Ch08 Receivables

Chapter 8
Receivables
OBJECTIVES
Obj 1
Obj 2
Obj 3
Obj 4
Obj 5
Obj 6
Obj 7
Describe the common classifications of receivables.

Describe the nature of and the accounting of uncollectible receivables.
Describe the direct write-off method of the accounting for uncollectible receivables.
Describe the allowance method of accounting for uncollectible receivables.
Compare the direct write-off and allowance methods of accounting for uncollectible
accounts.
Describe the nature, characteristics, and accounting of notes receivable.
Describe the reporting of receivables on the balance sheet.
QUESTION GRID
True/False
No Objective
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Objective
Difficulty
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Objective
Difficulty
Easy
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Moderate
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08-APP
08-APP
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08-APP
08-APP
Easy
Easy
Easy
Easy
Easy
Easy
Easy
Moderate
Moderate
Moderate
Easy
Easy
Easy
Easy
401
Chapter 8/Receivables 402
Multiple Choice
No Objective
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Difficulty
No.
Objective
Difficulty
No.
Objective
Difficulty
Easy
Easy
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Moderate
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Easy
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08-APP
08-APP
08-APP
08-APP
08-APP
08-APP
08-APP
08-APP
Easy
Moderate
Easy
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Easy
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Moderate
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Difficult
Moderate
Exercise/Other
No Objectiv Difficulty
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Easy
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No
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Objective
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Problem
No Objective
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Moderate
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No.
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Easy
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08-APP
08-APP
Difficult
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Moderate
Chapter 8Receivables
TRUE/FALSE
1. Notes receivable and accounts receivables can also be called trade receivables.
ANS: T
DIF: Easy OBJ: 08-01
NAT: AACSB Analytic | AICPA FN-Measurement
2. Receivables from company owners and officers should be disclosed separately on the balance sheet.
ANS: T
3.
Receivables not currently collectible are reported in the investments section of the balance
sheet.
ANS: T
4. Trade receivables occur when two companies trade or exchange notes receivables.
ANS: F
5. Other receivables include non trade receivables such as loans to company officers.
ANS: T
6.
Both accounts receivable and notes receivable represent claims that are expected to be
collected in cash.
ANS: T
7. When companies sell their receivables to other companies, the transaction is called factoring
ANS: T
404 Chapter 8/Receivables
8.
Of the two methods of accounting for uncollectible receivables, the allowance method
provides in advance for uncollectible receivables.
ANS: T
9.
Generally accepted accounting principles do not normally allow the use direct write-off
method of accounting for uncollectible accounts.
ANS: T
10. The direct write-off method records uncollectible accounts expense in the year the specific
account receivable is determined to be uncollectible.
ANS: T
11. Allowance for Doubtful Accounts is debited under the direct write-off method when an
account is determined to be uncollectible.
ANS: F
12. Under the direct write-off method, no attempt is made to match Bad Debt Expense to sales
revenues in the same accounting period.
ANS: T
13. The difference between Accounts Receivable and its contra asset account is called net
realizable value.
ANS: T
14. The estimate based on sales method violates the matching principle.
ANS: F
15. When the estimate based on analysis of receivables is used, income is reduced when a
specific receivable is written off.
ANS: F
16. When an account receivable that has been written off is subsequently collected, the account
receivable is reinstated.
ANS: T
17. 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.
ANS: T
18. At the end of a period, before the accounts are adjusted, Allowance for Doubtful Accounts
has a credit balance of $250, and net sales on account for the period total $500,000. If
uncollectible accounts expense is estimated at 1% of net sales on account, the current
provision to be made for uncollectible accounts expense is $4,750.
ANS: F
DIF: Moderate
OBJ: 08-04
has a debit balance of $500, and net sales on account for the period total $800,000. If
uncollectible accounts expense is estimated at 1% of net sales on account, the current
provision to be made for uncollectible accounts expense is $8,500.
ANS: F
DIF: Moderate
OBJ: 08-04
20. Allowance for Doubtful Accounts is a liability account.
ANS: F
has a debit balance of $2,000. If the estimate of uncollectible accounts determined by aging
the receivables is $30,000, the current provision to be made for uncollectible accounts
expense is $30,000.
ANS: F
DIF: Moderate
OBJ: 08-04
has a credit balance of $5,000. If the estimate of uncollectible accounts determined by aging
the receivables is $50,000, the current provision to be made for uncollectible accounts
expense is $45,000.
ANS: T
DIF: Moderate
OBJ: 08-04
23. When using the estimate-based-on-sales method, the entry to record uncollectible accounts
expense includes a credit to the Accounts Receivable account.
ANS: F
24. When using the estimate based on analysis of receivables, the amount computed in the
analysis is always the required amount that would be recorded in the adjusting entry.
ANS: F
25. The allowance for doubtful accounts is similar to accumulated depreciation in that the
account represents the total of all accounts written-off since the beginning year.
ANS: F
26. The equation for computing interest on an interest-bearing note is as follows: interest equals
maturity value times interest rate times time.
ANS: F
27. The due date of a 60-day note dated July 10 is September 10.
ANS: F
28. The maturity value of a 12%, 60-day note for $5,000 is $5,600.
ANS: F
29. The maturity value of a note receivable is always the same as its face value.
ANS: F
30. The interest on a 6%, 60-day note for $5,000 is $300.
ANS: F
31. The party promising to pay a note at maturity is the payee.
ANS: F
32. If the maker of a note fails to pay the debt on the due date, the note is said to be dishonored.
ANS: T
33. When a note is received from a customer on account, it is recorded by debiting Accounts
Receivable and crediting Notes Receivable.
ANS: F
34. In computing the maturity date of a note, the date the note is issued is included but the due
date is omitted.
ANS: F
35. When a note is written to settle an open account no entry is necessary.
ANS: F
36. If a promissory note is dishonored, the payee should not record interest income.
ANS: F
37. The receivables turnover ratio is computed by dividing total gross sales by the average net
receivables during the year.
ANS: F
38. The balance of the allowance for doubtful accounts is added to accounts receivable on the
balance sheet.
ANS: F
39. The accounts receivable turnover measures the length of time in days it takes to collect a
receivable.
ANS: F
40. A 60-day, 12% note receivable for $20,000, dated May 20, is discounted at the bank on June
9 at 15%. The number of days in the discount period is 20.
ANS: F
DIF: Moderate
OBJ: 08-App
41. A 60-day, 12% note receivable for $20,000, dated May 20, is discounted at the bank on June
9 at 15%. The proceeds are $20,340.
ANS: F
DIF: Moderate
OBJ: 08-App
42. If the proceeds from discounting a note receivable are less than the face value of the note,
Interest Expense will be debited for the excess of the proceeds over the face value.
ANS: T
DIF: Moderate
OBJ: 08-App
43. The discounting of a note receivable creates a contingent liability that continues in effect
until the due date of the note.
ANS: T
DIF: Easy OBJ: 08-App
44. A note receivable can be sold to a financial institution to secure cash before the maturity
date. This type of transaction is called discounting the note receivable.
ANS: T
45. The amount of cash received for a discounted noted is called maturity value.
ANS: F
46. The proceeds received from discounting a note receivable at a bank are equal to the face
value of the note less the discount charged by the bank.
ANS: F
MULTIPLE CHOICE
1.
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
ANS: D
2.
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.
ANS: B
3.
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
ANS: D
4.
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.
ANS: B
5.
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.
ANS: A
6.
When does an account become uncollectible?

a. when the debtor fails to pay an account according to a sales contract
b. when the debtor fails to pay a note on the due date
c. there is no general rule for when an account becomes uncollectible
d. at the end of the fiscal year
e. upon receipt of a certified letter from the debtor
ANS: C
7.
The type of account and normal balance of Allowance for Doubtful Accounts is
a. contra asset, credit
b. asset, debit
c. liability, credit
d. expense, debit
e. expense, credit
ANS: A
8.
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
ANS: B
9.
The direct write-off method of accounting for uncollectible accounts

a. emphasizes balance sheet relationships.
b. is not generally accepted as a basis for estimating bad debts.
c. emphasizes cash realizable value.
d. emphasizes the matching of expenses with revenues.
ANS: B
10. 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.
ANS: D
11. An alternative name for Bad Debts Expense is
a. Collection Expense.
b. Credit Loss Expense.
c. Uncollectible Accounts Expense.
d. Deadbeat Expense.
ANS: C
12. 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.
ANS: A
13. 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 Payable
b. Accounts Receivable
c. Allowance for Doubtful Accounts
d. Bad Debt Expense
ANS: D
14. 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
d. Interest Expense
ANS: B
15. 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
ANS: B
16. The LMN Co. uses the direct write-off method of accounting for uncollectible accounts
receivable. The entry to write off an account that has been determined to be uncollectible
would be as follows:
a. debit Allowance for Doubtful Accounts; credit Accounts Receivable
b. debit Sales Returns and Allowance, credit Accounts Receivable
c. debit Uncollectible Accounts Expense; credit Allowance for Doubtful Accounts
d. debit Accounts Receivable, credit Uncollectible Accounts Expense
e. debit Uncollectible Accounts Expense; credit Accounts Receivable
ANS: E
DIF: Moderate
OBJ: 08-03
17. Allowance for Doubtful Accounts has a credit balance of $500 at the end of the year (before
adjustment), and uncollectible accounts expense is estimated at 3% of net sales. If net sales
are $600,000, the amount of the adjusting entry to record the provision for doubtful accounts
is
a. $18,500
b. $17,500
c. $18,000
d. none of the above
ANS: C
DIF: Moderate
OBJ: 08-04
18. Under the allowance method, writing off an uncollectible account

a. affects only income statement accounts.
b. is not acceptable practice.
c. affects only balance sheet accounts.
d. affects both balance sheet and income statement accounts.
ANS: C
19. An estimate based on an analysis of receivables shows that $780 of accounts receivables are
uncollectible. The Allowance for Doubtful Accounts has a debit balance of $110. After
preparing the adjusting entry at the end of the year, the balance in the Allowance for
Doubtful Accounts is
a. $110
b. $780
c. $670
d. $890
ANS: D
DIF: Moderate
OBJ: 08-04
20. 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?
b. Allowance for Doubtful Accounts
c. Accounts Receivable
d. Interest Expense
ANS: B
21. 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 customers ledger indicates doubtful accounts
of $15,000. Which of the following entries records the proper provision for doubtful
accounts?
a. debit Uncollectible Accounts Expense, $800; credit Allowance for Doubtful Accounts,
$800
b. debit Uncollectible Accounts Expense, $14,200; credit Allowance for Doubtful Accounts,
$14,200
c. debit Allowance for Doubtful Accounts, $800; credit Uncollectible Accounts Expense,
$800
d. debit Allowance for Doubtful Accounts, $15,800; credit Uncollectible Accounts Expense,
$15,800
ANS: B
DIF: Moderate
OBJ: 08-04
22. Allowance for Doubtful Accounts has a debit balance of $500 at the end of the year (before
adjustment), and uncollectible accounts expense is estimated at 3% of net sales. If net sales
are $600,000, the amount of the adjusting entry to record the provision for doubtful accounts
is
a. $18,500
b. $17,500
c. $18,000
d. none of the above
ANS: C
DIF: Moderate
OBJ: 08-04
23. After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable
has a balance of $450,000 and Allowance for Doubtful Accounts has a balance of $25,000.
What is the net realizable value of the accounts receivable?
a. $25,000
b. $425,000
c. $450,000
d. $455,000
ANS: B
24. 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?
d. Interest Expense
ANS: B
25. Allowance for Doubtful Accounts is listed on the balance sheet under the caption
a. stockholders equity
b. investments
c. fixed assets
d. current assets
ANS: D
26. 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.
ANS: C
27. Allowance for Doubtful Accounts has a credit balance of $1,100 at the end of the year
(before adjustment), and an analysis of customers' accounts indicates doubtful accounts of
$12,900. Which of the following entries records the proper provision for doubtful accounts?
a. debit Uncollectible Accounts Expense, $14,000; credit Allowance for Doubtful Accounts,
$14,000
b. debit Allowance for Doubtful Accounts, $14,000; credit Uncollectible Accounts Expense,
$14,000
c. debit Allowance for Doubtful Accounts, $11,800; credit Uncollectible Accounts Expense,
$11,800
d. debit Uncollectible Accounts Expense, $11,800; credit Allowance for Doubtful Accounts,
$11,800
ANS: D
DIF: Moderate
OBJ: 08-04
a. debit Allowance for Doubtful Accounts, $16,400; credit Uncollectible Accounts Expense,
$16,400
$19,400
c. debit Uncollectible Accounts Expense, $19,400; credit Allowance for Doubtful Accounts,
$19,400
$16,400
ANS: D
DIF: Moderate
OBJ: 08-04
29. 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
ANS: A
30. A company uses the estimate of sales method to account for uncollectible accounts. 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. total current assets are reduced and total expenses are increased
d. there is no effect on total current assets or total expenses
ANS: D
DIF: Moderate
OBJ: 08-04
31. An estimate based on an analysis of receivables shows that $780 of accounts receivables are
uncollectible. The Allowance for Doubtful Accounts has a debit balance of $110. After
preparing the adjusting entry at the end of the year, the balance in the Uncollectible
Accounts Expense is
a. $110
b. $780
c. $670
d. $890
ANS: D
DIF: Moderate
OBJ: 08-04
32. ABC company uses the estimate of sales method of accounting for uncollectible accounts.
ABC estimates that 3% of all credit sales will be uncollectible. On January 1, 2005, the
Allowance for Doubtful Accounts had a credit balance of $2,400. During 2005, ABC wroteoff accounts receivable totaling $1,800 and made credit sales of $100,000. After the
adjusting entry, the December 31, 2005, balance in the Uncollectible Accounts Expense
would be
a. $1,200
b. $3,000
c. $3,600
d. $7,200
ANS: B
DIF: Moderate
OBJ: 08-04
33. The balance in Allowance for Doubtful Accounts must be carefully considered prior to the
end of the year adjustment when applying which method?
a. direct write-off method
b. estimate based on sales
c. estimate based on an analysis of receivables
d. both (b) and (c)
ANS: C
34. Donovan Company uses the estimate based on analysis of receivables to account for
uncollectible accounts. The company has determined that the Irish Company account is
uncollectible. To write-off this account, Donovan should debit
a. Uncollectible Accounts Expense and credit Accounts Receivable
b. Uncollectible Accounts 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
ANS: C
35. Using the estimate based on sales method of accounting for uncollectible accounts, 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
ANS: D
36. At the beginning of the year, the balance in the Allowance for Doubtful Accounts is a credit
of $540. During the year, $350 of previously written-off accounts were reinstated and
accounts totaling $410 are written-off as uncollectible. The end of the year balance in the
Allowance for Doubtful Accounts should be
a. $350
b. $410
c. $480
d. $600
ANS: C
DIF: Moderate
OBJ: 08-04
37. Allowance for Doubtful Accounts has a debit balance of $800 at the end of the year (before
adjustment), and an analysis of accounts in the customers ledger indicates doubtful accounts
of $15,000. Which of the following entries records the proper provision for doubtful
accounts?
a. debit Uncollectible Accounts Expense, $800; credit Allowance for Doubtful Accounts,
$800
b. debit Uncollectible Accounts Expense, $14,200; credit Allowance for Doubtful Accounts,
$14,200
c. debit Allowance for Doubtful Accounts, $800; credit Uncollectible Accounts Expense,
$800
$15,800
ANS: D
DIF: Moderate
OBJ: 08-04
38. Allowance for Doubtful Accounts has a debit balance of $1,100 at the end of the year
a. debit Uncollectible Accounts Expense, $14,000; credit Allowance for Doubtful Accounts,
$14,000
$14,000
c. debit Allowance for Doubtful Accounts, $11,800; credit Uncollectible Accounts Expense,
$11,800
$11,800
ANS: A
DIF: Moderate
OBJ: 08-04
a. debit Allowance for Doubtful Accounts, $16,400; credit Uncollectible Accounts Expense,
$16,400
$19,400
c. debit Uncollectible Accounts Expense, $19,400; credit Allowance for Doubtful Accounts,
$19,400
$16,400
ANS: D
DIF: Moderate
OBJ: 08-04
40. 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.
ANS: D
41. The collection of an account that had been previously written off under the allowance
method of accounting for uncollectibles
a. will increase income in the period it is collected.
b. will decrease income in the period it is collected.
c. does not affect income in the period it is collected.
d. requires a correcting entry for the period in which the account was written off.
ANS: C
42. An aging of a company's accounts receivable indicates that $4,000 are estimated to be
uncollectible. If Allowance for Doubtful Accounts has a $1,200 credit balance, the
adjustment to record bad debts for the period will require a
a. debit to Allowance for Doubtful Accounts for $2,800.
b. debit to Bad Debts Expense for $2,800.
c. debit to Allowance for Doubtful Accounts for $4,000.
d. credit to Allowance for Doubtful for $4,000.
ANS: B
DIF: Moderate
OBJ: 08-04
uncollectible. If Allowance for Doubtful Accounts has a $1,200 debit balance, the
a. debit to Bad Debt Expense for $4,200.
c. debit to Bad Debts Expense for $1,800.
d. credit to Allowance for Doubtful Accounts for $4,000.
ANS: A
DIF: Moderate
OBJ: 08-04
uncollectible. If Allowance for Doubtful Accounts has a $1,200 credit balance, the
a. debit to Bad Debt Expense for $4,200.
c. debit to Bad Debts Expense for $1,800.
d. credit to Allowance for Doubtful Accounts for $4,000.
ANS: C
DIF: Moderate
OBJ: 08-04
45. 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.
ANS: D
DIF: Moderate
OBJ: 08-04
46. To record estimated uncollectible accounts using the allowance method, the adjusting entry
would be a
a. debit to Bad Debts 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.
ANS: A
47. The balance in Allowance for Doubtful Accounts must be considered prior to end of period
adjustment when using which of the following methods?
a. Analysis of receivables allowance method
b. Direct write-off method
c. Accrual method
d. Net realizable method
ANS: A
48. 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.
ANS: C
49. Tanning Company uses the percentage of receivables method for recording bad debts
expense. The accounts receivable balance is $200,000 and credit sales are $1,000,000. An
aging of accounts receivable shows that 5% will be uncollectible. What adjusting entry will
Manning Company make if the Allowance for Doubtful Accounts has a credit balance of
$2,000 before adjustment?
a. Bad Debts Expense
8,000
Allowance for Doubtful Accounts
8,000
b. Bad Debts Expense
10,000
10,000
c. Bad Debts Expense
8,000
Accounts Receivable
8,000
d. Bad Debts Expense
10,000
Accounts Receivable
10,000
ANS: A
DIF: Moderate
OBJ: 08-04
50. 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.
ANS: D
DIF: Moderate
OBJ: 08-04
51. The amount of a promissory note is called the
a. realizable value
b. maturity value
c. face value
d. proceeds
ANS: C
52. The amount of the promissory note plus the interest earned on the due date is called the
a. realizable value
b. maturity value
c. face value
d. net realizable value
ANS: B
53. A 60-day, 10% note for $8,000, dated April 15, is received from a customer on account. The
face value of the note is
a. $8,600
b. $7,200
c. $8,800
d. $8,000
ANS: D
54. A 90-day, 12% 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. $10,300
c. $450
d. $9,550
ANS: B
DIF: Moderate
OBJ: 08-06
55. Interest on a note can be calculated without knowledge of the

a. note's maturity date
b. rate of interest
c. notes duration
d. principal amount
ANS: A
56. On November 1, Blazer Company receives a 6% interest bearing note from Ram Company
to settle a $20,000 account receivable. The note is due in six months. At December 31,
Blazer should record interest revenue of
a. $0
b. $100
c. $200
d. $600
ANS: C
DIF: Moderate
OBJ: 08-06
57. 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
ANS: C
58. The journal entry to record a note received from a customer to apply on 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
ANS: A
59. A $6,000, 30-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, $6,060; credit Notes Receivable, $6,060
b. debit Accounts Receivable, $6,060; credit Notes Receivable, $6,000; Credit Interest
Receivable, $60
c. debit Notes Receivable, $6,060; credit Accounts Receivable, $6,060
d. debit Accounts Receivable, $6,060; credit Notes Receivable, $6,000; Credit Interest
Revenue, $60
ANS: D
DIF: Moderate
OBJ: 08-06
60. On November 1, Kim Company accepted a 3-month note receivable as payment for services
provided to Chu Company. The terms of the note were $8,000 face value and 6% interest.
Kim Company closes its books at December 31 and does not use reversing entries. On
February 1, the journal entry to record the collection of the note should include a credit to
a. Notes Receivable for $8,120
b. Interest Receivable for $120
c. Interest Revenue for $120
d. Interest Revenue for $40
ANS: D
DIF: Moderate
OBJ: 08-06
61. A note receivable or promissory note
a. has the party to whom the money is due as the maker.
b. is not a formal credit instrument.
c. cannot be factored to another party.
d. may be used to settle an accounts receivable.
ANS: D
62. 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.
ANS: B
63. Pane Company receives a $3,000, 3-month, 6% promissory note from Dag Company in
settlement of an open accounts receivable. What entry will Pane Company make upon
receiving the note?
a. Notes Receivable
3,000
Accounts ReceivableDag Company
3,000
b. Notes Receivable
3,045
3,045
c. Notes Receivable
3,045
3,000
Interest Revenue
45
d. Notes Receivable
3,000
Interest Receivable
45
3,000
Interest Revenue
45
ANS: A
64. The maturity value of a $20,000, 9%, 40-day note receivable dated July 3 is
a. $20,000.
b. $20,200.
c. $21,800.
d. $22,000.
ANS: B
65. Harper Company lends Hewell Company $20,000 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
100
Interest Revenue
100
b. Interest Receivable
300
Interest Revenue
300
c. Interest Receivable
100
Interest Revenue
100
d. Note Receivable
20,000
Cash
20,000
ANS: C
66. Bright Co. holds Park Co.s $20,000, 120 day, 9% note. The entry made by Bright Co. when
the note is collected, assuming no interest has previously been accrued is:
a. Cash
20,000
Notes Receivable
20,000
20,600
Notes Receivable
20,000
Interest Revenue
600
c. Cash
20,600
Notes Receivable
20,000
Interest Revenue
600
d. Accounts Receivable
20,600
Notes Revenue
20,000
Interest Revenue
600
ANS: C
DIF: Moderate
OBJ: 08-06
67. Receivables are usually listed on the balance sheet after Cash in what order?
a. Accounts Receivable, Notes Receivable, Interest Receivable
b. Interest Receivable, Notes Receivable, Accounts Receivable
c. Notes Receivable, Interest Receivable, Accounts Receivable
d. Notes Receivable, Accounts Receivable, Interest Receivable
ANS: D
68. Receivables are usually listed in order

a. of the due date
b. of the size
c. alphabetically
d. of liquidity
ANS: D
69. Accounts Receivable Turnover measures
a. how frequently during the year the accounts receivable are converted to cash
b. the number of days outstanding
c. the fair market value of accounts receivable
d. the efficiency of the accounts payable function
ANS: A
70. 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
ANS: A
71. In reference to a promissory note, another word for "discount" is
a. maturity
b. sale
c. purchase
d. interest
ANS: D
72. The amount received by the endorser after discounting a note receivable at the bank is called
the
a. proceeds
b. maturity value
c. face value
d. realizable value
ANS: A
73. A 60-day, 12% note for $10,000, dated May 1, is received from a customer on account. If
the note is discounted on May 21 at 15%, the proceeds are
a. $170
b. $9,830
c. $10,000
d. $10,030
ANS: D
DIF: Moderate
OBJ: 08-App
the note is discounted on June 10 at 15%, the proceeds are
a. $10,115
b. $10,200
c. $10,000
d. $10,030
ANS: A
DIF: Moderate
OBJ: 08-App
the note is discounted on May 21 at 15%, the amount of interest revenue or expense to be
recorded by the payee of the note on May 21 is
a. $30 interest expense
b. $30 interest revenue
c. $170 interest revenue
d. $170 interest expense
ANS: B
DIF: Moderate
OBJ: 08-App
76. A 60-day, 12% note received from a customer for $50,000, dated May 15, is endorsed to the
bank on May 25, and the bank discounts the note at 15%. If the note is dishonored by the
maker and the bank charges a $20 protest fee, what is the amount payable to the bank on
July 14?
a. $51,000
b. $51,020
c. $56,020
d. $50,000
ANS: B
DIF: Moderate
OBJ: 08-App
77. A 90-day, 12% note for $20,000, dated April 10, is received from a customer on account. If
the note is discounted at 15% on May 10, the due date is
a. July 9
b. July 10
c. July 11
d. July 8
ANS: A
DIF: Difficult
OBJ: 08-App
78. A 90-day, 12% note for $20,000, dated April 10, is received from a customer on account. If
the note is discounted at 15% on May 10, the days in the discount period are
a. 60
b. 90
c. 120
d. 30
ANS: A
DIF: Moderate
OBJ: 08-App
EXERCISE/OTHER
1.
Other than accounts receivable and notes receivable, name other receivables that might be
included in the general ledger.
ANS:
Interest Receivable, Receivables from Officers or Employees, Taxes Receivable.
2.
If sales personnel are allowed to approve customer credit, how might the cost of approving
poor credit risk be controlled?
ANS:
Allow sales personnel to approve customer credit for only sales of small amounts.
3.
On March 31st the company determines that it needs to recognize $1,950.00 in uncollectible
accounts expense based on an evaluation of accounts receivable. Journalize this recognition.
ANS:
Mar 31st Uncollectible Accounts Expense
1,950.00
1,950.00
4.
Journalize the following transaction using the direct write-off method of accounting for
uncollectible receivables.
June 10 Received $1,300 from Jan Downs and wrote off the remainder owed of $4,200.
Oct. 11 Reinstated the account of Jan Downs and received $4,200 cash in full payment.
ANS:
June 10
Cash
1,300
Bad Debt Expense
4,200
Accounts Receivable-Jan Downs
5,500
Oct 11
11

Bad Debt Expense
4,200
Cash
4,200
4,200
4,200

NAT: AACSB Analytic | AICPA FN-Measurement TOP: Example Exercise 8-1
5.
Mega Stampers utilizes the direct write-off method for accounts receivable. On September
15th it is notified by the attorneys for Hub Cap Ben that Hub Cap Ben is bankrupt and no
cash is expected in the liquidation of Hub Cap Bens. Journalize the $655.00 shown as
accounts receivable from Hub Cap Bens as a write-off.
ANS:
Sept 15th Uncollectible Accounts Expense
655.00
Accounts Receivable - Hub Cap Ben
655.00
6.
The following journal entries illustrate the two methods of accounting for uncollectible
receivables. Identify each.
(a)
Uncollectible Accounts Expense
Accounts Receivable-Billings
450
(b)
Accounts Receivable-Helena
450
ANS:
(a) Direct Write-Off Method
(b) Allowance Method
450
450
DIF: Easy OBJ: 08-03 | 08-04

7.
Determine the amount to be added to Allowance for Doubtful Accounts in each of the
following cases. Indicate the ending balance in each case.
(a)
(b)
Credit balance of $400 in the allowance account just prior to adjustment. Analysis
of accounts receivable indicates doubtful accounts of $8,500.
Credit balance of $400 in the allowance account just prior to adjustment.
Uncollectible accounts are estimated at 2% of sales, which totaled $1,000,000 for
the year.
ANS:
(a) $8,100 and $8,500
(b) $20,000 and $20,400
DIF: Moderate
OBJ: 08-04
8.
Mega Sales has Gross sales of $1,525,000.00. Of these sales, $1,175,000.00 were on
accounts receivable. During the year of 2007 there were sales returns and allowances and
sales discounts on sales made on account of $55,000.00. Mega Sales calculates that 6 1/2%
of the period sales less sales returns and allowances and sales discounts will be
uncollectible.
Calculate the net realizable value of sales and write the journal entry to recognize the period
expense of uncollectible accounts.
ANS:
Period credit sales
$1,175,000
Less sales returns, allowances, and discounts
55,000
Net sales on account
$1,120,000
Percentage estimate for uncollectibles
6 1/2%
Amount calculated to be uncollectible
$72,800.00
Dec 31, 2007 Uncollectible Accounts Expense
72,800.00
DIF: Difficult
OBJ: 08-04
72,800.00
9.
Journalize the following transactions using the allowance method of accounting for
uncollectible receivables.
June 10 Received $1,300 from Jan Downs and wrote off the remainder owed of $4,200.
Oct. 11 Reinstated the account of Jan Downs and received $4,200 cash in full payment.
ANS:
June 10
Cash
1,300
4,200
5,500
Oct 11
11

Bad Debt Expense
4,200
Cash
4,200
4,200
4,200

10. 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
$2,500,000. Bad Debt Expense is estimated at 1/2 of 1% 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.
ANS:
(a)
$12,500 ($2,500,000 .005)
Adjusted Balance
(b)
Accounts Receivable
$700,000
Allowance for Doubtful Accounts ($5,500 + $12,500)
18,000
Bad Debt Expense
12,500
(c)
Net realizable value ( $700,000 - $18,000)
$682,000
DIF: Moderate
OBJ: 08-04
ANS:
(a)
$15,000 ($3,000,000 .005)
Adjusted Balance
(b)
Accounts Receivable
$900,000
18,500
Bad Debt Expense
15,000
(c)
$881,500
DIF: Moderate
OBJ: 08-04
$2,500,000. Using the aging method, the balance of Allowance for Doubtful Accounts is
estimated as $25,000.
ANS:
(a)
$19,500 ($25,000 -$5,500)
Adjusted Balance
(b)
Accounts Receivable
$700,000
25,000
Bad Debt Expense
19,500
(c)
$675,000
DIF: Moderate
OBJ: 08-04
ANS:
(a)
$15,000 ($3,000,000 .005)
Adjusted Balance
(b)
Accounts Receivable
$800,000
Allowance for Doubtful Accounts ($3,500 + 15,000)
18,500
Bad Debt Expense
15,000
(c)
$781,500
DIF: Moderate
OBJ: 08-04
$3,000,000. Using the aging method, the balance of Allowance for Doubtful Accounts is
estimated to be $35,000.
ANS:
(a)
$31,500 ($35,000 -$3,500)
Adjusted Balance
(b)
Accounts Receivable
$900,000
35,000
Bad Debt Expense
31,500
(c)
$865,000
DIF: Moderate
OBJ: 08-04
15. Mega Stampers utilizes the allowance for doubtful accounts method for accounts receivable
that are deemed uncollectible. On December 12th it is notified by Fancy Wheels and Tires
that it is submitting $275.00 in settlement of its $550.00 outstanding accounts receivable.
Due to the owners failing health the company is closing and it expects to make no further
payments. Journalize this declaration.
ANS:
Dec 12th
Cash
275.00
275.00
Accounts Receivable - Fancy Wheels and Tires
550.00
DIF: Moderate
OBJ: 08-04
16. On June 30th the company has a credit balance of $27,275.00 in its allowance for doubtful
accounts. An evaluation of accounts receivable indicates that the proper balance should be
$31,025.00. Journalize this recognition.
ANS:
Jun 30th Uncollectible Accounts Expense
3,750.00
3,750.00
17. Good Day Service Center received a 120-day, 6% note for $50,000, dated April 12 from a
customer on account.
(a)
(b)
(c)
Determine the due date of the note.

Determine the maturity value of the note.
Journalize the entry to record the receipt of the payment of the note at maturity.
ANS:
(a)
August 10 determined as follows:
April
May
June
July
August
Total
(b)
18 days (30-12)
31 days
30 days
31 days
10 days
120 days
$51,000 [$50,000 + ($50,000 x 6% x (120/360)]
(c)
Aug. 10
Cash
Note Receivable
Interest Revenue
51,000
50,000
1,000
DIF: Moderate
OBJ: 08-06
18. Calculate the following:
(a)
(b)
If the interest on a note is $500, the interest rate is 6% and the time is 60 days, what
is the principal?
If the principal of a note is $30,000, the interest is $500 and the time is 60 days,
what is the interest rate?
ANS:
(a) $50,000 ($500 360/60) .06
(b) 10% ($500 $30,000) (360/60) = 10%
DIF: Easy
OBJ: 08-07
19. Determine the due date and amount of interest due at maturity on the following notes:
(a)
(b)
Origination
Date
Mar 1
May 15
Face
Amount
$4,000
$9,000
Term
of Note
60 days
90 days
Interest
Rate
9%
8%
Maturity
Date
__________
__________
Interest
Amount
__________
__________
ANS:
(a) April 30; $60 = ($4,000 .09) (60/360)
(b) August 13; $180 = ($9,000
DIF: Easy
OBJ: 08-07
20. 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
average 10. (c) Comment on this situation.
12/31/07 Accounts Receivable, net
12/31/08 Accounts Receivable, net
For the year ended 12/31/07, net credit sales
For the year ended 12/31/08, net credit sales
ANS:
(a) $1,600,000 [($90,000 + $70,000) 2] = 20
(b) $70,000 ($1,600,000 365 days) = 15.97 days
(c) This situation is better than the industry average.
$90,000
$70,000
$1,250,000
$1,600,000
DIF: Moderate
OBJ: 08-07
PROBLEM
1.
For a business that makes advance provision for uncollectible receivables

(a)
(b)
(c)
Journalize the entries to record the following:

(1) Record the adjusting entry at December 31, the end of the fiscal year, to
provide for doubtful accounts. 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 doubtful accounts of
$20,000.
(2) In March of the following fiscal year, the $550 owed by Flake Co. on account
is written off as uncollectible.
(3) Eight months later, $200 of the Flake Co. account is reinstated and payment of
that amount is received.
(4) In October, $400 is received on the $600 owed by Doe Co. and the remainder
is written off as uncollectible.
Based on the data in (a) (1) above, what is the net realizable value of the accounts
receivable as reported on the balance sheet as of December 31?
Assuming that the business had been following the direct write-off procedure in
accounting for uncollectible receivables, journalize the entries to record the
following:
(1) Recorded the write-off of account of Flake Co. [(a) (2) above].
(2) Reinstated account of Flake Co. for $200 and recorded payment of that
amount received [(a) (3) above].
(3) Recorded the receipt of $400 from Doe Co. in (a) (4) above and wrote off the
remainder owed as uncollectible.
ANS:
(a)
(1)
(2)
(3)
(4)
(b)

20,600
20,600

Accounts Receivable-Flake Co
550
200
550
200
Cash
200
Cash
Accounts Receivable-Doe Co
400
200
200
600
$780,000 ($800,000 - $20,000)
(c)
(1)
(2)
(3)

550
200
Cash
200
Cash
Accounts Receivable-Doe Co
400
200
DIF: Moderate
OBJ: 08-03 | 08-04 | 08-07
550
200
200
600
2.
The aging of Freedom Sales is shown below. Calculate the amount of each periodicity range
that is deemed to be uncollectible. The Allowance for Doubtful Accounts carries a credit
balance of $1,135.00. Write the adjusting entry for the end of the current year.
Age Interval:
Not past due
1~30 days past due:
31~60 days past due:
Over 365 days past due:
Total:
Balance:
750,000
47,500
21,750
11,250
5,065
2,500
1,145
839,210
Est Uncollectible Accts

Percentage:
Amount:
2.50%
5.00%
10.00%
20.00%
30.00%
50.00%
95.00%
ANS:
Age Interval:
Not past due
1~30 days past due:
Over 365 days past due:
Total:
Dec 31
Balance:
750,000
47,500
21,750
11,250
5,065
2,500
1,145
839,210
Est Uncollectible Accts

Percentage:
Amount:
2.50%
18,750.00
5.00%
2,375.00
10.00%
2,175.00
20.00%
2,250.00
30.00%
1,519.50
50.00%
1,250.00
95.00%
1,087.75
29,407.25

28,272.25
Calculation of expense: Amount of calculated uncollectible accounts

Less credit balance of account
Additional credit amount to establish calcd
value
DIF: Difficult
OBJ: 08-04
28,272.25
$29,407.25
1,135.00
$28,272.25
3.
Mr. P issued a 90-day, 7% note for $200,000, dated February 3rd to VWX Co. on account.
(a) Determine the due date of the note.
(b) Determine the interest.
(b) Determine the maturity value of the note.
(c) Journalize the entry to record the receipt of the note by VWX Co.
(d) Journalize the entry to record the receipt of payment of the note at maturity by VWX
Co.
ANS:
(a) May 4
Feb 4 - Feb 28
March
April
May
25 days
31 days
30 days
4 days
90 days
(b)
Interest = Face Amount (or principal) Rate Time

Interest = $200,000
Interest = $3,500
(c)
Maturity Value = Face Amount + Interest

Maturity Value = $200,000 + 3,500
Maturity Value = $203,500
(d)
Cash
Notes Receivable
Interest Revenue
DIF: Moderate
OBJ: 08-04
4.
Last Day Service Center received a 90-day, 6% note for $50,000, dated March 12 from a
customer on account.
(a)
(b)
(c)

Journalize the entry to record the receipt of the payment of the note at maturity.
ANS:
(a)
June 10 determined as follows:
March
April
May
June
Total
(b)
19 days (31-12)
30 days
31 days
10 days
90 days
$50,750 [$50,000 + ($50,000 6% (90/360)]
(c)
June 10
Cash
Note Receivable
Interest Revenue
DIF: Moderate
OBJ: 08-06
5.
Wolfe Company issued a 60-day, 8% note for $15,000, dated April 5, to Lamb Company on
account.
(a)
(b)
(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.
ANS:
(a) June 4
(b)
$15,200
(c)
Note Receivable-Wolfe Co
Account Receivable-Wolfe Co
15,000
Cash
Note Receivable-Wolfe Co
Interest Revenue
15,200

15,000
15,000
200
6.
On the basis of the following data related to assets due within one year for Wally Co.,
prepare a partial balance sheet in good form at December 31, 2005. Show total current
assets.
Cash
Notes receivable
Accounts receivable
Allowance for doubtful accounts
Interest receivable
$125,000
50,000
275,000
25,000
1,000
ANS:
Wally Co.
Balance Sheet
December 31, 2005
Assets
Current assets:
Cash
Notes receivable
Accounts receivable
Less allowance for doubtful accounts
Interest receivable
Total current assets
$125,000
50,000
$275,000
25,000
250,000
1,000
$426,000

7.
Journalize the following transactions:

Mar. 1
May 30
Dec. 11
Received a 90-day, 10% note for $36,000, dated March 1, from Burke Co. on
account.
The note of March 1 was dishonored.
Accepted $33,000 in full settlement of the amount owed on the note
dishonored on May 30. The allowance method of accounting for uncollectible
receivables is used.
ANS:
Mar. 1
Notes Receivable
Accounts Receivable-Burke Co.
36,000.00
36,000.00
May. 30 Accounts Receivable-Burke Co.

Notes Receivable
Interest Revenue
36,900.00
Dec. 11
33,000.00
3,900.00
36,000.00
900.00
Cash
Accounts Receivable-Burke Co.
36,900.00
DIF: Moderate
OBJ: 08-04 | 08-07
8.
The following are the current assets from Happy Co. as of December 31, 2007:
Accounts Receivable
Cash
Interest Receivable
Merchandise Inventories
Notes Receivable
42,000
3,000
74,000
3,500
104,000
100,000
Prepare the current asset section of the balance sheet.

ANS:
Happy Co.
Balance Sheet
December 31, 2007
Assets
Current Assets:
Cash
Notes Receivable
Accounts Receivable
Less allowance for doubtful accounts
Interest Receivable
Merchandise Inventory
Total Current Assets
DIF: Moderate
OBJ: 08-07
$ 74,000
100,000
42,000
3,000
39,000
3,500
104,000
320,500
9.
For the fiscal years 2007 and 2008, ABC Co. reported the following:
Net Sales
Accounts Receivable
Year Ended December 31,

2007
2008
$44,123,486
$36,124,961
749,321
719,365
(a) Compute the accounts receivable turnover for 2008.

(b) Compute the number of days sales in receivable at the end of 2008.
ANS:
(a)
Accounts receivable turnover = Net Sales / Average accounts receivable
Accounts receivable turnover = 36,124,961 / ((749,321+719,365)/2)
Accounts receivable turnover = 49.19
(b)
Number of days sales in receivables = Accounts receivable, end of year/Ave.

daily sales
Number of days sales in receivables = 719,365/(36,124,961/365 days)
Number of days sales in receivables = 7.3
DIF: Moderate
OBJ: 08-07
10. Journalize the following transactions:
Mar. 1
Apr. 30
Apr. 30
May 10
Received a 60-day, 10% note for $24,000, dated today, from Toy Co. on
account.
Received amount due on note above.
Received a 90-day, 10% note for $4,800, dated April 30, from Bear Co. on
account.
Discounted the note dated April 30 at Third National Bank at a discount rate of
10%.
ANS:
Mar. 1
Apr. 30
Apr. 30
May 10
Notes Receivable
Accounts Receivable-Toy Co
24,000
Cash
Notes Receivable
Interest Revenue
24,400
Notes Receivable
Accounts Receivable-Bear
Cash
Interest Revenue
Notes Receivable
24,000
24,000
400
4,800
4,800
4,813.33
10.33
4,800.00
DIF: Difficult
OBJ: 08-App
11. Small Co. received a $10,000, 12%, 90-day note, dated October 1, from Wade Co. on
account. On October 31, Ashley Co. discounted the note at the bank at 9%. Determine the
items below and insert answers in the spaces provided.
(a)
(b)
(c)
(d)
(e)
(f)
Due date of note

Maturity value of note
Discount period
Discount amount
Proceeds from discounting note
Interest ________________________
(insert Revenue or Expense)
ANS:
(a) December 30
(b) $10,300
(c) 60 days
(d) $150.00
(e) $10,150.00
(f)
Revenue $150.00
DIF: Moderate
OBJ: 08-App
__________
__________
__________ days
__________
__________
__________

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Ch08 Receivables

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Chapter 8

Describe the common classifications of receivables.

Chapter 8/Receivables 402

Chapter 8/Receivables 403

404 Chapter 8/Receivables

Chapter 8/Receivables 405

406 Chapter 8/Receivables

Chapter 8/Receivables 407

408 Chapter 8/Receivables

The receivable that is usually evidenced by a formal instrument of credit is a(n)

Which of the following receivables would not be classified as an "other receivable?

Chapter 8/Receivables 409

The term "receivables" includes all

When does an account become uncollectible?

410 Chapter 8/Receivables

The direct write-off method of accounting for uncollectible accounts

Chapter 8/Receivables 411

412 Chapter 8/Receivables

18. Under the allowance method, writing off an uncollectible account

Chapter 8/Receivables 413

414 Chapter 8/Receivables

Chapter 8/Receivables 415

416 Chapter 8/Receivables

Chapter 8/Receivables 417

418 Chapter 8/Receivables

Chapter 8/Receivables 419

420 Chapter 8/Receivables

Chapter 8/Receivables 421

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

422 Chapter 8/Receivables

Chapter 8/Receivables 423

424 Chapter 8/Receivables

68. Receivables are usually listed in order

Chapter 8/Receivables 425

426 Chapter 8/Receivables

Chapter 8/Receivables 427

Accounts Receivable-Jan Downs

DIF: Easy OBJ: 08-03

428 Chapter 8/Receivables

DIF: Easy OBJ: 08-03 | 08-04

Chapter 8/Receivables 429

Accounts Receivable-Jan Downs

DIF: Easy OBJ: 08-04

Net realizable value ( $700,000 - $18,000)

430 Chapter 8/Receivables

Net realizable value ( $900,000 - $18,500)

Net realizable value ( $700,000 - $25,000)

Chapter 8/Receivables 431

Net realizable value ( $800,000 - $18,500)

Net realizable value ( $900,000 - $35,000)

432 Chapter 8/Receivables

Determine the due date of the note.

$51,000 [$50,000 + ($50,000 x 6% x (120/360)]

Chapter 8/Receivables 433

434 Chapter 8/Receivables

For a business that makes advance provision for uncollectible receivables

Journalize the entries to record the following:

Chapter 8/Receivables 435

Uncollectible Accounts Expense

Allowance for Doubtful Accounts

$780,000 ($800,000 - $20,000)

Uncollectible Accounts Expense

436 Chapter 8/Receivables

Est Uncollectible Accts