Accounting for Receivables and Bad Debts

1) A _________________ is an amount due from another party. [Receivable] 2) Explain what a control account is by completing the following sentence. A control account appears in the _____ (general/subsidiary) ledger and is supported by information in a separate _____ (general/subsidiary) ledger. [General, subsidiary] 3) Zion Company sells merchandise on credit to BRC, Inc. in the amount of $1,200. The entry to record this sale would include a: (Check all that apply.) [Debit to Accounts Receivable. Credit to Sales.] 4) The advantages of using the allowance method to account for bad debts include which of the following? (Check all that apply.) [Matches expenses in the same period with the related sales, Reports accounts receivable balance at the estimated amount to be collected] 5) A company has $150,000 of credit sales during the year and estimates that $1,000 of its accounts receivable will be uncollectible. The adjusting entry will include a credit to: [Allowance for Doubtful Accounts] 6) On July 10, Yao Co. collects $740 from Ean, Inc. from a prior credit sale. This entry would be recorded by Yao with a: (Check all that apply.) [Debit to Cash. Credit to Accounts Receivable.] 7) Flash Co. uses the allowance method to account for bad debts. At the end of the year, Flash Co.'s unadjusted trial balance shows an accounts receivable balance of $45,000; allowance for doubtful accounts balance of $400 (debit); and sales of $1,500,000. Based on history, Flash estimates that bad debts will be 0.5% of sales. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of: [$7,500] 8) Ana Co. uses the allowance method to account for bad debts. At the end of the period, Ana's unadjusted trial balance shows an accounts receivable balance of $40,000; allowance for doubtful accounts balance of $300 (credit); and sales of $500,000. Based on history, Ana estimates that bad debts will be 2% of accounts receivable. The entry to record estimated bad debts will include a debit to bad debts expense in the amount of: [$500] 9) True or false: The two methods companies can use to convert receivables to cash before they are due includes selling them and pledging them. [True] 10) Review the statements below and choose the one that correctly describes a control account. [A control account appears in the general ledger and is supported by a subsidiary ledger.] 11) A company sells merchandise to a customer on credit. The journal entry to record this transaction would include a debit entry to the Accounts _____ account. [Receivable] 12) To record a customer's check in full payment for a sale that was made the prior month, the company should debit the ____________ account. [Cash] 13) Leo Co. uses the allowance method to account for bad debts. At the end of the year, Leo Co.'s accounts receivable balance is $25,000; allowance for doubtful accounts balance of $100 (credit); and sales of $500,000. Based on history, Leo estimates that bad debts will be 2% of accounts receivable. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of: [$400] 14) Companies sometimes convert receivables to cash before they are due by selling them or using them as security for a loan. The reasons that a company may convert receivables before their due date include: (Check all that apply.) [The company does not want to deal with collecting receivables. The company needs cash.] 15) Ace Company sells merchandise to a customer in the amount of $200 on credit, terms n/30. The entry to record this sale would include a debit to the ____________ account: [Accounts Receivable] 16) In July, Lane Co. sells merchandise to Avery Co. on account. In August, Avery pays the balance in full. The entry that Lane will make to record the receipt of cash will include a credit to the _______ account. [Accounts Receivable] 17) Lani Co. uses the allowance method to account for bad debts. At the end of the year, their unadjusted trial balance shows an accounts receivable balance of $400,000; allowance for doubtful accounts balance of $400 (debit); and sales of $1,200,000. Based on history, Lani estimates that bad debts will be 1% of accounts receivable. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of: [$4,400] 18) The _____ of accounts receivable method uses several percentages to estimate the allowance. [Aging] 19) Match the following terms to the appropriate definitions. 20) A 90-day note is signed on October 21. The due date of the note is: [January 19] 21) On November 1, Eli Co. received a $6,000, 60-day, 6% note from a customer as payment on his $6,000 account. Eli's journal entry to record this transaction on November 1, would include a: (Check all that apply.) [Debit to Notes Receivable for $6,000. Credit to Accounts Receivable for $6,000.] 22) On January 1, Franz Co. accepted a 30-day, 6% note in the amount of $5,000 from Bria Co., a customer. On January 31, the due date of the note, Bria honors the note and pays in full. The journal entry that Franz would make to record payment of this note would include a: (Check all that apply.) [Credit to Interest Revenue for $25. Credit to Note Receivable for $5,000. Debit to Cash for $5,025.] 23) In September, DK Company sells merchandise to Lions Company on credit. In October, Lions Company pays the balance in full. The entry to record the collection of cash by DK Company in October will include a (debit/credit) _____ to Accounts Receivable. [Credit] 24) On March 14, Ian Co. accepted a 180-day, 5% note in the amount of $1,000 from Ali Co., a customer. On the due date of the note, Ali dishonors the note. The journal entry that Ian would record on the due date would include a: (Check all that apply.) [Credit to Interest Revenue for $25. Credit to Notes Receivable for $1,000. Debit to Accounts Receivable - Ali for $1,025.] 25) On January 1, JC Co. accepted a 60-day, 6%, note in the amount of $10,000 from a customer. On March 2, the due date of the note, the customer honors the note and pays in full. The journal entry that JC would make to record the receipt of payment of this note would include a debit to: [Cash in the amount of $10,100] 26) On September 1, Horn Co. accepted a 60-day, 5% note in the amount of $3,000 from a customer. On the due date of the note, the customer dishonors the note and fails to pay. The journal entry that Horn would make on the due date would include debit to: [Accounts Receivable for $3,025] 27) A company estimates that $1,000 of its accounts receivable is uncollectible at the end of the period and will make the following adjusting entry: (Check all that apply). [Credit to Allowance for Doubtful Accounts. Debit to Bad Debts Expense for $1,000] 28) Iron Company collects cash in full from a customer who purchased merchandise last month on credit. To record the receipt of cash, Iron Company should make the following entries in the general journal. (Check all that apply.) [Credit to Accounts Receivable. Debit to Cash] 29) On March 14, Teal Co. accepted a 120-day, 6% note in the amount of $10,000 from AZC Co., a customer. On the due date of the note, AZC honors the note and pays in full. The journal entry that Teal would make to record payment of this note would include a credit to: [Interest Revenue for $200]