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Exam 5: Receivables and Sales

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Question 91

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Timkin creates the following accounts receivable aging report at the end of the year: Prior to adjusting entries,the Allowance for Uncollectible Accounts has a debit balance of $500.The year-end adjustment would include a: $\begin{array} { | c | r | c | } \hline \text { Age } & \text { Amount } & \text { Estimated uncollectible } \\\hline \begin{array} { c } \text { Less than } 30 \\\text { days }\end{array} & \$ 6,000 & 5 \% \\\hline 31 - 60 \text { days } & \$ 4,000 & 10 \% \\\hline 61 + \text { days } & \$ 2,000 & 25 \% \\\hline\end{array}$

A) Credit to Allowance for Uncollectible Accounts for $1,200.
B) Debit to Bad Debt Expense for $700.
C) Debit to Bad Debt Expense for $1,700.

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

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Question 92

Multiple Choice

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At December 31,Amy Jo's Appliances had account balances in Accounts Receivable of $311,000 and in Allowance for Uncollectible Accounts of $970 (credit) before any adjustments.An analysis of Amy Jo's December 31 accounts receivable suggests that the allowance for uncollectible accounts should be 2% of accounts receivable.Bad debt expense for the year should be:

A) $6,220.
B) $6,450.
C) $5,250.

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

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Question 93

Multiple Choice

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Shupe Inc.estimates uncollectible accounts based on the percentage of accounts receivable.What effect will recording the estimate of uncollectible accounts have on the accounting equation?

A $10,000 note that has a stated interest rate of 10% and is due in six months would have interest of $1,000.Interest = face value ($10,000)× annual interest rate (10%)× fraction of year (6/12)= $500.

On September 1,2018,Middleton Corp.lends cash and accepts a $1,000 note receivable that offers 12% interest and is due in six months.How much interest revenue will Middleton Corp.report during 2019?

Accrued interest on a note receivable has the effects of increasing assets and increasing liabilities.Accrued interest increases assets and increases revenues.

If the direct write-off method is used to account for uncollectible accounts,which of the following statements is false?

On February 1,2018,Middleton Corp.lends cash and accepts a $1,000 note receivable that offers 12% interest and is due in six months.How much interest revenue will Middleton Corp.report during 2018?

On October 1,2018,Stripes Inc.lends $100,000 to another company and accepts a 24-month,6% note.What is the amount of interest revenue Stripes will report in its 2020 income statement?