?
A. debit Bad Debt Expense, $800; credit Allowance for Doubtful Accounts, $800
B. debit Bad Debt Expense, $15,200; credit Allowance for Doubtful Accounts, $15,200
C. debit Allowance for Doubtful Accounts, $800; credit Bad Debt Expense, $800
D. debit Bad Debt Expense, $16,800; credit Allowance for Doubtful Accounts, $16,800

85. When using the allowance method to estimate uncollectible accounts receivable based on an analysis of
receivables shows that $640 of accounts receivables are uncollectible. The Allowance for Doubtful Accounts
has a debit balance of $110. The adjusting entry at the end of the year will include a credit to Allowance for
Doubtful Accounts in the amount of:
A. $110
B. $640
C. $530
D. $750

86. Allowance for Doubtful Accounts has a credit balance of $500 at the end of the year (before adjustment),
and bad debt expense is estimated at 3% of net credit sales. If net credit sales are $300,000, the amount of the
adjusting entry to record the estimated uncollectible accounts receivables is
A. $8,500
B. $8,500
C. $9,000
D. Cannot be determined

87. Allowance for Doubtful Accounts is classified as a(n) ______ and has a normal ______ balance.
A. owners’ equity, credit
B. contra-asset, debit
C. owners’ equity, debit
D. contra-asset, credit

88. Under the allowance method of accounting for uncollectible receivables, writing off an uncollectible
account.
A. affects only income statement accounts.
B. is not an acceptable practice.
C. affects only balance sheet accounts.
D. affects both balance sheet and income statement accounts.
89. When comparing the direct write-off method and the allowance method of accounting for uncollectible
receivables, a major difference is that the direct write-off method
A. uses a percentage of sales method to estimate uncollectible accounts.
B. is used primarily by large companies with many receivables.
C. is used primarily by small companies with few receivables.
D. uses an allowance account.

90. When a company uses the allowance method of accounting for uncollectible receivables, which entry would
not be found in the general journal?
A. Bad Debt Expense 500
Allowance for Doubtful Accounts 500
B. Bad Debt Expense 500
Accounts Receivable - Bob Smith 500
C. Cash 300
Allowance for Doubtful Accounts 200
Accounts Receivable - Bob Smith 500
D. Cash 500
Accounts Receivable - Bob Smith 500

91. When a company uses the allowance method of accounting for uncollectible receivables, the entry to
reinstate a previously written off account would include:
A. A credit to Bad Debt Expense
B. A debit to Bad Debt Expense
C. A debit to Allowance for Doubtful Accounts
D. A credit to Allowance for Doubtful Accounts

92. The amount of a promissory note is called the

A. realizable value
B. maturity value
C. face value
D. proceeds

93. The amount of the promissory note plus the interest earned on the due date is called the
A. interest value
B. maturity value
C. face value
D. issuance value
94. A 60-day, 12% note for $7,000, dated April 15, is received from a customer on account. The face value of
the note is
A. $6,860
B. $7,140
C. $7,840
D. $7,000

95. A 60-day, 9% note for $10,000, dated May 1, is received from a customer on account. The maturity value of
the note is
A. $10,000
B. $10,150
C. $10,900
D. $9,100

96. Interest on a note can be calculated without knowledge of the

A. fair value of the note
B. rate of interest
C. notes duration
D. principal amount

97. On October 1, Black Company receives a 9% interest bearing note from Reese Company to settle a $20,000
account receivable. The note is due in six months. At December 31, Black should record interest revenue of
A. $0
B. $450
C. $900
D. $1,800

98. If the maker of a promissory note fails to pay the note on the due date, the note is said to be
A. displaced
B. disallowed
C. dishonored
D. discounted

99. The journal entry to record a note received from a customer to replace an account is
A. debit Notes Receivable; credit Accounts Receivable
B. debit Accounts Receivable; credit Notes Receivable
C. debit Cash; credit Notes Receivable
D. debit Notes Receivable; credit Notes Payable
100. A $6,000, 60-day, 12% note recorded on November 21 is not paid by the maker at maturity. The journal
entry to recognize this event is
A. debit Cash, $6,120; credit Notes Receivable, $6,120
B. debit Accounts Receivable, $6,120; credit Notes Receivable, $6,000; Credit Interest Receivable, $120
C. debit Notes Receivable, $6,060; credit Accounts Receivable, $6,060
D. debit Accounts Receivable, $6,120; credit Notes Receivable, $6,000; Credit Interest Revenue, $120

101. When referring to a note receivable or promissory note

A. the maker is the party to whom the money is due.
B. the note is not considered a formal credit instrument.
C. the note cannot be factored to another party.
D. the note may be used to settle an accounts receivable.

102. When a company receives an interest-bearing note receivable, it will

A. debit Notes Receivable for the maturity value of the note.
B. debit Notes Receivable for the face value of the note.
C. credit Notes Receivable for the maturity value of the note.
D. credit Notes Receivable for the face value of the note.

103. Paper Company receives a $6,000, 3-month, 6% promissory note from Dame Company in settlement of an
open accounts receivable. What entry will Paper Company make upon receiving the note?
A. Notes Receivable 6,000
Accounts Receivable—Dame Company 6,000
B. Notes Receivable 6,090
Accounts Receivable—Dame Company 6,090
C. Notes Receivable 6,090
Accounts Receivable—Dame Company 6,000
Interest Revenue 90
D. Notes Receivable 6,000
Interest Revenue 90
Accounts Receivable—Dame Company 6,000
Interest Receivable 90

104. The maturity value of a $40,000, 9%, 40-day note receivable dated July 3 is
A. $40,000
B. $40,400
C. $43,600
D. $44,000
105. Harper Company lends Hewell Company $40,000 on March 1, accepting a four-month, 6% interest note.
Harper Company prepares financial statements on March 31. What adjusting entry should be made before the
financial statements can be prepared?
A. Cash 200
Interest Revenue 200
B. Interest Receivable 800
Interest Revenue 800
C. Interest Receivable 200
Interest Revenue 200
D. Note Receivable 40,000
Cash 40,000

106. On August 1, Kim Company accepted a 90-day note receivable as payment for services provided to Hsu
Company. The terms of the note were $20,000 face value and 6% interest. On October 30, the journal entry to
record the collection of the note should include a
A. credit to Notes Receivable for $20,300
B. debit to Interest Receivable for $300
C. credit to Interest Revenue for $300
D. debit to Notes Receivable for $20,000

107. Current assets are usually listed in order

A. of the due date
B. of the size
C. alphabetically
D. of liquidity

108. Accounts Receivable Turnover measures

A. how frequently during the year the accounts receivable are converted to cash
B. the number of days of accounts receivable outstanding
C. the fair market value of accounts receivable
D. the efficiency of the accounts payable function

109. The number of days' sales in receivables

A. is an estimate of the length of time the receivables have been outstanding
B. measures the number of times the receivables turn over each year
C. is Net Credit Sales divided by Average Receivables
D. is not meaningful and therefore is not used
110. Given the following information, compute Accounts Receivable Turnover:

Gross Sales: $150,000 Accounts Receivable, Beginning of Year: $18,000

Net Sales: $135,000 Accounts Receivable, End of Year: $22,000

A. 6.75
B. 7.5
C. 6.13
D. 6.82

111. At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful
Accounts has a credit balance of $5,500; and net sales for the year total $2,500,000. An analysis of receivables
estimates uncollectible receivables as $25,000.

Determine the amount of the adjusting entry for bad debt expense and the adjusted balance of Allowance of
Doubtful Accounts, respectively.

A. $19,500 and $25,000

B. $30,500 and $525,000
C. $19,500 and $525,000
D. $30,500 and $25,000

112. At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful
Accounts has a credit balance of $5,500; and net sales for the year total $2,500,000. An analysis of receivables
estimates uncollectible receivables as $25,000.

Determine the net realizable value of accounts receivable after adjustment. (Hint: Determine the amount of the
adjusting entry for bad debt expense and the adjusted balance Allowance of Doubtful Accounts.)

A. $550,000
B. $544,500
C. $525,000
D. $575,000
113. Match each of the following terms associated with the best description of that term.

1. The difference between Accounts Receivable

and Allowance for Doubtful Accounts. Accounts Receivable ____
2. A list of customer accounts sorted by age
classes. Aging Report ____
3. Operating expense recorded as a result of Allowance for
receivables becoming uncollectible. Doubtful Accounts ____
4. A contra asset that represents the amount of
estimated uncollectible receivables at a specific Direct Write-off
date. Method ____
5. A receivable created from selling merchandise
or services on account. Bad Debt Expense ____
6. All money claims against other entities. Net Realizable Value ____
7. Another term for selling receivables. Factoring ____
8. Records bad debt expense only when a specific
customer’s account is deemed worthless. Receivables ____
9. Measures how frequently during the year Accounts Receivable
accounts receivables are being turned into cash. Turnover ____

114. Match each of the following terms associated with notes receivable with the best description of that term.

Notes
1. The amount due when the note is paid off. Receivable ____
2. The amount charged for using the money of another
party. Maturity Value ____
3. The time between the date a note is issued and the
due date of the note. Interest ____
4. The stated rate charged for using the money of
another party Interest Rate ____
5. A formal written instrument that represents amounts Dishonored
due from customers. Note ____
6. The party promising to pay a note Face Amount ____
7. The dollar amount listed on the promissory note. Maker ____
8. A note that is not paid when it is due Term ____

115. Other than accounts receivable and notes receivable, name other receivables that might be included in the
general ledger.
116. Discuss the similarities and differences between accounts receivables, notes receivables and other
receivables.

117. List at least three things that indicate a receivable may be uncollectible.

118. Discuss the two methods for recording bad-debt expense. What type of company uses each method?
119. Journalize the following transactions using the direct write-off method of accounting for uncollectible
receivables.

April 1 Sold merchandise on account to Jim Dobbs, $7,200. The cost of the merchandise is $5,400.

June 10 Received payment for one-third of the receivable from Jim Dobbs and wrote off the remainder.

Oct. 11 Reinstated the account of Jim Dobbs for and received cash in full payment.

120. Stephanie Roe utilizes the direct write-off method of accounting for uncollectible receivables. On
September 15th she is notified by the attorneys for Jacob Marley that Jacob Marley is bankrupt and no cash is
expected in the liquidation of Jacob Marley. Write off the $675 of accounts receivable due Jacob Marley.

121. Journalize the following transactions using the direct write-off method of accounting for uncollectible
receivables:
Feb 20 Received $1,000 from Andrew Warren and wrote off the remainder owed of $4,000 as uncollectible.
May 10 Reinstated the account of Andrew Warren and received $4,000 cash in full payment.
122. The following journal entries would be used in one of the two methods of accounting for uncollectible
receivables. Identify each.

(a)

Bad Debt Expense 900

Accounts Receivable-Billings 900

(b)
Allowance for Doubtful Accounts 900
Accounts Receivable-Grover 900

123. Determine the amount to be added to Allowance for Doubtful Accounts in each of the following cases and
indicate the ending balance in each case.

(a) Credit balance of $300 in Allowance for Doubtful Accounts just prior to adjustment. Analysis of Accounts Receivable indicates
uncollectible receivables of $8,500.
(b) Credit balance of $500 in Allowance for Doubtful Accounts just prior to adjustment. Uncollectible receivables are estimated at 2% of
credit sales, which totaled $1,000,000 for the year.
124. Journalize the following transactions using the allowance method of accounting for uncollectible
receivables.

April 1 Sold merchandise on account to Jim Dobbs, $7,200. The cost of the merchandise is $5,400.

June 10 Received payment for one-third of the receivable from Jim Dobbs and wrote off the remainder.

Oct. 11 Reinstated the account of Jim Dobbs and received cash in full payment.

125. At the end of the current year, Accounts Receivable has a balance of $700,000; Allowance for Doubtful
Accounts has a credit balance of $5,500; and net sales for the year total $3,500,000. Bad debt expense is
estimated at 1/2 of 1% of net sales.

Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts
Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value of
accounts receivable.

126. At the end of the current year, Accounts Receivable has a balance of $750,000; Allowance for Doubtful
Accounts has a debit balance of $6,200; and net sales for the year total $3,500,000. Bad debt expense is
estimated at 1/2 of 1% of net sales.

Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts
Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value of
accounts receivable.
127. At the end of the current year, Accounts Receivable has a balance of $90,000; Allowance for Doubtful
Accounts has a credit balance of $850; and net sales for the year total $300,000. Bad debt expense is estimated
at 2.5% of net sales.

Determine (a) the amount of the adjusting entry for uncollectible accounts; (b) the adjusted balances of
Accounts Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value
of accounts receivable.

128. At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful
Accounts has a credit balance of $5,500; and net sales for the year total $2,500,000. An analysis of receivables
estimates uncollectible receivables as $25,000.

Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts
Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value of
accounts receivable.

129. At the end of the current year, Accounts Receivable has a balance of $675,000; Allowance for Doubtful
Accounts has a debit balance of $5,400; and net sales for the year total $3,000,000. An analysis of receivables
indicates the uncollectible receivables are estimated to be $45,000.

Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts
Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value of
accounts receivable.
130. Discount Mart utilizes the allowance method of accounting for uncollectible receivables. On December
12th the company receives a $550 check from Chad Thomas in settlement of Thomas’ $1,100 outstanding
accounts receivable. Due to Thomas’ failing health he is closing his company and is expecting to make no
further payments to Discount Mart. Journalize this declaration.

131. On June 30th (the end of the period) Brown Company has a credit balance of $2,275 in Allowance for
Doubtful Accounts. An evaluation of accounts receivable indicates that the proper balance should be $30,025.
Journalize the appropriate adjusting entry.

132. Discuss the (1) focus and (2) financial statement emphasis of (a) the percent of sales and (b) the analysis of
receivables methods of estimating bad debts.
133. Fellows Corporation has determined that the $2,700 accounts receivable due from Andrew Stevens is
uncollectible. Compare the journal entry that is required under the direct write-off method to the journal entry
that is required using the allowance method.

134. Sunshine Service Center received a 120-day, 6% note for $40,000, dated April 12 from a customer on
account.

a. Determine the due date of the note.

b. Determine the maturity value of the note.
c. Journalize the entry to record the receipt of the payment of the note at maturity.

135.
Fill in the blanks related to the characteristics of a promissory note:

1. The party promising to pay the note is called the ________.

2. The amount for which the note is written is called the _______ amount.
3. The date the note is to be paid is the _______ date.
4. The time between the date when a note is written and the time it must be paid is called the _____ of the note.
136. Determine the due date and amount of interest due at maturity on the following notes:

Origination Face Term Interest Maturity Interest

Date Amount of Note Rate Date Amount
(a) Mar 15 $8,000 60 days 9% _______ _______
(b) May 1 $12,000 90 days 8% _______ _______

137. Blackwell Industries received a 120-day, 9% note for $180,000, dated August 10 from a customer on
account.

Required:

1. Determine the due date of the note.

2. Determine the maturity value of the note.

3. Journalize the entry to record the receipt of the payment of the note at maturity.

138. Based on the following data and using a 365-day year, compute (a) the accounts receivable turnover and
(b) the number of days' sales in receivables. The industry average is a collection period of once every 20 days,
and the number of days' sales in receivables averages 25. (c) Comment on this situation.

12/31/11 Accounts Receivable, net $90,000

12/31/12 Accounts Receivable, net $70,000
For the year ended 12/31/11, net credit sales $1,050,000
For the year ended 12/31/12, net credit sales $1,200,000
139. Posner Company wrote off the following accounts receivable as uncollectible for the first year of its
operations ending December 31, 2011:

Customer Amount
J. Jackson $10,000
L. Stanton 9,500
C. Barton 13,100
S. Fenton 2,400
Total $35,000

Required:

(1) Journalize the write-offs for 2011 under the direct write-off method.

(2) Journalize the write-offs for 2011 under the allowance method. Also, journalize the adjusting entry for uncollectible receivables
assuming the company made $2,400,000 of credit sales during 2011 and the industry average for uncollectible receivables is
1.50% of credit sales.

(3) How much higher or lower would Posner Company’s 2011 net income have been under the direct write-off method than under the
allowance method?

140.
Determine the due date and the amount of interest due at maturity on the following notes:

Date of Note Face Amount Interest Rate Term of Note

(1) October 1 $21,000 8% 60 days
(2) August 30 9,000 10 120 days
(3) May 30 12,000 12 90 days
(4) March 6 15,000 9 60 days
(5) May 23 9,000 10 60 days
141. Journalize the following transactions in the accounts of Simmons Company:
Mar 1 Received a $60,000, 60-day, 6% note dated March 1 from Bynum Company on
account.
Mar 18 Received a $25,000, 60-day, 9% note dated March 18 from Solo Company on
account.
Apr. 30 The note dated March 1 from Bynum Company is dishonored, and the
customer’s account is charged for the note, including interest.
May 17 The note dated March 18 from Solo Company is dishonored, and the customer’s
account is charged for the note, including interest.
July 29 Cash is received for the amount due on the dishonored note dated March 1 plus
interest for 90 days at 8% on the total amount debited to Bynum Company on April 30.
Aug. 23 Wrote off against the allowance account the amount charged to Solo
Company on May 17 for the dishonored note dated March 18.
142. Financial Statement data for the years ended December 31 for Parker Corporation is as follows:
2012 2011
Net Sales $2,595,600 $2,409,500
Accounts Receivable
Beginning of the year $ 390,000 $400,000
End of the year 434,000 390,000

a) Determine the accounts receivable turnover for 2012 and 2011.

b) Determine the number of days’ sales in receivables for 2012 and 2011.

c) Does the change in accounts receivable turnover and number of days’ sales in receivables from 2011 to 2012
indicate a favorable or unfavorable trend.?

143. Journalize the following transactions for Solley Company that occurred during 2011 and 2012.

November 14, 2011 Received a $4,800.00, 90-day, 9% note from Alan Hibbetts in payment of his account.

December 31, 2011 Accrued interest on the Hibbetts note.

February 12, 2012 Received the amount due from Hibbetts on his note.

Date Description Post Ref Debit Credit

144. For each of the following notes receivables held by Rogers Company determine the interest revenue to be
reported on the income statements for 2011 and 2012. Round answers to nearest whole dollar.

Date Face Rate Time 2011 Interest Revenue 2012 Interest Revenue
Aug 8, 2011 $15,000 7% 180 days
Oct 7, 2011 $22,000 8% 60 days
Jan 6, 2012 $30,000 8% 90 days
Nov 12, 2011 $28,000 9% 60 days

145. a) The aging of Torme Designs shown below. Calculate the amount of each periodicity range that is
deemed to be uncollectible.

Est Uncollectible Accts

Age Interval: Balance: Percentage: Amount:
Not past due 850,000 3.50%
1~30 days past due: 47,500 5.00%
31~60 days past due: 21,750 10.00%
61~90 days past due: 11,250 20.00%
91~180 days past due: 5,065 30.00%
181~365 days past due: 2,500 50.00%
Over 365 days past due: 1,145 95.00%
Total: 939,210

b) If the Allowance for Doubtful Accounts has a credit balance of $1,135.00, record the adjusting entry for the bad debt expense for the year.
146. For each of the following scenarios, indicate the amount of the adjusting journal entry for Bad Debt
Expense to be recorded in 2014, the balance in Allowance for Doubtful Accounts after adjustment at December
31, 2014, and the net realizable value of Accounts Receivable at December 31, 2014:

a) Based on an analysis of Simmon’s Company’s $380,000 balance in Accounts Receivable at December 31,
2014, is was estimated that $15,500 will be uncollectible. There is a credit balance of $1,200 in Allowance for
Doubtful Accounts before adjustment.

b) Blake Company had net credit sales of $900,000 during 2014, and has an Accounts Receivable balance of
$425,000 at December 31, 2014, and an Allowance for Doubtful Accounts credit balance of $11,000 before
adjustment. Blake estimates Bad Debt Expense as 3/4 of 1% of net credit sales.

c) Hidgon Inc. has a balance of $812,000 in Accounts Receivable at December 31, 2014. An analysis of those
receivables shows $24,000 will probably not be collected. Before adjusting entries are prepared, the Allowance
for Doubtful Accounts has a debit balance of $750.

147. Mr. Potts issued a 90-day, 7% note for $200,000, dated February 3rd to Valley Co. on account. (Assume a
360-day year when calculating interest.)
a. Determine the due date of the note.
b. Determine the interest.
c. Determine the maturity value of the note.
d. Journalize the entry to record the issuance of the note by Potts on Feb. 3.
e. Journalize the entry to record the receipt of payment of the note at maturity by Valley Co.

148. Lone Star Company received a 90-day, 6% note for $80,000, dated March 12 from a customer on account.
(Assume a 360-day year when calculating interest.)

a. Determine the due date of the note.

b. Determine the maturity value of the note.
c. Journalize the entry to record the receipt of the payment of the note at maturity.
149. Watson Company issued a 60-day, 8% note for $18,000, dated April 5, to Laker Company on account.
(Assume a 360-day year when calculating interest.)

(a) Determine the due date of the note.

(b) Determine the maturity value of the note.
(c) Journalize the entries to record the following:
(1) receipt of the note by the payee, and
(2) receipt by the payee of the amount due on the note at maturity. Round answers to the nearest $1.

150. On the basis of the following data related to assets due within one year for Webb Co., prepare a partial
balance sheet in good form at December 31, 2014. Show total current assets.

Cash $96,000
Notes receivable 50,000
Accounts receivable 275,000
Allowance for doubtful accounts 40,000
Interest receivable 1,000
151. Journalize the following transactions (Assume a 360-day year when calculating interest.):

Mar. 1 Received a 90-day, 10% note for $24,000, dated March 1, from Batson Co. on account.
May 30 The note of March 1 was dishonored.

152. The following are the current assets from Hanes Co. as of December 31, 2014:

Accounts Receivable 38,000

Allowance for Doubtful Accounts 5,000
Cash 45,000
Interest Receivable 5,500
Merchandise Inventory 88,000
Notes Receivable 100,000

Prepare the current asset section of the balance sheet.

153. For a business that uses the allowance method of accounting for uncollectible receivables:

(a) Journalize the entries to record the following:

(1) Record the adjusting entry at December 31, 2010, the end of the fiscal year, to record the bad debt expense. The accounts
receivable account has a balance of $800,000, and the contra asset account before adjustment has a debit balance of $600.
Analysis of the receivables indicates uncollectible receivables of $18,000.
(2) In March, 2011, the $350 owed by Fronk Co. on account is written off as uncollectible.
(3) In November, 2011, $200 of the Fronk Co. account is reinstated and payment of that amount is received.
(4) In December, 2011, $400 is received on the $600 owed by Dodger Co. and the remainder is written off as uncollectible.

(b) Redo the entries in steps (2), (3) and (4) assuming the company uses the direct write-off method.
154. For the fiscal years 2009 and 2010, Apple Co. reported the following:

Year Ended December 31,

2009 2010
Net Sales $44,123,486 $34,124,961
Accounts Receivable 749,321 719,365

a. Compute the accounts receivable turnover for 2010.

b. Compute the number of days’ sales in receivable at the end of 2010.

155. Journalize the following transactions of Upton Drugs:

July 8 Received a $180,000, 90-day 8% note dated July 8 from Miracle Chemical on account.

Oct. 6 The note is dishonored by Miracle Chemical.

Nov. 5 Received the amount due on the dishonored note plus interest for 30 days at 10% on the total amount charged to Miracle
Chemical on Oct. 6.
Chapter 9--Receivables Key

1. Notes Receivable and Accounts Receivable can also be called trade receivables.
TRUE

2. Receivables not currently collectible are reported in the investments section of the balance sheet.
TRUE

3. Trade receivables occur when two companies trade or exchange notes receivables.
FALSE

4. Other receivables include non trade receivables such as loans to company officers.
TRUE

5. Both Accounts Receivable and Notes Receivable represent claims that are expected to be collected in cash.
TRUE

6. When companies sell their receivables to other companies, the transaction is called factoring.
TRUE

7. Of the two methods of accounting for uncollectible receivables, the allowance method provides in advance
for uncollectible receivables.
TRUE

8. Generally accepted accounting principles do not normally allow the use of the direct write-off method of
accounting for uncollectible accounts.
TRUE
9. The direct write-off method records Bad Debt Expense in the year the specific account receivable is
determined to be uncollectible.
TRUE

10. When using the direct write-off method off accounting for uncollectible receivables, the account Allowance
for Doubtful Accounts is debited when a specific account is determined to be uncollectible.
FALSE

11. When an account receivable that has been written off is subsequently collected, the account receivable is
said to be reinstated.
TRUE

12. Although Allowance for Doubtful Accounts normally has a credit balance, it may have either a debit or a
credit balance before adjusting entries are recorded at the end of the accounting period.
TRUE

13. Allowance for Doubtful Accounts is a liability account.

FALSE

14. When using the estimate based on sales method, the entry to record uncollectible accounts expense includes
a credit to the Accounts Receivable account.
FALSE

15. The difference between the balance in Accounts Receivable and the balance in the Allowance for Doubtful
Accounts is called the net realizable value.
TRUE

16. When the allowance method for accounting for uncollectible receivables is used, net income is reduced
when a specific receivable is written off.
FALSE
17. At the end of a period, (before adjustment), Allowance for Doubtful Accounts has a credit balance of $250.
The net credit sales for the period total $500,000. If the company estimates uncollectible accounts expense at
1% of net credit sales, the amount of bad debt expense to be recorded in an adjusting entry is $4,750.
FALSE

18. At the end of a period (before adjustment), Allowance for Doubtful Accounts has a debit balance of $500.
Net credit sales for the period totaled $800,000. If bad debt expense is estimated at 1% of net credit sales, the
amount of bad debt expense to be recorded in the adjusting entry is $8,500.
FALSE

19. At the end of a period (before adjustment), Allowance for Doubtful Accounts has a debit balance of $2,000.
The Accounts Receivable balance is analyzed by aging the accounts and the amount estimated to be
uncollectible is $15,000. The amount to be recorded in the adjusting entry for the bad debt expense is $15,000.
FALSE

20. At the end of a period (before adjustment), Allowance for Doubtful Accounts has a credit balance of
$5,000. The Accounts Receivable balance is analyzed by aging the accounts and the amount estimated to be
uncollectible is $50,000. The amount to be recorded in the adjusting entry for the Bad Debt Expense is
$45,000.
TRUE

21. When using the analysis of receivables method for estimating uncollectible receivables, the amount
computed in the analysis is usually the amount that would be recorded in the end-of-period adjusting entry.
FALSE

22. The balance in the Allowance for Doubtful Accounts account at the end of the year includes the total of all
accounts written-off since the beginning year.
FALSE

23. When accounting for uncollectible receivables and using the percentage of sales method, the matching
principle is violated.
FALSE
24. A primary difference between the direct write-off and allowance method is whether or not bad debts is based
on a percentage of sales.
FALSE

25. The due date of a 60-day note dated July 10 is September 10.
FALSE

26. The maturity value of a 12%, 60-day note for $5,000 is $5,600.
FALSE

27. The maturity value of a note receivable is always the same as its face value.
FALSE

28. The interest on a 6%, 60-day note for $5,000 is $300.

FALSE

29. The party promising to pay a note at maturity is the maker.

TRUE

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

31. If a promissory note is dishonored, the payee should still record interest revenue.
TRUE

32. The equation for computing interest on an interest-bearing note is as follows: interest equals maturity value
times interest rate times time.
FALSE

33. If the maker of a note fails to pay the debt on the due date, the note is said to be dishonored.
TRUE
34. When a note is received from a customer on account, it is recorded by debiting Notes Receivable and
crediting Accounts Receivable.
TRUE

35. When a note is written to settle an open account, no entry is necessary.

FALSE

36. The balance of the Allowance for Doubtful Accounts is added to Accounts Receivable on the balance sheet.
FALSE

37. Receivables that are expected to be collected in cash in eighteen months or less are reported in the Current
Asset section of the balance sheet.
FALSE

38. The accounts receivables turnover ratio is computed by dividing total gross sales by the average net
receivables during the year.
FALSE

39. The accounts receivable turnover measures the length of time in days it takes to collect a receivable.
FALSE

40. The number of days’ sales in receivables is an estimate of the length of time the accounts receivables have
been outstanding.
TRUE

41. A note receivable due in 18 months is listed on the balance sheet under the caption
A. long-term liabilities
B. fixed assets
C. current assets
D. investments
42. The receivable that is usually evidenced by a formal instrument of credit is a(n)
A. trade receivable.
B. note receivable.
C. accounts receivable.
D. income tax receivable.

43. Which of the following receivables would not be classified as an "other receivable”?
A. Advance to an employee
B. Interest receivable
C. Refundable income tax
D. Notes receivable

44. Notes or accounts receivables that result from sales transactions are often called
A. non-trade receivables.
B. trade receivables.
C. merchandise receivables.
D. sales receivables.

45. The term "receivables" includes all

A. money claims against other entities.
B. merchandise to be collected from individuals or companies.
C. cash to be paid to creditors.
D. cash to be paid to debtors.

46. When does an account become uncollectible?

A. when accounts receivable is converted into notes receivable
B. when discount is availed on notes receivable
C. there is no general rule for when an account becomes uncollectible
D. at the end of the fiscal year

47. The two methods of accounting for uncollectible receivables are the allowance method and the
A. equity method
B. direct write-off method
C. interest method
D. cost method
48. The direct write-off method of accounting for uncollectible accounts
A. emphasizes balance sheet relationships.
B. is often used by small companies and companies with few receivables.
C. emphasizes cash realizable value.
D. emphasizes the matching of expenses with revenues.

49. Under the direct write-off method of accounting for uncollectible accounts, Bad Debts Expense is debited
A. at the end of each accounting period.
B. when a credit sale is past due.
C. whenever a pre-determined amount of credit sales have been made.
D. when an account is determined to be worthless.

50. An alternative name for Bad Debt Expense is

A. Collection Expense.
B. Credit Loss Expense.
C. Uncollectible Accounts Expense.
D. Deadbeat Expense.

51. Two methods of accounting for uncollectible accounts are the

A. direct write-off method and the allowance method.
B. allowance method and the accrual method.
C. allowance method and the net realizable method.
D. direct write-off method and the accrual method.

52. If the direct write-off method of accounting for uncollectible receivables is used, what general ledger
account is credited to write off a customer's account as uncollectible?
A. Uncollectible Accounts Expense
B. Accounts Receivable
C. Allowance for Doubtful Accounts
D. Interest Expense

53. One of the weaknesses of the direct write-off method is that it

A. understates accounts receivable on the balance sheet
B. violates the matching principle
C. is too difficult to use for many companies
D. is based on estimates
54. The Lowery Co. uses the direct write-off method of accounting for uncollectible accounts receivable.
Lowery has a customer whose accounts receivable balance has been determined to likely be uncollectible. The
entry to write off this account would be which of the following?:
A. debit Allowance for Doubtful Accounts; credit Accounts Receivable
B. debit Sales Returns and Allowance, credit Accounts Receivable
C. debit Bad Debt Expense; credit Allowance for Doubtful Accounts
D. debit Bad Debt Expense; credit Accounts Receivable

55. If the direct write-off method of accounting for uncollectible receivables is used, what general ledger
account is debited to write off a customer's account as uncollectible?
A. Uncollectible Accounts Receivable
B. Accounts Receivable
C. Allowance for Doubtful Accounts
D. Bad Debts Expense

56. If the allowance method of accounting for uncollectible receivables is used, what general ledger account is
debited to write off a customer's account as uncollectible?
A. Uncollectible Accounts Expense
B. Allowance for Doubtful Accounts
C. Accounts Receivable
D. Interest Expense

57. After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance of
$340,000 and Allowance for Doubtful Accounts has a balance of $51,000. What is the net realizable value of
the accounts receivable?
A. $51,000
B. $289,000
C. $340,000
D. $391,000

58. If the allowance method of accounting for uncollectible receivables is used, what general ledger account is
credited to write off a customer's account as uncollectible?
A. Uncollectible Accounts Expense
B. Accounts Receivable
C. Allowance for Doubtful Accounts
D. Interest Expense
59. On the balance sheet, the amount shown for the Allowance for Doubtful Accounts is equal to the
A. Uncollectible accounts expense for the year
B. total of the accounts receivables written-off during the year
C. total estimated uncollectible accounts as of the end of the year
D. sum of all accounts that are past due.

60. What is the type of account and normal balance of Allowance for Doubtful Accounts?
A. Contra asset, credit
B. Asset, debit
C. Asset, credit
D. Contra asset, debit

61. When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited
when
A. a customer's account becomes past due.
B. an account becomes bad and is written off.
C. a sale is made.
D. management estimates the amount of uncollectibles.

62. A debit balance in the Allowance for Doubtful Accounts

A. is the normal balance for that account.
B. indicates that actual bad debt write-offs have been less than what was estimated.
C. cannot occur if the percentage of receivables method of estimating bad debts is used.
D. indicates that actual bad debt write-offs have exceeded previous provisions for bad debts.

63. To record estimated uncollectible receivables using the allowance method, the adjusting entry would be a
A. debit to Bad Debs Expense and a credit to Allowance for Doubtful Accounts.
B. debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts.
C. debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable.
D. debit to Loss on Credit Sales and a credit to Accounts Receivable.

64. Under the allowance method, when a year-end adjustment is made for estimated uncollectible accounts
A. Liabilities decrease.
B. Net Income is unchanged.
C. Total Assets are unchanged.
D. Total Assets decrease.
65. Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is
$390,000 and credit sales are $1,300,000. An aging of accounts receivable shows that approximately 5% of the
outstanding receivables will be uncollectible. What adjusting entry will Tanning Company make if the
Allowance for Doubtful Accounts has a credit balance of $2,500 before adjustment?
A. Bad Debt Expense 17,000
Allowance for Doubtful Accounts 17,000
B. Bad Debt Expense 19,500
Allowance for Doubtful Accounts 19,500
C. Bad Debt Expense 22,000
Allowance for Doubtful Accounts 22,000
D. Bad Debt Expense 65,000
Allowance for Doubtful Accounts 65,000

66. You have just received notice that a customer of yours with an Account Receivable balance of $100 has
gone bankrupt and will not make any future payments. Assuming you use the allowance method, the entry you
make is to
A. debit Bad Debt Expense and credit Allowance for Doubtful Accounts.
B. debit Bad Debt Expense and credit Accounts Receivable.
C. debit Allowance for Doubtful Accounts and credit Accounts Receivable.
D. debit Allowance for Doubtful Accounts and credit Bad Debt Expense

67. The balance in Allowance for Doubtful Accounts will directly impact the end of period adjustment for the
bad debt expense when using which of the following methods?
A. Allowance method
B. Direct write-off method
C. Accrual method
D. declining value method

68. An aging of a company's accounts receivable indicates the estimate of uncollectible receivables totals
$7,900. If Allowance for Doubtful Accounts has a $700 credit balance, the adjustment to record the bad debt
expense for the period will require a
A. debit to Bad Debt Expense for $8,600.
B. debit to Bad Debt Expense for $7,900.
C. debit to Bad Debt Expense for $7,200.
D. credit to Allowance for Doubtful Accounts for $700.
69. An aging of a company's accounts receivable indicates that the estimate of uncollectible accounts totals
$6,400. If Allowance for Doubtful Accounts has a $1,300 debit balance, the adjustment to record the bad debt
expense for the period will require a
A. debit to Bad Debt Expense for $7,700.
B. debit to Bad Debt Expense for $6,400.
C. debit to Bad Debt expense for $5,100
D. credit to Allowance for Doubtful Accounts for $1,300.

70. An aging of a company's accounts receivable indicates that estimate of the uncollectible accounts totals
$4,000. If Allowance for Doubtful Accounts has a $800 credit balance, the adjustment to record the bad debt
expense for the period will require a
A. debit to Allowance for Doubtful Accounts for $3,200.
B. debit to Bad Debt Expense for $3,200.
C. debit to Allowance for Doubtful Accounts for $4,000.
D. credit to Allowance for Doubtful Accounts for $4,000.

71. The collection of an account that had been previously written off under the allowance method of accounting
for uncollectibles
A. will increase net income in the period it is collected.
B. will decrease net income in the period it is collected.
C. does not affect net income in the period it is collected.
D. requires a correcting entry for the period in which the account was written off.

72. Allowance for Doubtful Accounts has a credit balance of $2,100 at the end of the year (before adjustment),
and an analysis of customers' accounts indicates uncollectible receivables of $19,700. Which of the following
entries records the proper adjustment for Bad Debt Expense?
A. debit Allowance for Doubtful Accounts, $17,600; credit Bad Debt Expense, $17,600
B. debit Allowance for Doubtful Accounts, $21,800; credit Bad Debt Expense, $21,800
C. debit Bad Debt Expense $21,800; credit Allowance for Doubtful Accounts, $21,800
D. debit Bad Debt Expense, $17,600; credit Allowance for Doubtful Accounts, $17,600

73. Allowance for Doubtful Accounts has a debit balance of $1,100 at the end of the year (before adjustment),
and an analysis of customers' accounts indicates uncollectible receivables of $12,900. Which of the following
entries records the proper adjustment for Bad Debt Expense?
A. debit Bad Debt Expense, $14,000; credit Allowance for Doubtful Accounts, $14,000
B. debit Allowance for Doubtful Accounts, $14,000; credit Bad Debt Expense, $14,000
C. debit Allowance for Doubtful Accounts, $11,800; credit Bad Debt Expense, $11,800
D. debit Bad Debt Expense, $11,800; credit Allowance for Doubtful Accounts, $11,800
74. Allowance for Doubtful Accounts has a debit balance of $600 at the end of the year (before adjustment), and
an analysis of accounts in the customers ledger indicates uncollectible receivables of $13,000. Which of the
following entries records the proper adjusting entry for bad debt expense?
A. debit Bad Debt Expense, $600; credit Allowance for Doubtful Accounts, $600
B. debit Bad Debt Expense, $12,400; credit Allowance for Doubtful Accounts, $12,400
C. debit Allowance for Doubtful Accounts, $600; credit Bad Debt Expense, $600
D. debit Bad Debt Expense, $13,600; credit Allowance for Doubtful Accounts, $13,600

75. At the beginning of the year, the balance in the Allowance for Doubtful Accounts is a credit of $760.
During the year, $120 of previously written-off accounts were reinstated and accounts totaling $740 are written-
off as uncollectible. The end of the year balance (before adjustment) in the Allowance for Doubtful Accounts
should be
A. $760
B. $120
C. $140
D. $740

76. Using the allowance method of accounting for uncollectible receivables, the entry to reinstate a specific
receivable previously written off would include a
A. credit to Bad Debt Expense
B. credit to Accounts Receivable
C. debit to Allowance for Doubtful Accounts
D. debit to Accounts Receivable

77. Dalton Company uses the allowance method to account for uncollectible receivables. Dalton has
determined that the Irish Company account is uncollectible. To write-off this account, Dalton should debit
A. Bad Debt Expense and credit Accounts Receivable
B. Bad Debt Expense and credit Allowance for Doubtful Accounts
C. Allowance for Doubtful Accounts and credit Accounts Receivable
D. Accounts receivable and credit Allowance for Doubtful Accounts

78. In accounting for uncollectible receivables, the balance in Allowance for Doubtful Accounts will directly
impact the amount of the adjustment when applying which method?
A. direct write-off method
B. percentage of sales method
C. Analysis of receivables method
D. both (b) and (c)
79. Abbott Company uses the allowance method of accounting for uncollectible accounts. Abbott estimates that
3% of net credit sales will be uncollectible. On January 1, 2010, the Allowance for Doubtful Accounts had a
credit balance of $2,400. During 2010, Abbott wrote-off accounts receivable totaling $1,800 and made credit
sales of $100,000. There were no Sales Returns or Sales Discounts during the year. After the adjusting entry,
the December 31, 2010, balance in the Bad Debt Expense would be
A. $1,200
B. $3,000
C. $3,600
D. $7,200

80. A company uses the allowance method to account for uncollectible accounts receivables. When the firm
writes off a specific customer's account receivable
A. total current assets are reduced
B. total expenses for the period are increased
C. net realizable value of accounts receivable increases
D. there is no effect on total current assets or total expenses

81. Allowance for Doubtful Accounts has a credit balance of $1,300 at the end of the year (before adjustment).
The company prepares an analysis of customers' accounts to estimate the amount of uncollectible accounts of
$41,900. Which of the following adjusting entries would be made to record the Bad Debt Expense for the
year?
A. debit Allowance for Doubtful Accounts, $40,600; credit Bad Debt Expense, $40,600
B. debit Allowance for Doubtful Accounts $43,200; credit Bad Debt Expense, $43,200
C. debit Bad Debt Expense, $43,200; credit Allowance for Doubtful Accounts, $43,200
D. debit Bad Debt Expense, $40,600; credit Allowance for Doubtful Accounts, $40,600

82. Allowance for Doubtful Accounts has a debit balance of $2,300 at the end of the year (before adjustment).
The company prepares an analysis of customers' accounts and estimates the amount of uncollectible accounts to
be $31,900. Which of the following adjusting entries is needed to record the Bad Debt Expense for the year?
A. debit Bad Debt Expense, $34,200; credit Allowance for Doubtful Accounts, $34,200
B. debit Allowance for Doubtful Accounts, $34,200; credit Bad Debt Expense, $34,200
C. debit Allowance for Doubtful Accounts, $29,600; credit Bad Debt Expense, $29,600
D. debit Bad Debt Expense, $29,600; credit Allowance for Doubtful Accounts, $29,600

83. Allowance for Doubtful Accounts has a debit balance of $2,500 at the end of the year (before adjustment),
and bad debt expense is estimated at 4% of net credit sales. If net credit sales are $800,000, the amount of the
adjusting entry to record the estimate of the uncollectible accounts is
A. $29,500
B. $34,500
C. $32,000
D. cannot be determined
84. Allowance for Doubtful Accounts has a credit balance of $800 at the end of the year (before adjustment),
and an analysis of accounts in the customer ledger indicates the estimated amount of uncollectible accounts
should be $16,000. Based on the estimate above, which of the following adjusting entries should be made?
A. debit Bad Debt Expense, $800; credit Allowance for Doubtful Accounts, $800
B. debit Bad Debt Expense, $15,200; credit Allowance for Doubtful Accounts, $15,200
C. debit Allowance for Doubtful Accounts, $800; credit Bad Debt Expense, $800
D. debit Bad Debt Expense, $16,800; credit Allowance for Doubtful Accounts, $16,800

85. When using the allowance method to estimate uncollectible accounts receivable based on an analysis of
receivables shows that $640 of accounts receivables are uncollectible. The Allowance for Doubtful Accounts
has a debit balance of $110. The adjusting entry at the end of the year will include a credit to Allowance for
Doubtful Accounts in the amount of:
A. $110
B. $640
C. $530
D. $750

86. Allowance for Doubtful Accounts has a credit balance of $500 at the end of the year (before adjustment),
and bad debt expense is estimated at 3% of net credit sales. If net credit sales are $300,000, the amount of the
adjusting entry to record the estimated uncollectible accounts receivables is
A. $8,500
B. $8,500
C. $9,000
D. Cannot be determined

87. Allowance for Doubtful Accounts is classified as a(n) ______ and has a normal ______ balance.
A. owners’ equity, credit
B. contra-asset, debit
C. owners’ equity, debit
D. contra-asset, credit

88. Under the allowance method of accounting for uncollectible receivables, writing off an uncollectible
account.
A. affects only income statement accounts.
B. is not an acceptable practice.
C. affects only balance sheet accounts.
D. affects both balance sheet and income statement accounts.
89. When comparing the direct write-off method and the allowance method of accounting for uncollectible
receivables, a major difference is that the direct write-off method
A. uses a percentage of sales method to estimate uncollectible accounts.
B. is used primarily by large companies with many receivables.
C. is used primarily by small companies with few receivables.
D. uses an allowance account.

90. When a company uses the allowance method of accounting for uncollectible receivables, which entry would
not be found in the general journal?
A. Bad Debt Expense 500
Allowance for Doubtful Accounts 500
B. Bad Debt Expense 500
Accounts Receivable - Bob Smith 500
C. Cash 300
Allowance for Doubtful Accounts 200
Accounts Receivable - Bob Smith 500
D. Cash 500
Accounts Receivable - Bob Smith 500

91. When a company uses the allowance method of accounting for uncollectible receivables, the entry to
reinstate a previously written off account would include:
A. A credit to Bad Debt Expense
B. A debit to Bad Debt Expense
C. A debit to Allowance for Doubtful Accounts
D. A credit to Allowance for Doubtful Accounts

92. The amount of a promissory note is called the

A. realizable value
B. maturity value
C. face value
D. proceeds

93. The amount of the promissory note plus the interest earned on the due date is called the
A. interest value
B. maturity value
C. face value
D. issuance value
94. A 60-day, 12% note for $7,000, dated April 15, is received from a customer on account. The face value of
the note is
A. $6,860
B. $7,140
C. $7,840
D. $7,000

95. A 60-day, 9% note for $10,000, dated May 1, is received from a customer on account. The maturity value of
the note is
A. $10,000
B. $10,150
C. $10,900
D. $9,100

96. Interest on a note can be calculated without knowledge of the

A. fair value of the note
B. rate of interest
C. notes duration
D. principal amount

97. On October 1, Black Company receives a 9% interest bearing note from Reese Company to settle a $20,000
account receivable. The note is due in six months. At December 31, Black should record interest revenue of
A. $0
B. $450
C. $900
D. $1,800

98. If the maker of a promissory note fails to pay the note on the due date, the note is said to be
A. displaced
B. disallowed
C. dishonored
D. discounted

99. The journal entry to record a note received from a customer to replace an account is
A. debit Notes Receivable; credit Accounts Receivable
B. debit Accounts Receivable; credit Notes Receivable
C. debit Cash; credit Notes Receivable
D. debit Notes Receivable; credit Notes Payable
100. A $6,000, 60-day, 12% note recorded on November 21 is not paid by the maker at maturity. The journal
entry to recognize this event is
A. debit Cash, $6,120; credit Notes Receivable, $6,120
B. debit Accounts Receivable, $6,120; credit Notes Receivable, $6,000; Credit Interest Receivable, $120
C. debit Notes Receivable, $6,060; credit Accounts Receivable, $6,060
D. debit Accounts Receivable, $6,120; credit Notes Receivable, $6,000; Credit Interest Revenue, $120

101. When referring to a note receivable or promissory note

A. the maker is the party to whom the money is due.
B. the note is not considered a formal credit instrument.
C. the note cannot be factored to another party.
D. the note may be used to settle an accounts receivable.

102. When a company receives an interest-bearing note receivable, it will

A. debit Notes Receivable for the maturity value of the note.
B. debit Notes Receivable for the face value of the note.
C. credit Notes Receivable for the maturity value of the note.
D. credit Notes Receivable for the face value of the note.

103. Paper Company receives a $6,000, 3-month, 6% promissory note from Dame Company in settlement of an
open accounts receivable. What entry will Paper Company make upon receiving the note?
A. Notes Receivable 6,000
Accounts Receivable—Dame Company 6,000
B. Notes Receivable 6,090
Accounts Receivable—Dame Company 6,090
C. Notes Receivable 6,090
Accounts Receivable—Dame Company 6,000
Interest Revenue 90
D. Notes Receivable 6,000
Interest Revenue 90
Accounts Receivable—Dame Company 6,000
Interest Receivable 90

104. The maturity value of a $40,000, 9%, 40-day note receivable dated July 3 is
A. $40,000
B. $40,400
C. $43,600
D. $44,000
105. Harper Company lends Hewell Company $40,000 on March 1, accepting a four-month, 6% interest note.
Harper Company prepares financial statements on March 31. What adjusting entry should be made before the
financial statements can be prepared?
A. Cash 200
Interest Revenue 200
B. Interest Receivable 800
Interest Revenue 800
C. Interest Receivable 200
Interest Revenue 200
D. Note Receivable 40,000
Cash 40,000

106. On August 1, Kim Company accepted a 90-day note receivable as payment for services provided to Hsu
Company. The terms of the note were $20,000 face value and 6% interest. On October 30, the journal entry to
record the collection of the note should include a
A. credit to Notes Receivable for $20,300
B. debit to Interest Receivable for $300
C. credit to Interest Revenue for $300
D. debit to Notes Receivable for $20,000

107. Current assets are usually listed in order

A. of the due date
B. of the size
C. alphabetically
D. of liquidity

108. Accounts Receivable Turnover measures

A. how frequently during the year the accounts receivable are converted to cash
B. the number of days of accounts receivable outstanding
C. the fair market value of accounts receivable
D. the efficiency of the accounts payable function

109. The number of days' sales in receivables

A. is an estimate of the length of time the receivables have been outstanding
B. measures the number of times the receivables turn over each year
C. is Net Credit Sales divided by Average Receivables
D. is not meaningful and therefore is not used
110. Given the following information, compute Accounts Receivable Turnover:

Gross Sales: $150,000 Accounts Receivable, Beginning of Year: $18,000

Net Sales: $135,000 Accounts Receivable, End of Year: $22,000

A. 6.75
B. 7.5
C. 6.13
D. 6.82

111. At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful
Accounts has a credit balance of $5,500; and net sales for the year total $2,500,000. An analysis of receivables
estimates uncollectible receivables as $25,000.

Determine the amount of the adjusting entry for bad debt expense and the adjusted balance of Allowance of
Doubtful Accounts, respectively.

A. $19,500 and $25,000

B. $30,500 and $525,000
C. $19,500 and $525,000
D. $30,500 and $25,000

112. At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful
Accounts has a credit balance of $5,500; and net sales for the year total $2,500,000. An analysis of receivables
estimates uncollectible receivables as $25,000.

Determine the net realizable value of accounts receivable after adjustment. (Hint: Determine the amount of the
adjusting entry for bad debt expense and the adjusted balance Allowance of Doubtful Accounts.)

A. $550,000
B. $544,500
C. $525,000
D. $575,000
113. Match each of the following terms associated with the best description of that term.

1. The difference between Accounts Receivable and

Allowance for Doubtful Accounts. Accounts Receivable 5
2. A list of customer accounts sorted by age classes. Aging Report 2
3. Operating expense recorded as a result of Allowance for
receivables becoming uncollectible. Doubtful Accounts 4
4. A contra asset that represents the amount of Direct Write-off
estimated uncollectible receivables at a specific date. Method 8
5. A receivable created from selling merchandise or
services on account. Bad Debt Expense 3
6. All money claims against other entities. Net Realizable Value 1
7. Another term for selling receivables. Factoring 7
8. Records bad debt expense only when a specific
customer’s account is deemed worthless. Receivables 6
9. Measures how frequently during the year accounts Accounts Receivable
receivables are being turned into cash. Turnover 9

114. Match each of the following terms associated with notes receivable with the best description of that term.

Notes
1. The amount due when the note is paid off. Receivable 5
2. The amount charged for using the money of another
party. Maturity Value 1
3. The time between the date a note is issued and the due
date of the note. Interest 2
4. The stated rate charged for using the money of another
party Interest Rate 4
5. A formal written instrument that represents amounts due Dishonored
from customers. Note 8
6. The party promising to pay a note Face Amount 7
7. The dollar amount listed on the promissory note. Maker 6
8. A note that is not paid when it is due Term 3

115. Other than accounts receivable and notes receivable, name other receivables that might be included in the
general ledger.

Interest Receivable, Receivables from Officers or Employees, Taxes Receivable.

116. Discuss the similarities and differences between accounts receivables, notes receivables and other
receivables.

Accounts receivables result from the sale of goods and services on credit. They are normally collected within a
short period of time (30 - 60 days) and are classified as current assets on the balance sheet.

Notes receivables can also result from the sale of goods - generally when the amount owed is due in more than
60 days. Notes can also be used to settle accounts receivables. Notes are formal written agreements of credit.
When collection is expected to be in less than one year, they are classified as current assets on the balance
sheet.

Other receivables result from non-sale transactions (interest, taxes, amounts due from employees). They are
generally reported separately on the balance sheet. If collection is expected in less than one year, the are
classified as current assets. If not, they are classified as investments.

117. List at least three things that indicate a receivable may be uncollectible.

1. The receivable is past due.

2. The customer does not respond to the company’s attempts to collect.
3. The customer files for bankruptcy.
4. The customer closes its business.
5. The company cannot locate the customer.

118. Discuss the two methods for recording bad-debt expense. What type of company uses each method?

The first method is the direct write-off method. Under this method, bad debt expense is recorded only when
an account is deemed uncollectible. This method is most often used by small companies and those with few
receivables.

The second method is the allowance method. Under this method, bad debt expense is recorded by estimating
bad debts at the end of the accounting period. Companies that have a large amount of receivables are required
to use this method under generally accepted accounting principles (GAAP).
119. Journalize the following transactions using the direct write-off method of accounting for uncollectible
receivables.

April 1 Sold merchandise on account to Jim Dobbs, $7,200. The cost of the merchandise is $5,400.

June 10 Received payment for one-third of the receivable from Jim Dobbs and wrote off the remainder.

Oct. 11 Reinstated the account of Jim Dobbs for and received cash in full payment.

April 1 Accounts Receivable 7,200

Sales 7,200
1
Cost of Merchandise Sold 5,400
Merchandise Inventory 5,400

June 10 Cash 2,400

Bad Debt Expense 4,800
Accounts Receivable-Jim Dobbs 7,200

Oct 11 Accounts Receivable-Jim Dobbs 4,800

Bad Debt Expense 4,800

11 Cash 4,800
Accounts Receivable-Jim Dobbs 4,800

120. Stephanie Roe utilizes the direct write-off method of accounting for uncollectible receivables. On
September 15th she is notified by the attorneys for Jacob Marley that Jacob Marley is bankrupt and no cash is
expected in the liquidation of Jacob Marley. Write off the $675 of accounts receivable due Jacob Marley.

Sept 15th Bad Debt Expense 675

Accounts Receivable - Jacob Marley 675
121. Journalize the following transactions using the direct write-off method of accounting for uncollectible
receivables:
Feb 20 Received $1,000 from Andrew Warren and wrote off the remainder owed of $4,000 as uncollectible.
May 10 Reinstated the account of Andrew Warren and received $4,000 cash in full payment.

Feb. 20 Cash 1,000

Bad 4,000
Debt
Expense
Accounts Receivable—Andrew Warren 5,000

May 10 Account 4,000

s
Receiva
ble—
Andrew
Warren
Bad Debt Expense 4,000

10 Cash 4,000
Accounts Receivable—Andrew Warren 4,000

122. The following journal entries would be used in one of the two methods of accounting for uncollectible
receivables. Identify each.

(a)

Bad Debt Expense 900

Accounts Receivable-Billings 900

(b)
Allowance for Doubtful Accounts 900
Accounts Receivable-Grover 900

(a) Direct Write-Off Method

(b) Allowance Method

123. Determine the amount to be added to Allowance for Doubtful Accounts in each of the following cases and
indicate the ending balance in each case.

(a) Credit balance of $300 in Allowance for Doubtful Accounts just prior to adjustment. Analysis of Accounts Receivable indicates
uncollectible receivables of $8,500.
(b) Credit balance of $500 in Allowance for Doubtful Accounts just prior to adjustment. Uncollectible receivables are estimated at 2% of
credit sales, which totaled $1,000,000 for the year.
(a) Amount added: $8,200 Ending balance: $8,500
(b) Amount added: $20,000 Ending balance: $20,500

124. Journalize the following transactions using the allowance method of accounting for uncollectible
receivables.

April 1 Sold merchandise on account to Jim Dobbs, $7,200. The cost of the merchandise is $5,400.

June 10 Received payment for one-third of the receivable from Jim Dobbs and wrote off the remainder.

Oct. 11 Reinstated the account of Jim Dobbs and received cash in full payment.

April 1 Accounts Receivable 7,200

Sales 7,200

Cost of Merchandise Sold 5,400

Merchandise Inventory 5,400

June 10 Cash 2,400

Allowance for Doubtful Accounts 4,800
Accounts Receivable-Jim Dobbs 7,200

Oct 11 Accounts Receivable-Jim Dobbs 4,800

Allowance for Doubtful Accounts 4,800

11 Cash 4,800
Accounts Receivable-Jim Dobbs 4,800
125. At the end of the current year, Accounts Receivable has a balance of $700,000; Allowance for Doubtful
Accounts has a credit balance of $5,500; and net sales for the year total $3,500,000. Bad debt expense is
estimated at 1/2 of 1% of net sales.

Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts
Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value of
accounts receivable.

(a) $17,500 ($3,500,000 ´ .005)

Adjusted Balance
(b) Accounts Receivable $700,000
Allowance for Doubtful Accounts ($5,500 + $17,500) 23,000
Bad Debt Expense 17,500

(c) Net realizable value ( $700,000 - $23,000) $677,000

126. At the end of the current year, Accounts Receivable has a balance of $750,000; Allowance for Doubtful
Accounts has a debit balance of $6,200; and net sales for the year total $3,500,000. Bad debt expense is
estimated at 1/2 of 1% of net sales.

Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts
Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value of
accounts receivable.

(a) $17,500 ($3,500,000 ´ .005)

Adjusted Balance
(b) Accounts Receivable $750,000
Allowance for Doubtful Accounts ($17,500 - $6,200) 11,300
Bad Debt Expense 17,500

(c) Net realizable value ( $750,000 - $11,300) $738,700

127. At the end of the current year, Accounts Receivable has a balance of $90,000; Allowance for Doubtful
Accounts has a credit balance of $850; and net sales for the year total $300,000. Bad debt expense is estimated
at 2.5% of net sales.

Determine (a) the amount of the adjusting entry for uncollectible accounts; (b) the adjusted balances of
Accounts Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value
of accounts receivable.

(a) $7,500 ($300,000 ´ .025)

Adjusted Balance
(b) Accounts Receivable $90,000
Allowance for Doubtful Accounts ($850 + $7,500) 8,350
Bad Debt Expense 7,500

(c) Net realizable value ( $90,000 - $8,350) $81,650

128. At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful
Accounts has a credit balance of $5,500; and net sales for the year total $2,500,000. An analysis of receivables
estimates uncollectible receivables as $25,000.

Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts
Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value of
accounts receivable.

(a) $19,500 ($25,000 -$5,500)

Adjusted Balance
(b) Accounts Receivable $550,000
Allowance for Doubtful Accounts ($5,500 + $19,500) 25,000
Bad Debt Expense 19,500

(c) Net realizable value ( $550,000 - $25,000) $525,000

129. At the end of the current year, Accounts Receivable has a balance of $675,000; Allowance for Doubtful
Accounts has a debit balance of $5,400; and net sales for the year total $3,000,000. An analysis of receivables
indicates the uncollectible receivables are estimated to be $45,000.

Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts
Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value of
accounts receivable.

(a) $50,400 ($45,000 + $5,400)

Adjusted Balance
(b) Accounts Receivable $675,000
Allowance for Doubtful Accounts ($50,400 - $5,400) 45,000
Bad Debt Expense 50,400

(c) Net realizable value ( $675,000 - $45,000) $630,000

130. Discount Mart utilizes the allowance method of accounting for uncollectible receivables. On December
12th the company receives a $550 check from Chad Thomas in settlement of Thomas’ $1,100 outstanding
accounts receivable. Due to Thomas’ failing health he is closing his company and is expecting to make no
further payments to Discount Mart. Journalize this declaration.

Dec 12th Cash 550

Allowance for 550
Doubtful
Accounts
Accounts Receivable - 1,100
Chad Thomas

131. On June 30th (the end of the period) Brown Company has a credit balance of $2,275 in Allowance for
Doubtful Accounts. An evaluation of accounts receivable indicates that the proper balance should be $30,025.
Journalize the appropriate adjusting entry.

Jun 30th Bad Debt Expense 27,750

Allowance for Doubtful Accounts 27,750

$30,025 - $2,275 = $27,750

132. Discuss the (1) focus and (2) financial statement emphasis of (a) the percent of sales and (b) the analysis of
receivables methods of estimating bad debts.

(a) Bad debt expense is the focus of the percent of sales method. It places more emphasis on matching
revenues and expenses and thus emphasizes the income statement.

(b) The allowance for doubtful accounts is the focus of the analysis of receivables method. It places more
emphasis on the net realizable value of receivables and thus emphasizes the balance sheet.

133. Fellows Corporation has determined that the $2,700 accounts receivable due from Andrew Stevens is
uncollectible. Compare the journal entry that is required under the direct write-off method to the journal entry
that is required using the allowance method.

Under the direct write-off method, Bad Debt Expense will be debited for $2,700. Under the allowance method,
the debit will be made to the Allowance for Doubtful Accounts. Under both methods, Accounts Receivable -
Andrew Stephens will be credited $2,700.

134. Sunshine Service Center received a 120-day, 6% note for $40,000, dated April 12 from a customer on
account.

a. Determine the due date of the note.

b. Determine the maturity value of the note.
c. Journalize the entry to record the receipt of the payment of the note at maturity.

a. August 10 determined as follows:

April 18 days (30-12)days (30-12)

May 31 days
June 30 days
July 31 days
August 10 days
Total 120 days

b. $40,800 [$40,000 + ($40,000 x 6% x (120/360)]

c.
Aug. 10 Cash 40,800
Note Receivable 40,000
Interest Revenue 800
135.
Fill in the blanks related to the characteristics of a promissory note:

1. The party promising to pay the note is called the ________.

2. The amount for which the note is written is called the _______ amount.
3. The date the note is to be paid is the _______ date.
4. The time between the date when a note is written and the time it must be paid is called the _____ of the note.

1. maker
2. face
3. maturity or due
4. term

136. Determine the due date and amount of interest due at maturity on the following notes:

Origination Face Term Interest Maturity Interest

Date Amount of Note Rate Date Amount
(a) Mar 15 $8,000 60 days 9% _______ _______
(b) May 1 $12,000 90 days 8% _______ _______

(a) May 14; $120 = ($8,000 ´ .09) ´ (60/360)

(b) July 30; $240 = ($12,000 ´ .08) ´ (90/360)

137. Blackwell Industries received a 120-day, 9% note for $180,000, dated August 10 from a customer on
account.

Required:

1. Determine the due date of the note.

2. Determine the maturity value of the note.

3. Journalize the entry to record the receipt of the payment of the note at maturity.
1. The due date for the note is December 8, determined as follows:

August (31 21 days

- 10)
September 30 days
October 31 days
November 30 days
December 8 days
Total 120 days

2. $185,400 [$180,000 + ($180,000 ´ 9% ´ 120/360)]

3. Dec 8 Cash 185,400

Notes 180,000
Receiv
able
Interes 5,400
t
Reven
ue

138. Based on the following data and using a 365-day year, compute (a) the accounts receivable turnover and
(b) the number of days' sales in receivables. The industry average is a collection period of once every 20 days,
and the number of days' sales in receivables averages 25. (c) Comment on this situation.

12/31/11 Accounts Receivable, net $90,000

12/31/12 Accounts Receivable, net $70,000
For the year ended 12/31/11, net credit sales $1,050,000
For the year ended 12/31/12, net credit sales $1,200,000

(a) $1,200,000 ¸ [($90,000 + $70,000) ¸ 2] = 15

(b) [($70,000 + $90,000) ¸ 2]¸ ($1,200,000 ¸ 365 days) = 24.33 days
(c) This situation is better than the industry average.

139. Posner Company wrote off the following accounts receivable as uncollectible for the first year of its
operations ending December 31, 2011:

Customer Amount
J. Jackson $10,000
L. Stanton 9,500
C. Barton 13,100
S. Fenton 2,400
Total $35,000
Required:

(1) Journalize the write-offs for 2011 under the direct write-off method.

(2) Journalize the write-offs for 2011 under the allowance method. Also, journalize the adjusting entry for uncollectible receivables
assuming the company made $2,400,000 of credit sales during 2011 and the industry average for uncollectible receivables is
1.50% of credit sales.

(3) How much higher or lower would Posner Company’s 2011 net income have been under the direct write-off method than under the
allowance method?

(1) Bad Debt 35,000

Expense
Accounts Receivable—J. 10,000
Jackson
Accounts Receivable—L. 9,500
Stanton
Accounts Receivable—C. 13,100
Barton
Accounts Receivable—S. 2,400
Fenton

(2) Allowan 35,000

ce for
Doubtfu
l
Account
s
Accounts Receivable— J. 10,000
Jackson
Accounts Receivable— L. 9,500
Stanton
Accounts Receivable— C. 13,100
Barton
Accounts Receivable— S. 2,400
Fenton

Bad 36,000
Debt
Expense
Allowance for Doubtful 36,000
Accounts
Uncollectible accounts
estimate.
($2,400,000 ´ 1 1/2% = $36,000)

(3) Net income would have been $1,000 higher in 2010 under the direct write-off method,
because bad debt expense is $1,000 higher under the allowance method ($36,000 expense
under the allowance method vs. $35,000 expense under the direct write-off method).
140.
Determine the due date and the amount of interest due at maturity on the following notes:

Date of Note Face Amount Interest Rate Term of Note

(1) October 1 $21,000 8% 60 days
(2) August 30 9,000 10 120 days
(3) May 30 12,000 12 90 days
(4) March 6 15,000 9 60 days
(5) May 23 9,000 10 60 days

Due Date Interest

(1) Nov. 30 $280 [$21,000 ´ 0.08 ´ (60/360)]
(2) Dec. 28 300 [$9,000 ´ 0.10 ´ (120/360)]
(3) Aug. 28 360 [$12,000 ´ 0.12 ´ (90/360)]
(4) May 5 225 [$15,000 ´ 0.09 ´ (60/360)]
(5) July 22 150 [$9,000 ´ 0.10 ´ (60/360)]
141. Journalize the following transactions in the accounts of Simmons Company:
Mar 1 Received a $60,000, 60-day, 6% note dated March 1 from Bynum Company on
account.
Mar 18 Received a $25,000, 60-day, 9% note dated March 18 from Solo Company on
account.
Apr. 30 The note dated March 1 from Bynum Company is dishonored, and the
customer’s account is charged for the note, including interest.
May 17 The note dated March 18 from Solo Company is dishonored, and the customer’s
account is charged for the note, including interest.
July 29 Cash is received for the amount due on the dishonored note dated March 1 plus
interest for 90 days at 8% on the total amount debited to Bynum Company on April 30.
Aug. 23 Wrote off against the allowance account the amount charged to Solo
Company on May 17 for the dishonored note dated March 18.
Mar. 1 Notes 60,000
Receiv
able
Accounts Receivable—Bynum Co. 60,000

18 Notes 25,000
Receiv
able
Accounts Receivable—Solo Co. 25,000

Apr. 30 Accoun60,600
ts
Receiv
able—
Bynum
Co.
Notes Receivable 60,000
Interest Revenue 600*
*($60,0
00 ´
6% ´
60/360)

May 17 Accoun25,375
ts
Receiv
able—
Solo
Co.
Notes Receivable 25,000
Interest Revenue 375*
*($25,0
00 ´
9% ´
60/360)

July 29 Cash 61,812

Accounts Receivable—Bynum Co. 60,600
Interest Revenue 1,212*
*60,60
0 ´ 0.08
´
90/360
=
$1,212

Aug. 23 Allowa 25,375

nce for
Doubtf
ul
Accoun
ts
Accounts Receivable—Solo Co. 25,375
142. Financial Statement data for the years ended December 31 for Parker Corporation is as follows:
2012 2011
Net Sales $2,595,600 $2,409,500
Accounts Receivable
Beginning of the year $ 390,000 $400,000
End of the year 434,000 390,000

a) Determine the accounts receivable turnover for 2012 and 2011.

b) Determine the number of days’ sales in receivables for 2012 and 2011.

c) Does the change in accounts receivable turnover and number of days’ sales in receivables from 2011 to 2012
indicate a favorable or unfavorable trend.?

a) Accounts receivable turnover:

2012 2011

Average Accounts Receivable

(390,000 + 434,000) /2 $412,000
(400,000 + 390,000) /2 $395,000

Accounts Receivable Turnover

2,595,600 / 412,000 6.3
2,409,500 / 395,000 6.1

b) Number of days’ sales in receivables:

2012 2011

Average daily sales:

(2,595,600 / 365 days) $ 7,111
(2,409,500 / 365 days) $ 6,601

Number of days’ sales in receivables:

(412,000 / 7,111) 58 days
(395,000 / 6,601) 60 days

c) The increase in the accounts receivable turnover from 6.1 to 6.3 times and the decrease in number of days’
sales in receivables from 60 days to 58 days indicates a favorable trend in the efficiency of collection of
accounts receivables.
143. Journalize the following transactions for Solley Company that occurred during 2011 and 2012.

November 14, 2011 Received a $4,800.00, 90-day, 9% note from Alan Hibbetts in payment of his account.

December 31, 2011 Accrued interest on the Hibbetts note.

February 12, 2012 Received the amount due from Hibbetts on his note.

Date Description Post Ref Debit Credit

Nov 14 Notes Receivable 4,800.00

Accounts Receivable 4,800.00

Dec 31 Interest Receivable 56.40

Interest Revenue 56.40

Feb 12 Cash 4,908.00

Interest Receivable 56.40
Interest Revenue 51.60
Notes Receivable 4,800.00

144. For each of the following notes receivables held by Rogers Company determine the interest revenue to be
reported on the income statements for 2011 and 2012. Round answers to nearest whole dollar.

Date Face Rate Time 2011 Interest Revenue 2012 Interest Revenue
Aug 8, 2011 $15,000 7% 180 days
Oct 7, 2011 $22,000 8% 60 days
Jan 6, 2012 $30,000 8% 90 days
Nov 12, 2011 $28,000 9% 60 days

Date Face Rate Time 2011 Interest Revenue 2012 Interest Revenue
Aug 8, 2011 $15,000 7% 180 days $423* 102**
Oct 7, 2011 $22,000 8% 60 days 293 0
Jan 6, 2012 $30,000 8% 90 days 0 600
Nov 12, 2011 $28,000 9% 60 days 343 77
*15,000 X .07 X 145/360 = 423 (rounded)
** 15,000 X .07 X 180/360 = 525 - 423 = 102

145. a) The aging of Torme Designs shown below. Calculate the amount of each periodicity range that is
deemed to be uncollectible.

Est Uncollectible Accts

Age Interval: Balance: Percentage: Amount:
Not past due 850,000 3.50%
1~30 days past due: 47,500 5.00%
31~60 days past due: 21,750 10.00%
61~90 days past due: 11,250 20.00%
91~180 days past due: 5,065 30.00%
181~365 days past due: 2,500 50.00%
Over 365 days past due: 1,145 95.00%
Total: 939,210

b) If the Allowance for Doubtful Accounts has a credit balance of $1,135.00, record the adjusting entry for the bad debt expense for the year.

Est Uncollectible Accts

Age Interval: Balance: Percentage: Amount:
Not past due 850,000 3.50% 29,750.00
1~30 days past due: 47,500 5.00% 2,375.00
31~60 days past due: 21,750 10.00% 2,175.00
61~90 days past due: 11,250 20.00% 2,250.00
91~180 days past due: 5,065 30.00% 1,519.50
181~365 days past due: 2,500 50.00% 1,250.00
Over 365 days past due: 1,145 95.00% 1,087.75
Total: 939,210 40,407.25

Dec 31 Uncollectible Accounts Expense 39,272.25

Allowance for Doubtful Accounts 39,272.25

Calculation of expense: Amount of $40,407.25

calculated uncollectible accounts
Less credit balance of account 1,135.00
Bad debt expense $39,272.25
146. For each of the following scenarios, indicate the amount of the adjusting journal entry for Bad Debt
Expense to be recorded in 2014, the balance in Allowance for Doubtful Accounts after adjustment at December
31, 2014, and the net realizable value of Accounts Receivable at December 31, 2014:

a) Based on an analysis of Simmon’s Company’s $380,000 balance in Accounts Receivable at December 31,
2014, is was estimated that $15,500 will be uncollectible. There is a credit balance of $1,200 in Allowance for
Doubtful Accounts before adjustment.

b) Blake Company had net credit sales of $900,000 during 2014, and has an Accounts Receivable balance of
$425,000 at December 31, 2014, and an Allowance for Doubtful Accounts credit balance of $11,000 before
adjustment. Blake estimates Bad Debt Expense as 3/4 of 1% of net credit sales.

c) Hidgon Inc. has a balance of $812,000 in Accounts Receivable at December 31, 2014. An analysis of those
receivables shows $24,000 will probably not be collected. Before adjusting entries are prepared, the Allowance
for Doubtful Accounts has a debit balance of $750.

a) Bad Debt Expense for 2014 $14,300

Allowance for Doubtful Accounts at Dec. 31, 2014 15,500
Net Realizable Value of A/R at Dec. 31, 2014 364,500

b) Bad Debt Expense for 2014 $6,750

Allowance for Doubtful Accounts at Dec. 31, 2014 17,750
Net Realizable Value of A/R at Dec. 31, 2014 407,250

c) Bad Debt Expense for 2014 $24,750

Allowance for Doubtful Accounts at Dec. 31, 2014 24,000
Net Realizable Value of A/R at Dec. 31, 2014 788,000

147. Mr. Potts issued a 90-day, 7% note for $200,000, dated February 3rd to Valley Co. on account. (Assume a
360-day year when calculating interest.)
a. Determine the due date of the note.
b. Determine the interest.
c. Determine the maturity value of the note.
d. Journalize the entry to record the issuance of the note by Potts on Feb. 3.
e. Journalize the entry to record the receipt of payment of the note at maturity by Valley Co.

a. May 4

Feb 4 - Feb 28 25 days

March 31 days
April 30 days
May 4 days
90 days

b. Interest = Face Amount (or principal) ´ Rate ´ Time

Interest = $200,000 ´ .07 ´ 90/360
Interest = $3,500
c. Maturity Value = Face Amount + Interest
Maturity Value = $200,000 + 3,500
Maturity Value = $203,500

d. Cash 200,000
Notes Payable 200,000

e. Cash 203,500
Notes Receivable 200,000
Interest Revenue 3,500

148. Lone Star Company received a 90-day, 6% note for $80,000, dated March 12 from a customer on account.
(Assume a 360-day year when calculating interest.)

a. Determine the due date of the note.

b. Determine the maturity value of the note.
c. Journalize the entry to record the receipt of the payment of the note at maturity.

a. June 10 determined as follows:

March 19 days (31-12)
April 30 days
May 31 days
June 10 days
Total 90 days

b. $81,200 [$80,000 + ($80,000 x 6% x (90/360)]

c.
June 10 Cash 81,200
Note Receivable 80,000
Interest Revenue 1,200

149. Watson Company issued a 60-day, 8% note for $18,000, dated April 5, to Laker Company on account.
(Assume a 360-day year when calculating interest.)

(a) Determine the due date of the note.

(b) Determine the maturity value of the note.
(c) Journalize the entries to record the following:
(1) receipt of the note by the payee, and
(2) receipt by the payee of the amount due on the note at maturity. Round answers to the nearest $1.
(a) June 4

(b) $18,240

(c) Note Receivable-Watson Co 18,000

Account Receivable-Watson Co 18,000

Cash 18,240
Note Receivable-Watson Co 18,000
Interest Revenue 240

150. On the basis of the following data related to assets due within one year for Webb Co., prepare a partial
balance sheet in good form at December 31, 2014. Show total current assets.

Cash $96,000
Notes receivable 50,000
Accounts receivable 275,000
Allowance for doubtful accounts 40,000
Interest receivable 1,000

Webb Co.
Balance Sheet
December 31, 2014

Assets
Current assets:
Cash $96,000
Notes receivable 50,000
Accounts receivable $275,000
Less allowance for doubtful accounts 40,000 235,000
Interest receivable 1,000
Total current assets $382,000

151. Journalize the following transactions (Assume a 360-day year when calculating interest.):

Mar. 1 Received a 90-day, 10% note for $24,000, dated March 1, from Batson Co. on account.
May 30 The note of March 1 was dishonored.
Mar. 1 Notes Receivable 24,000
Accounts Receivable-Batson Co. 24,000

May. 30 Accounts Receivable-Batson Co. 24,600

Notes Receivable 24,000
Interest Revenue 600

152. The following are the current assets from Hanes Co. as of December 31, 2014:

Accounts Receivable 38,000

Allowance for Doubtful Accounts 5,000
Cash 45,000
Interest Receivable 5,500
Merchandise Inventory 88,000
Notes Receivable 100,000

Prepare the current asset section of the balance sheet.

Hanes Co.
Balance Sheet
December 31, 2014

Assets
Current Assets:
Cash $ 45,000
Notes Receivable 100,000
Accounts Receivable 38,000
Less allowance for doubtful accounts 5,000 33,000
Interest Receivable 5,500
Merchandise Inventory 88,000
Total Current Assets $ 271,500
153. For a business that uses the allowance method of accounting for uncollectible receivables:

(a) Journalize the entries to record the following:

(1) Record the adjusting entry at December 31, 2010, the end of the fiscal year, to record the bad debt expense. The accounts
receivable account has a balance of $800,000, and the contra asset account before adjustment has a debit balance of $600.
Analysis of the receivables indicates uncollectible receivables of $18,000.
(2) In March, 2011, the $350 owed by Fronk Co. on account is written off as uncollectible.
(3) In November, 2011, $200 of the Fronk Co. account is reinstated and payment of that amount is received.
(4) In December, 2011, $400 is received on the $600 owed by Dodger Co. and the remainder is written off as uncollectible.

(b) Redo the entries in steps (2), (3) and (4) assuming the company uses the direct write-off method.

(a)
(1) Uncollectible Accounts Expense 18,600
Allowance for Doubtful Accounts 18,600

(2) Allowance for Doubtful Accounts 350

Accounts Receivable-Fronk Co 350

(3) Accounts Receivable-Fronk Co 200

Allowance for Doubtful Accounts 200

Cash 200
Accounts Receivable-Fronk Co 200

(4) Cash 400

Allowance for Doubtful Accounts 200
Accounts Receivable-Dodger Co 600

(b)
(2) Uncollectible Accounts Expense 350
Accounts Receivable-Fronk Co 350

(3) Accounts Receivable-Fronk Co 200

Uncollectible Accounts Expense 200

Cash 200
Accounts Receivable-Fronk Co 200

(4) Cash 400

Uncollectible Accounts Expense 200
Accounts Receivable-Dodger Co 600

154. For the fiscal years 2009 and 2010, Apple Co. reported the following:

Year Ended December 31,

2009 2010
Net Sales $44,123,486 $34,124,961
Accounts Receivable 749,321 719,365
a. Compute the accounts receivable turnover for 2010.
b. Compute the number of days’ sales in receivable at the end of 2010.

a. Accounts receivable turnover = Net Sales / Average accounts receivable

Accounts receivable turnover = 34,124,961 / ((749,321+719,365)/2)
Accounts receivable turnover = 46.47

b. Number of days’ sales in receivables = Accounts receivable, end of year/Ave. daily sales
Number of days’ sales in receivables = [($749,321 + $719,365)/2]/(34,124,961/365 days)
Number of days’ sales in receivables = 7.85

155. Journalize the following transactions of Upton Drugs:

July 8 Received a $180,000, 90-day 8% note dated July 8 from Miracle Chemical on account.

Oct. 6 The note is dishonored by Miracle Chemical.

Nov. 5 Received the amount due on the dishonored note plus interest for 30 days at 10% on the total amount charged to Miracle
Chemical on Oct. 6.
July 8 Notes Receivable 180,000
Accoun
ts
Receiva
ble—
Miracle
Chemic
al
Compa 1
ny 8
0,
0
0
0

Oct. 6 Accounts Receivable—

Miracle Chemical
Company 183,600
Notes 1
Receiva 8
ble 0,
0
0
0
Interest 3,
Revenu 6
e 0
0

Nov. 5 Cash 185,130

Accoun
ts
Receiva
ble—
Miracle
Chemic
al
Compa 1
ny 8
3,
6
0
0
Interest 1,
Revenu 5
e 3
0
*

*$183,600 ´ 0.10 ´
30/360 = $1,530