ACCT 2301 CH 7 Part 2

On July 9, Mifflin Company receives an $8,900, 90-day, 12% note from customer Payton Summers to replace an account receivable. What entry should be made by Mifflin on the maturity date assuming the maker pays in full, and no adjusting entries have been made related to the note? (Use 360 days a year.)

• Debit Cash $9,167; Credit Accounts Receivable $8,900; Credit Interest Revenue $267
• Debit Cash $9,167; credit Interest Revenue $267; credit Notes Receivable $8,900

• Debit Cash $8,900; Credit Notes Receivable $8,900; Credit Interest Revenue $0

Answer explanation

$8,900 × 0.12 × 90/360 = $267 + $8,900 = $9,167

On December 31 of the current year, the unadjusted trial balance of a company using the percent of receivables method to estimate bad debt included the following: Accounts Receivable, debit balance of $97,250; Allowance for Doubtful Accounts, credit balance of $951. What amount should be debited to Bad Debts Expense, assuming 6% of outstanding accounts receivable at the end of the current year are estimated to be uncollectible?

• $5,835.

• $3,992.

• $4,884.

• $6,786

Answer explanation

Desired balance in allowance account:$ 97,250 × 0.06 =$ 5,835 credit

Current balance in allowance account: −951 credit Required: amount of Bad Debts Expense: $ 4,884 credit

The following selected amounts are reported on the year-end unadjusted trial balance report for a company that uses the percent of sales method to determine its bad debts expense.
 

Accounts receivable$ 435,000 Debit

Net Sales 2,100,000 Credit

 
All sales are made on credit. Based on past experience, the company estimates 1.0% of sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

• Debit Bad Debts Expense $21,000; credit Allowance for Doubtful Accounts $21,000.

• Debit Bad Debts Expense $30,000; Credit Allowance for Doubtful Accounts $30,000.
• Debit Bad Debts Expense $5,000; Credit Allowance for Doubtful Accounts $5,000.
• Debit Bad Debts Expense $10,000; Credit Allowance for Doubtful Accounts $10,000.

Answer explanation

$2,100,000 × 0.01 = $21,000

At the end of the current year, using the aging of accounts receivable method, management estimated that $33,750 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a credit balance of $555. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

• Debit Bad Debts Expense $34,305; Credit Allowance for Doubtful Accounts $34,305.

• Debit Bad Debts Expense $33,195; Credit Allowance for Doubtful Accounts $33,195.

• Debit Bad Debts Expense $555; Credit Allowance for Doubtful Accounts $555.

Answer explanation

Desired balance in allowance account:$ 33,750 credit

Current balance: 555 credit

Required: adjustment to allowance$ 33,195credit

33,750 - 555 = 33,195

A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts:
 

Accounts receivable 347,000 debit

Net Sales 792,000 credit

All sales are made on credit. Based on past experience, the company estimates 0.4% of net sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

• Debit Bad Debts Expense $3,168; Credit Allowance for Doubtful Accounts $3,168.
• Debit Bad Debts Expense $4,000; Credit Allowance for Doubtful Accounts $4,000.
• Debit Bad Debts Expense $2,000; Credit Allowance for Doubtful Accounts $2,000.
• Debit Allowance for Doubtful Accounts $3,168; Credit Bad Debts Expense $3,168.

Answer explanation

$792,000 × 0.004 = $3,168

Jax Recording Studio purchased $6,200 in electronic components from Music World. Jax signed a 60-day, 6% promissory note for $6,200. Music World's journal entry to record the sales transaction is:

• Debit Notes Receivable $6,200; Credit Sales $6,200.

• Debit Inventory $6,200; Credit Cash $6,200.

• Debit Cash $6,200; Credit Accounts Payable $6,200.

On February 1, a customer's account balance of $3,600 was deemed to be uncollectible. What entry should be recorded on February 1 to record the write-off assuming the company uses the allowance method?

• Debit Allowance for Doubtful Accounts $3,600; credit Accounts Receivable $3,600.

• Debit Bad Debts Expense $3,600; credit Accounts Receivable $3,600.

• Debit Accounts Receivable $3,600; credit Allowance for Doubtful Accounts $3,600.

On July 9, Mifflin Company receives an $8,700, 120-day, 10% note from customer Payton Summers to replace an account receivable. What entry should be made by Mifflin on July 9 to record receipt of the note?

• Debit Accounts Receivable—P. Summers $8,700; credit Sales $8,700.

• Debit Notes Receivable $8,988; credit Interest Revenue $288; credit Accounts Receivable—P. Summers $8,700.

• Debit Notes Receivable $8,700; credit Accounts Receivable—P. Summers $8,700.

Date when a note’s final principal payment is due.

• Final payment date
• Maturity date
• Due date
• Payment date

Contra asset account with a balance approximating uncollectible accounts receivable

• Allowance for Doubtful Accounts
• Accounts Payable
• Cash Equivalents
• Inventory