Practice for CH 8

141. When calculating interest on a promissory note with the maturity date stated
in terms of days, the
a.
maker pays more interest if 365 days are used instead of 360.
b.
maker pays the same interest regardless if 365 or 360 days are
used.
c.
payee receives more interest if 360 days are used instead of
365.
d.
payee receives less interest if 360 days are used instead of 365.
142.

The interest on a $4,000, 10%, 1-year note receivable is

a.
$4,000.
b.
$400.
c.
$4,400.
d.
$4,040.

143.

The interest on a $4,000, 6%, 60-day note receivable is

a.
$240.
b.
$40.
c.
$80.
d.
$120.

152. Loan Company receives a $5,000, 3-month, 6% promissory note from Day
Company in settlement of an open accounts receivable. What entry will Sloan
Company make upon receiving the note?
a.
Notes Receivable
5,025
Accounts ReceivableDay Company
5,025
b.
Notes Receivable
5,075
Accounts ReceivableDay Company
5,000
Interest Revenue
75
c.
Notes Receivable
5,000
Interest Receivable
75
Accounts ReceivableDay Company
5,000
Interest Revenue
75
d.
Notes Receivable
5,000
Accounts ReceivableDay Company
5,000
158. The maturity value of a $2,000, 6%, 60-day note receivable dated February
10th is
a.
$2,020.
b.
$2,010.
c.
$2,000.
d.
$2,120.
159.
a.
b.
c.
d.

When a note is dishonored, the payees entry includes a

debit to Interest Revenue.
credit to Accounts Receivable.
debit to Interest Expense.
credit to Notes Receivable.

174.

The receivables turnover ratio

a.
Is computed by dividing net credit sales for the accounting period by the cash
realiz-able value of accounts receivable on the last day of the accounting period.
b.
Can be used to compute the average collection period.
c.
Is a method of evaluating the solvency of net accounts receivable.
d.
Is only important to internal users of accounting information.
175. Kline Corporation had net credit sales during the year of $800,000 and cost of
goods sold of $500,000. The balance in receivables at the beginning of the year was
$120,000 and at the end of the year was $180,000. What was the receivables
turnover ratio?
a.
5.33
b.
6.67
c.
4.44
d.
3.33
176. Baldwin Corporation sells its goods on terms of 2/10, n/30. It has a receivables
turnover ratio of 9. What is its average collection period (days)?
a.
90
b.
30
c.
41
d.
270
180. XYZ Company accepted a national credit card for a $2,500 purchase. The cost
of the goods sold is $2,000. The credit card company charges a 3% fee. What is the
impact of this transaction on net operating income
a.
increase by $485
b.
increase by $500
c.
increase by $425
d.
increase by $2,425
Be. 197
The following are sales of Valentines Store during February. Valentines sells seasonal
holiday items.
2/3
Sold 50 heart balloons for $5 cash each.
2/8
Sold 100 boxes of chocolates at $10 each, terms 2/10, n/30. Collected within
the
discount period.
2/10 Sold 50 heart necklaces for $25 each with no discount. Have not collected as
of month
end.
2/14 Sold 100 bouquets of roses at $30 per bouquet. Half the sales were on
account. By month end, 75% were paid off.
2/27 Sold 25 leftover heart necklaces to a discount store for $10 each on credit.
2/28 Sold a display cabinet at a swap meet for $100 on account.
Determine the balance in Accounts Receivable at 2/28.
Be. 199
Assuming that the allowance method is being used, prepare general journal entries
without ex-planations to record the following transactions.
January 1
February 1
July 1

Sold merchandise to Jane Marks for $500 on account.

Received $200 from Marks.
Wrote off Marks account as uncollectible.

September 1 Unexpectedly received payment in full from Marks.

Be. 203
Compute the maturity value as indicated for each of the following notes receivable.
1.

An $5,000, 6%, 3-month note dated July 20.

Maturity value $____________.

2.

A $12,000, 9%, 150-day note dated August 5.

Maturity value $____________.

Be. 205
Brama Distributors has the following transactions related to notes receivable during
the last two months of the year.
Dec.

Loaned $12,000 cash to E. Hoffer on a 1-year, 6% note.

16

Sold goods to J. Smith, receiving a $2,400, 60-day, 7% note.

31 Accrued interest revenue on all notes receivable.

Instructions
Journalize the transactions for Brama Distributors.
Ex. 211
The Brawn Company had a $400 credit balance in Allowance for Doubtful Accounts at
December 31, 2007, before the current year's provision for uncollectible accounts.
An aging of the accounts receivable revealed the following:
Estimated Percentage
Uncollectible
Current Accounts
$140,000
1%
130 days past due 15,000 3%
3160 days past due 12,000 6%
6190 days past due 5,000 12%
Over 90 days past due
7,000
30%
Total Accounts Receivable $179,000
Instructions
(a)
Prepare the adjusting entry on December 31, 2007, to recognize bad debts
expense.
(b)
Assume the same facts as above except that the Allowance for Doubtful
Accounts account had a $400 debit balance before the current year's provision for
uncollectible accounts. Pre-pare the adjusting entry for the current year's provision
for uncollectible accounts.

Be. 206
Noell Co. sells Christmas angels. Noell determines that at the end of December, they
have the following aging schedule of Accounts Receivable:
Customer

Total

Not yet due

130

3160

$300

$200

Number of Days
Past Due
6190

Over 90

DV Farmer

$500

JJ Joysen

300

NJ Bell

150

JC Net

200

200

300

300

250

200

100

% uncollectible

1%

5%

10%

20%

50%

Total
Estimated
Uncollectible
Amounts

100

200
50

100

Compute the net receivables based on the above information at the end of December (There was no beginning balance in
the Allowance for Doubtful Accounts).