Chapter 8 Receivables 375- What is the maturity value of a 90-day, 12% note for
$10,000?
A. $8,800 C. $10,300
B. $10,000 D. $11,200 - What is the due date of a $12,000, 90-day, 8% note
receivable dated August 5?
A. October 31 C. November 3
B. November 2 D. November 4 - When a note receivable is dishonored, Accounts
Receivable is debited for what amount?
A. The face value of the note
B. The maturity value of the note
C. The maturity value of the note less accrued interest
D. The maturity value of the note plus accrued interest
Aug. 19 Cash 7,859.53
Accounts Receivable—Jill Klein 7,762.50
Interest Revenue 97.03
($7,762.5015%30/360)
Dec. 16 Notes Receivable—Global Company 12,000
Accounts Receivable—Global Company 12,000
31 Bad Debt Expense 41,250
Allowance for Doubtful Accounts 41,250Dec. 31 Interest Receivable 60
Interest Revenue 60
($12,00012%15/360)2.
SELF-STUDY QUESTIONS Answers at end of chapter
DISCUSSION QUESTIONS
- At the end of the fiscal year, before the accounts are
adjusted, Accounts Receivable has a balance of $200,000
and Allowance for Doubtful Accounts has a credit bal-
ance of $2,500. If the estimate of uncollectible accounts
determined by aging the receivables is $8,500, the
amount of bad debt expense is:
A. $2,500 C. $8,500
B. $6,000 D. $11,000 - At the end of the fiscal year, Accounts Receivable has a
balance of $100,000 and Allowance for Doubtful
Accounts has a balance of $7,000. The expected net real-
izable value of the accounts receivable is:
A. $7,000 C. $100,000
B. $93,000 D. $107,000 - What are the three classifications of receivables?
- What types of transactions give rise to accounts receivable?
- In what section of the balance sheet should a note re-
ceivable be listed if its term is (a) 120 days, (b) six years? - Give two examples of other receivables.
- Wilson’s Hardware is a small hardware store in the rural
township of Struggleville that rarely extends credit to its
customers in the form of an account receivable. The few cus-
tomers that are allowed to carry accounts receivable are
long-time residents of Struggleville and have a history of do-
ing business at Wilson’s. What method of accounting for un-
collectible receivables should Wilson’s Hardware use? Why? - Which of the two methods of accounting for uncollectible
accounts provides for the recognition of the expense at
the earlier date? - What kind of an account (asset, liability, etc.) is Allowance
for Doubtful Accounts, and is its normal balance a debit
or a credit? - After the accounts are adjusted and closed at the end of
the fiscal year, Accounts Receivable has a balance of
$783,150 and Allowance for Doubtful Accounts has a bal-
ance of $41,694. Describe how the accounts receivable
and the allowance for doubtful accounts are reported on
the balance sheet. - A firm has consistently adjusted its allowance account at
the end of the fiscal year by adding a fixed percent of the
period’s net sales on account. After five years, the bal-
ance in Allowance for Doubtful Accounts has become
very large in relationship to the balance in Accounts
Receivable. Give two possible explanations.