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Record the following transactions in general journal form for the Newell Company. July 1 Received a $9,000, 8%, 3-month note, dated July 1, from Lois Patton in payment of her open account. Oct. 1 Received notification from Lois Patton that she was unable to honor her note at this time. It is expected that Patton will pay at a later date. Nov. 15 Received full payment from Lois Patton for note receivable previously dishonored.

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The basic formula for computing interest on an interest-bearing note is face value of note x annual interest rate x time in terms of one year = interest.

A) True
B) False

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The maturity value of a $40,000, 9%, 40-day note receivable dated July 3 is


A) $40,000.
B) $44,000.
C) $43,600.
D) $40,400.

E) A) and D)
F) C) and D)

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Assuming that the allowance method is being used, prepare general journal entries without explanations to record the following transactions. January 1 Sold merchandise to Mary Baden for $500 on account. February 1 Received $300 from Baden. July 1 Wrote off Baden's account as uncollectible. September 1 Unexpectedly received payment in full from Baden.

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YZ Company accepted a national credit card for a $7,500 purchase. The cost of the goods sold is $6,000. The credit card company charges a 3% fee. What is the impact of this transaction on net operating income?


A) Increase by $1,455.
B) Increase by $1,500.
C) Increase by $1,275.
D) Increase by $7,275.

E) B) and C)
F) A) and D)

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A write off of a specific accounts receivable under the allowance method


A) increases bad debt expense for the accounting period.
B) should occur on the last day of the accounting period.
C) decreases the cash realizable value of accounts receivable.
D) should be formally approved by an authorized employee.

E) A) and B)
F) B) and C)

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A factor buys receivables from businesses for a fee and collects the payment directly from customers.

A) True
B) False

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The Allowance for Doubtful Accounts is necessary because


A) when recording uncollectible accounts expense, it is not possible to know which specific accounts will not pay.
B) uncollectible accounts that are written off must be accumulated in a separate account.
C) a liability results when a credit sale is made.
D) management needs to accumulate all the credit losses over the years.

E) A) and B)
F) B) and D)

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Which of the following is not true regarding a promissory note?


A) Promissory notes may not be transferred to another party by endorsement.
B) Promissory notes may be sold to another party.
C) Promissory notes give a stronger legal claim to the holder than accounts receivable.
D) Promissory notes may be bearer notes and not specifically identify the payee by name.

E) B) and D)
F) B) and C)

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A note receivable is a negotiable instrument which


A) eliminates the need for a bad debts allowance.
B) can be transferred to another party by endorsement.
C) takes the place of checks in a business firm.
D) can only be collected by a bank.

E) A) and B)
F) All of the above

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Shafer Company has the following accounts in its general ledger at July 31: Accounts Receivable $49,000 and Allowance for Doubtful Accounts $3,400. During August, the following transactions occurred. Aug. 15 Sold $30,000 of accounts receivable to More Factors, Inc. who assesses a 2% finance charge. 25 Made sales of $2,500 on Visa credit cards. The credit card service charge is 3%. 28 Made sales of $4,000 on Shafer credit cards. Instructions (a) Journalize the transactions. (b) Indicate the statement presentation of service charges.

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blured image (b) Service Charge ...

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The accounts receivable turnover is needed to calculate


A) the average collection period in days.
B) market risk.
C) return on assets.
D) current ratio.

E) A) and B)
F) None of the above

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The two accounting problems with accounts receivable are: (1) recognizing and (2) disposing.

A) True
B) False

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Using the allowance method, the uncollectible accounts for the year is estimated to be $40,000. If the balance for the Allowance for Doubtful Accounts is a $9,000 credit before adjustment, what is the amount of bad debt expense for the period?


A) $9,000
B) $31,000
C) $40,000
D) $49,000

E) B) and D)
F) A) and B)

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Using the allowance method, the uncollectible accounts for the year is estimated to be $40,000. If the balance for the Allowance for Doubtful Accounts is a $9,000 debit before adjustment, what is the amount of bad debt expense for the period?


A) $9,000
B) $31,000
C) $40,000
D) $49,000

E) None of the above
F) B) and C)

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Accounts receivable are one of a company's least liquid assets.

A) True
B) False

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An analysis and aging of the accounts receivable of Watts Company at December 31 reveal these data: An analysis and aging of the accounts receivable of Watts Company at December 31 reveal these data: What is the cash realizable value of the accounts receivable at December 31 after adjustment? A) $2,055,000 B) $2,250,000 C) $2,400,000 D) $2,205,000 What is the cash realizable value of the accounts receivable at December 31 after adjustment?


A) $2,055,000
B) $2,250,000
C) $2,400,000
D) $2,205,000

E) B) and C)
F) None of the above

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An aging of accounts receivable schedule is based on the premise that the longer the period an account remains unpaid, the greater the probability that it will eventually be collected.

A) True
B) False

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There is only one way to calculate interest correctly.

A) True
B) False

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IFRS


A) implies that receivables with different characteristics should be reported separately.
B) requires that receivables with different characteristics should be reported separately.
C) implies that receivables with different characteristics should be reported as one unsegregated amount.
D) requires that receivables with different characteristics should be reported as one unsegregated amount.

E) None of the above
F) B) and D)

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