Bad Debts Expense is a temporary account and is closed at the end of the fiscal period, while Allowance for Doubtful Accounts is a permanent account and remains open at the end of the fiscal period.
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Which one of the following is not a method used by companies to accelerate cash receipts?
answer
Allowing customers to settle their accounts by issuing notes
Writing off receivables
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note receivable
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type of receivable is evidenced by a formal instrument and normally requires the payment of interest
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When an uncollectible account is recovered after it has been written off, which of the following journal entries will be recorded first?
answer
Debit Accounts Receivable and credit Allowance for Doubtful Accounts
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If a company uses the allowance method for uncollectible accounts, then the entry to record writing-off a customer's $800 account includes
answer
a debit to Allowance for Doubtful Accounts for $800 and a credit to Accounts Receivable for $800.
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Which one of the following is not one of the five basic issues in accounting for notes receivable?
answer
Filing notes receivable
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Which one of these statements about promissory notes is correct?
answer
Notes receivable are formal agreements
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Michael Co. accepts a $4,000, 3-month, 8% promissory note in settlement of an account with Tony Co. Michael Co. records this transaction as
answer
a debit to Notes Receivable for $4,000 and a credit to Accounts Receivable for $4,000.
On the date Michael Co. accepts the note in settlement of a note, Notes Receivable is debited for $4,000 and Accounts Receivable is credited for $4,000. Interest is accrued only with the passage of time
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Interest earned
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Interest = Principal x interest rate x time
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When a note receivable is paid on time and no interest has been previously accrued, what will the journal entry to record the transaction contain?
answer
Two credits and one debit
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Baker Co. loaned $30,000 to Idaho Co. on April 1, at 12% interest for 4 months. What adjusting entry should Baker Co. record on June 30 before preparing the financial statements on June 30?
answer
Debit Interest Receivable for $900 and credit Interest Revenue for $900
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A bank holds a 30-day, 9%, $20,000 note. The maker of the note pays in full on the maturity date. Which of the following is part of the journal entry that the bank will record on the maturity date?
answer
Credit to Notes Receivable for $20,000
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What is often the most critical part of managing receivables?
answer
Determining who gets credit and who does not get credit
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accounts receivables turnover
answer
dividing net credit sales by average net accounts receivable.
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Which of these statements about national credit card (e.g., Visa) sales is correct?
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A retailer's acceptance of a national credit card is a form of factoring the receivable by the retailer.
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Which one of the following account pairs are both permanent accounts?
answer
Accounts Receivable; Allowance for Doubtful Accounts
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trade receivables
answer
Accounts receivable
Notes receivable
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When is a receivable recorded by a service organization?
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When service is provided on account
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When an uncollectible account is recovered after it has been written off two journal entries are recorded. Which of the following journal entries will be recorded second?
answer
Debit Cash and credit Accounts Receivable
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If a company uses the allowance method for uncollectible accounts, then the entry to record writing-off a customer's $800 account includes
answer
a debit to Allowance for Doubtful Accounts for $800 and a credit to Accounts Receivable for $800.
question
Which one of the following is not one of the five basic issues in accounting for notes receivable?
answer
Determining the recipient
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A 120-day note dated March 6, would mature on
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July 4
March = 31 - 6 = 25 days outstanding (i.e., do not count the date of issue or days preceding it).
April = 30 days
May = 31 days
June = 30 days
Subtotal = 25 + 30 + 31 + 30 = 116. So, 4 more days are needed to reach 120 days.
Due date = July 4
question
Michael Co. accepts a $6,000, 3-month, 12% promissory note in settlement of an account with Tony Co. Michael Co. records this transaction as
answer
a debit to Notes Receivable for $6,000 and a credit to Accounts Receivable for $6,000.
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If a company is concerned about lending money to a risky customer, which one of the following would it not want to do?
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Provide the customer a lengthy payment period
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accounts receivable turnover
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net credit sales divided by average net accounts receivable
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Which of these statements about national credit card (e.g., Visa) sales is false?
answer
The retailer conducts the credit investigation of the customer
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Factoring is the process of
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selling accounts receivable at a discount to another party.
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