Chapter 9 Practice Materials
Chapter 9—Receivables
MULTIPLE CHOICE
1. A note receivable due in 18 months is listed on the balance sheet under the caption
a. long-term liabilities
b. fixed assets
c. current assets
d. investments
ANS: D DIF: Easy OBJ: 09-01
NAT: AACSB Analytic | AICPA FN-Measurement
2. The receivable that is usually evidenced by a formal instrument of credit is a(n)
a. trade receivable.
b. note receivable.
c. accounts receivable.
d. income tax receivabl
e.
ANS: B DIF: Easy OBJ: 09-01
NAT: AACSB Analytic | AICPA FN-Measurement
3. Which of the following receivables would not be classified as an "other receivable”?
a. Advance to an employee
b. Interest receivable
c. Refundable income tax
d. Notes receivable
ANS: D DIF: Easy OBJ: 09-01
NAT: AACSB Analytic | AICPA FN-Measurement
4. Notes or accounts receivables that result from sales transactions are often called
a. non-trade receivables.
b. trade receivables.
c. merchandise receivables.
d. sales receivables.
ANS: B DIF: Easy OBJ: 09-01
NAT: AACSB Analytic | AICPA FN-Measurement
5. The term "receivables" includes all
a. money claims against other entities.
b. merchandise to be collected from individuals or companies.
c. cash to be paid to creditors.
d. cash to be paid to debtors.
ANS: A DIF: Easy OBJ: 09-01
NAT: AACSB Analytic | AICPA FN-Measurement
434
Chapter 9—Receivables ? 435
6. When does an account become uncollectible?
a. when the debtor fails to pay an account according to a sales contract
b. when the debtor fails to pay a note on the due date
c. there is no general rule for when an account becomes uncollectible
d. at the end of the fiscal year
e. upon receipt of a certified letter from the debtor
ANS: C DIF: Easy OBJ: 09-02
NAT: AACSB Analytic | AICPA FN-Measurement
7. The type of account and normal balance of Allowance for Doubtful Accounts is
a. contra asset, credit
b. asset, debit
c. liability, credit
d. expense, debit
e. expense, credit
ANS: A DIF: Easy OBJ: 09-02
NAT: AACSB Analytic | AICPA FN-Measurement
8. The two methods of accounting for uncollectible receivables are the allowance method and the
a. equity method
b. direct write-off method
c. interest method
d. cost method
ANS: B DIF: Easy OBJ: 09-02
NAT: AACSB Analytic | AICPA FN-Measurement
9. The direct write-off method of accounting for uncollectible accounts
a. emphasizes balance sheet relationships.
b. is not generally accepted as a basis for estimating bad debts.
c. emphasizes cash realizable value.
d. emphasizes the matching of expenses with revenues.
ANS: B DIF: Easy OBJ: 09-02
NAT: AACSB Analytic | AICPA FN-Measurement
10. Under the direct write-off method of accounting for uncollectible accounts, Bad Debts Expense is
debited
a. at the end of each accounting period.
b. when a credit sale is past due.
c. whenever a pre-determined amount of credit sales have been made.
d. when an account is determined to be worthless.
ANS: D DIF: Easy OBJ: 09-02
NAT: AACSB Analytic | AICPA FN-Measurement
436 Chapter 9—Receivables
11. An alternative name for Bad Debts Expense is
a. Collection Expense.
b. Credit Loss Expense.
c. Uncollectible Accounts Expense.
d. Deadbeat Expens
e.
ANS: C DIF: Easy OBJ: 09-02
NAT: AACSB Analytic | AICPA FN-Measurement
12. Two methods of accounting for uncollectible accounts are the
a. direct write-off method and the allowance method.
b. allowance method and the accrual method.
c. allowance method and the net realizable metho
d.
d. direct write-off method and the accrual method.
ANS: A DIF: Easy OBJ: 09-02
NAT: AACSB Analytic | AICPA FN-Measurement
13. If the direct write-off method of accounting for uncollectible receivables is used, what general
ledger account is debited to write off a customer's account as uncollectible?
a. Uncollectible Accounts Payable
b. Accounts Receivable
c. Allowance for Doubtful Accounts
d. Bad Debt Expense
ANS: D DIF: Easy OBJ: 09-03
NAT: AACSB Analytic | AICPA FN-Measurement
14. If the direct write-off method of accounting for uncollectible receivables is used, what general
ledger account is credited to write off a customer's account as uncollectible?
a. Uncollectible Accounts Expense
b. Accounts Receivable
c. Allowance for Doubtful Accounts
d. Interest Expense
ANS: B DIF: Easy OBJ: 09-03
NAT: AACSB Analytic | AICPA FN-Measurement
15. One of the weaknesses of the direct write-off method is that it
a. understates accounts receivable on the balance sheet
b. violates the matching principle
c. is too difficult to use for many companies
d. is based on estimates
ANS: B DIF: Easy OBJ: 09-03
NAT: AACSB Analytic | AICPA FN-Measurement
Chapter 9—Receivables ? 437 16. The LMN Co. uses the direct write-off method of accounting for uncollectible accounts receivable.
The entry to write off an account that has been determined to be uncollectible would be as follows:
a. debit Allowance for Doubtful Accounts; credit Accounts Receivable
b. debit Sales Returns and Allowance, credit Accounts Receivable
c. debit Uncollectible Accounts Expense; credit Allowance for Doubtful Accounts
d. debit Accounts Receivable, credit Uncollectible Accounts Expense
e. debit Uncollectible Accounts Expense; credit Accounts Receivable
ANS: E DIF: Moderate OBJ: 09-03
NAT: AACSB Analytic | AICPA FN-Measurement
17. Allowance for Doubtful Accounts has a credit balance of $500 at the end of the year (before
adjustment), and uncollectible accounts expense is estimated at 3% of net sales. If net sales are $600,000, the amount of the adjusting entry to record the provision for doubtful accounts is
a. $18,500
b. $17,500
c. $18,000
d. none of the above
ANS: C DIF: Moderate OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
18. Under the allowance method, writing off an uncollectible account
a. affects only income statement accounts.
b. is not acceptable practice.
c. affects only balance sheet accounts.
d. affects both balance sheet and income statement accounts.
ANS: C DIF: Easy OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
19. An estimate based on an analysis of receivables shows that $780 of accounts receivables are
uncollectible. The Allowance for Doubtful Accounts has a debit balance of $110. After preparing the adjusting entry at the end of the year, the balance in the Allowance for Doubtful Accounts is
a. $110
b. $780
c. $670
d. $890
ANS: D DIF: Moderate OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
438 Chapter 9—Receivables
20. If the allowance method of accounting for uncollectible receivables is used, what general ledger
account is debited to write off a customer's account as uncollectible?
a. Uncollectible Accounts Expense
b. Allowance for Doubtful Accounts
c. Accounts Receivable
d. Interest Expense
ANS: B DIF: Easy OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
21. Allowance for Doubtful Accounts has a credit balance of $800 at the end of the year (before
adjustment), and an analysis of accounts in the customers ledger indicates doubtful accounts of $15,000. Which of the following entries records the proper provision for doubtful accounts?
a. debit Uncollectible Accounts Expense, $800; credit Allowance for Doubtful Accounts,
$800
b. debit Uncollectible Accounts Expense, $14,200; credit Allowance for Doubtful Accounts,
$14,200
c. debit Allowance for Doubtful Accounts, $800; credit Uncollectible Accounts Expense,
$800
d. debit Allowance for Doubtful Accounts, $15,800; credit Uncollectible Accounts Expense,
$15,800
ANS: B DIF: Moderate OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
22. Allowance for Doubtful Accounts has a debit balance of $500 at the end of the year (before
adjustment), and uncollectible accounts expense is estimated at 3% of net sales. If net sales are $600,000, the amount of the adjusting entry to record the provision for doubtful accounts is
a. $18,500
b. $17,500
c. $18,000
d. none of the above
ANS: C DIF: Moderate OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
23. After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a
balance of $450,000 and Allowance for Doubtful Accounts has a balance of $25,000. What is the net realizable value of the accounts receivable?
a. $25,000
b. $425,000
c. $450,000
d. $455,000
ANS: B DIF: Easy OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
Chapter 9—Receivables ? 439 24. If the allowance method of accounting for uncollectible receivables is used, what general ledger
account is credited to write off a customer's account as uncollectible?
a. Uncollectible Accounts Expense
b. Accounts Receivable
c. Allowance for Doubtful Accounts
d. Interest Expense
ANS: B DIF: Easy OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
25. Allowance for Doubtful Accounts is listed on the balance sheet under the caption
a. owner's equity
b. investments
c. fixed assets
d. current assets
ANS: D DIF: Easy OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
26. On the balance sheet, the amount shown for the Allowance for Doubtful Accounts is equal to the
a. Uncollectible accounts expense for the year
b. total of the accounts receivables written-off during the year
c. total estimated uncollectible accounts as of the end of the year
d. sum of all accounts that are past du
e.
ANS: C DIF: Easy OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
27. Allowance for Doubtful Accounts has a credit balance of $1,100 at the end of the year (before
adjustment), and an analysis of customers' accounts indicates doubtful accounts of $12,900. Which of the following entries records the proper provision for doubtful accounts?
a. debit Uncollectible Accounts Expense, $14,000; credit Allowance for Doubtful Accounts,
$14,000
b. debit Allowance for Doubtful Accounts, $14,000; credit Uncollectible Accounts Expense,
$14,000
c. debit Allowance for Doubtful Accounts, $11,800; credit Uncollectible Accounts Expense,
$11,800
d. debit Uncollectible Accounts Expense, $11,800; credit Allowance for Doubtful Accounts,
$11,800
ANS: D DIF: Moderate OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
440 Chapter 9—Receivables
28. Allowance for Doubtful Accounts has a credit balance of $1,500 at the end of the year (before
adjustment), and an analysis of customers' accounts indicates doubtful accounts of $17,900. Which of the following entries records the proper provision for doubtful accounts?
a. debit Allowance for Doubtful Accounts, $16,400; credit Uncollectible Accounts Expense,
$16,400
b. debit Allowance for Doubtful Accounts, $19,400; credit Uncollectible Accounts Expense,
$19,400
c. debit Uncollectible Accounts Expense, $19,400; credit Allowance for Doubtful Accounts,
$19,400
d. debit Uncollectible Accounts Expense, $16,400; credit Allowance for Doubtful Accounts,
$16,400
ANS: D DIF: Moderate OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
29. What is the type of account and normal balance of Allowance for Doubtful Accounts?
a. Contra asset, credit
b. Asset, debit
c. Asset, credit
d. Contra asset, debit
ANS: A DIF: Easy OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
30. A company uses the estimate of sales method to account for uncollectible accounts. When the firm
writes off a specific customer's account receivable
a. total current assets are reduced
b. total expenses for the period are increased
c. total current assets are reduced and total expenses are increased
d. there is no effect on total current assets or total expenses
ANS: D DIF: Moderate OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
31. An estimate based on an analysis of receivables shows that $780 of accounts receivables are
uncollectible. The Allowance for Doubtful Accounts has a debit balance of $110. After preparing the adjusting entry at the end of the year, the balance in the Uncollectible Accounts Expense is
a. $110
b. $780
c. $670
d. $890
ANS: D DIF: Moderate OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
Chapter 9—Receivables ? 441 32. ABC company uses the estimate of sales method of accounting for uncollectible accounts. ABC
estimates that 3% of all credit sales will be uncollectible. On January 1, 2005, the Allowance for Doubtful Accounts had a credit balance of $2,400. During 2005, ABC wrote-off accounts
receivable totaling $1,800 and made credit sales of $100,000. After the adjusting entry, the
December 31, 2005, balance in the Uncollectible Accounts Expense would be
a. $1,200
b. $3,000
c. $3,600
d. $7,200
ANS: B DIF: Moderate OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
33. The balance in Allowance for Doubtful Accounts must be carefully considered prior to the end of
the year adjustment when applying which method?
a. direct write-off method
b. estimate based on sales
c. estimate based on an analysis of receivables
d. both (b) and (c)
ANS: C DIF: Easy OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
34. Donovan Company uses the estimate based on analysis of receivables to account for uncollectible
accounts. The company has determined that the Irish Company account is uncollectible. To
write-off this account, Donovan should debit
a. Uncollectible Accounts Expense and credit Accounts Receivable
b. Uncollectible Accounts Expense and credit Allowance for Doubtful Accounts
c. Allowance for Doubtful Accounts and credit Accounts Receivable
d. Accounts receivable and credit Allowance for Doubtful Accounts
ANS: C DIF: Easy OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
35. Using the estimate based on sales method of accounting for uncollectible accounts, the entry to
reinstate a specific receivable previously written off would include a
a. credit to Bad Debt Expense
b. credit to Accounts Receivable
c. debit to Allowance for Doubtful Accounts
d. debit to Accounts Receivable
ANS: D DIF: Easy OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
442 Chapter 9—Receivables
36. At the beginning of the year, the balance in the Allowance for Doubtful Accounts is a credit of $540.
During the year, $350 of previously written-off accounts were reinstated and accounts totaling
$410 are written-off as uncollectible. The end of the year balance in the Allowance for Doubtful Accounts should be
a. $350
b. $410
c. $480
d. $600
ANS: C DIF: Moderate OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
37. Allowance for Doubtful Accounts has a debit balance of $800 at the end of the year (before
adjustment), and an analysis of accounts in the customers ledger indicates doubtful accounts of
$15,000. Which of the following entries records the proper provision for doubtful accounts?
a. debit Uncollectible Accounts Expense, $800; credit Allowance for Doubtful Accounts,
$800
b. debit Uncollectible Accounts Expense, $14,200; credit Allowance for Doubtful Accounts,
$14,200
c. debit Allowance for Doubtful Accounts, $800; credit Uncollectible Accounts Expense,
$800
d. debit Uncollectible Accounts Expense, $15,800; credit Allowance for Doubtful Accounts,
$15,800
ANS: D DIF: Moderate OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
38. Allowance for Doubtful Accounts has a debit balance of $1,100 at the end of the year (before
adjustment), and an analysis of customers' accounts indicates doubtful accounts of $12,900. Which of the following entries records the proper provision for doubtful accounts?
a. debit Uncollectible Accounts Expense, $14,000; credit Allowance for Doubtful Accounts,
$14,000
b. debit Allowance for Doubtful Accounts, $14,000; credit Uncollectible Accounts Expense,
$14,000
c. debit Allowance for Doubtful Accounts, $11,800; credit Uncollectible Accounts Expense,
$11,800
d. debit Uncollectible Accounts Expense, $11,800; credit Allowance for Doubtful Accounts,
$11,800
ANS: A DIF: Moderate OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
Chapter 9—Receivables ? 443 39. Allowance for Doubtful Accounts has a credit balance of $1,500 at the end of the year (before
adjustment), and an analysis of customers' accounts indicates doubtful accounts of $17,900. Which of the following entries records the proper provision for doubtful accounts?
a. debit Allowance for Doubtful Accounts, $16,400; credit Uncollectible Accounts Expense,
$16,400
b. debit Allowance for Doubtful Accounts, $19,400; credit Uncollectible Accounts Expense,
$19,400
c. debit Uncollectible Accounts Expense, $19,400; credit Allowance for Doubtful Accounts,
$19,400
d. debit Uncollectible Accounts Expense, $16,400; credit Allowance for Doubtful Accounts,
$16,400
ANS: D DIF: Moderate OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
40. When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is
debited when
a. a customer's account becomes past due.
b. an account becomes bad and is written off.
c. a sale is made.
d. management estimates the amount of uncollectibles.
ANS: D DIF: Easy OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
41. The collection of an account that had been previously written off under the allowance method of
accounting for uncollectibles
a. will increase income in the period it is collected.
b. will decrease income in the period it is collected.
c. does not affect income in the period it is collecte
d.
d. requires a correcting entry for the period in which the account was written off.
ANS: C DIF: Easy OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
42. An aging of a company's accounts receivable indicates that $4,000 are estimated to be uncollectible.
If Allowance for Doubtful Accounts has a $1,200 credit balance, the adjustment to record bad debts for the period will require a
a. debit to Allowance for Doubtful Accounts for $2,800.
b. debit to Bad Debts Expense for $2,800.
c. debit to Allowance for Doubtful Accounts for $4,000.
d. credit to Allowance for Doubtful for $4,000.
ANS: B DIF: Moderate OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
444 Chapter 9—Receivables
43. An aging of a company's accounts receivable indicates that $3,000 are estimated to be uncollectible.
If Allowance for Doubtful Accounts has a $1,200 debit balance, the adjustment to record bad debts for the period will require a
a. debit to Bad Debt Expense for $4,200.
b. debit to Bad Debts Expense for $3,000.
c. debit to Bad Debts Expense for $1,800.
d. credit to Allowance for Doubtful Accounts for $4,000.
ANS: A DIF: Moderate OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
44. An aging of a company's accounts receivable indicates that $3,000 are estimated to be uncollectible.
If Allowance for Doubtful Accounts has a $1,200 credit balance, the adjustment to record bad debts for the period will require a
a. debit to Bad Debt Expense for $4,200.
b. debit to Bad Debts Expense for $3,000.
c. debit to Bad Debts Expense for $1,800.
d. credit to Allowance for Doubtful Accounts for $4,000.
ANS: C DIF: Moderate OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
45. A debit balance in the Allowance for Doubtful Accounts
a. is the normal balance for that account.
b. indicates that actual bad debt write-offs have been less than what was estimated.
c. cannot occur if the percentage of receivables method of estimating bad debts is use
d.
d. indicates that actual bad debt write-offs have exceeded previous provisions for bad debts.
ANS: D DIF: Moderate OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
46. To record estimated uncollectible accounts using the allowance method, the adjusting entry would
be a
a. debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts.
b. debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts.
c. debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable.
d. debit to Loss on Credit Sales and a credit to Accounts Receivabl
e.
ANS: A DIF: Easy OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
47. The balance in Allowance for Doubtful Accounts must be considered prior to end of period
adjustment when using which of the following methods?
a. Allowance method
b. Direct write-off method
c. Accrual method
d. Net realizable method
ANS: A DIF: Easy OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
Chapter 9—Receivables ? 445 48. You have just received notice that a customer of yours with an Account Receivable balance of $100
has gone bankrupt and will not make any future payments. Assuming you use the allowance method, the entry you make is to
a. debit Bad Debt Expense and credit Allowance for Doubtful Accounts.
b. debit Bad Debt Expense and credit Accounts Receivable.
c. debit Allowance for Doubtful Accounts and credit Accounts Receivable.
d. debit Allowance for Doubtful Accounts and credit Bad Debt Expens
e.
ANS: C DIF: Easy OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
49. Tanning Company uses the percentage of receivables method for recording bad debts expense. The
accounts receivable balance is $200,000 and credit sales are $1,000,000. An aging of accounts receivable shows that 5% will be uncollectible. What adjusting entry will Manning Company make if the Allowance for Doubtful Accounts has a credit balance of $2,000 before adjustment?
a.
Bad Debts Expense 8,000
Allowance for Doubtful Accounts 8,000
b.
Bad Debts Expense 10,000
Allowance for Doubtful Accounts 10,000
c.
Bad Debts Expense 8,000
Accounts Receivable 8,000
d.
Bad Debts Expense 10,000
Accounts Receivable 10,000
ANS: A DIF: Moderate OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
50. Under the allowance method, when a year-end adjustment is made for estimated uncollectible
accounts
a. Liabilities decrease.
b. Net Income is unchanged.
c. Total Assets are unchange
d.
d. Total Assets decreas
e.
ANS: D DIF: Moderate OBJ: 09-04
NAT: AACSB Analytic | AICPA FN-Measurement
51. The amount of a promissory note is called the
a. realizable value
b. maturity value
c. face value
d. proceeds
ANS: C DIF: Easy OBJ: 09-06
NAT: AACSB Analytic | AICPA FN-Measurement
446 Chapter 9—Receivables
52. The amount of the promissory note plus the interest earned on the due date is called the
a. realizable value
b. maturity value
c. face value
d. net realizable value
ANS: B DIF: Easy OBJ: 09-06
NAT: AACSB Analytic | AICPA FN-Measurement
53. A 60-day, 10% note for $8,000, dated April 15, is received from a customer on account. The face
value of the note is
a. $8,600
b. $7,200
c. $8,800
d. $8,000
ANS: D DIF: Easy OBJ: 09-06
NAT: AACSB Analytic | AICPA FN-Measurement
54. A 90-day, 12% note for $10,000, dated May 1, is received from a customer on account. The
maturity value of the note is
a. $10,000
b. $10,300
c. $450
d. $9,550
ANS: B DIF: Moderate OBJ: 09-06
NAT: AACSB Analytic | AICPA FN-Measurement
55. Interest on a note can be calculated without knowledge of the
a. note's maturity date
b. rate of interest
c. notes duration
d. principal amount
ANS: A DIF: Easy OBJ: 09-06
NAT: AACSB Analytic | AICPA FN-Measurement
56. On November 1, Blazer Company receives a 6% interest bearing note from Ram Company to settle
a $20,000 account receivable. The note is due in six months. At December 31, Blazer should
record interest revenue of
a. $0
b. $100
c. $200
d. $600
ANS: C DIF: Moderate OBJ: 09-06
NAT: AACSB Analytic | AICPA FN-Measurement
Chapter 9—Receivables ? 447
57. If the maker of a promissory note fails to pay the note on the due date, the note is said to be
a. displaced
b. disallowed
c. dishonored
d. discounted
ANS: C DIF: Easy OBJ: 09-06
NAT: AACSB Analytic | AICPA FN-Measurement
58. The journal entry to record a note received from a customer to apply on account is
a. debit Notes Receivable; credit Accounts Receivable
b. debit Accounts Receivable; credit Notes Receivable
c. debit Cash; credit Notes Receivable
d. debit Notes Receivable; credit Notes Payable
ANS: A DIF: Easy OBJ: 09-06
NAT: AACSB Analytic | AICPA FN-Measurement
59. A $6,000, 30-day, 12% note recorded on November 21 is not paid by the maker at maturity. The
journal entry to recognize this event is
a. debit Cash, $6,060; credit Notes Receivable, $6,060
b. debit Accounts Receivable, $6,060; credit Notes Receivable, $6,000; Credit Interest
Receivable, $60
c. debit Notes Receivable, $6,060; credit Accounts Receivable, $6,060
d. debit Accounts Receivable, $6,060; credit Notes Receivable, $6,000; Credit Interest
Revenue, $60
ANS: D DIF: Moderate OBJ: 09-06
NAT: AACSB Analytic | AICPA FN-Measurement
60. On November 1, Kim Company accepted a 3-month note receivable as payment for services
provided to Chu Company. The terms of the note were $8,000 face value and 6% interest. Kim Company closes its books at December 31 and does not use reversing entries. On February 1, the journal entry to record the collection of the note should include a credit to
a. Notes Receivable for $8,120
b. Interest Receivable for $120
c. Interest Revenue for $120
d. Interest Revenue for $40（3/6%）*80000
ANS: D DIF: Moderate OBJ: 09-06
NAT: AACSB Analytic | AICPA FN-Measurement
61. A note receivable or promissory note
a. has the party to whom the money is due as the maker.
b. is not a formal credit instrument.
c. cannot be factored to another party.
d. may be used to settle an accounts receivabl
e.
ANS: D DIF: Easy OBJ: 09-06
NAT: AACSB Analytic | AICPA FN-Measurement
448 Chapter 9—Receivables
62. When a company receives an interest-bearing note receivable, it will
a. debit Notes Receivable for the maturity value of the note.
b. debit Notes Receivable for the face value of the note.
c. credit Notes Receivable for the maturity value of the note.
d. credit Notes Receivable for the face value of the not
e.
ANS: B DIF: Easy OBJ: 09-06
NAT: AACSB Analytic | AICPA FN-Measurement
63. Pane Company receives a $3,000, 3-month, 6% promissory note from Dag Company in settlement
of an open accounts receivable. What entry will Pane Company make upon receiving the note?
a.
Notes Receivable 3,000
Accounts Receivable—Dag Company 3,000
b.
Notes Receivable 3,045
Accounts Receivable—Dag Company 3,045
c.
Notes Receivable 3,045
Accounts Receivable—Dag Company 3,000
Interest Revenue 45
d.
Notes Receivable 3,000
Interest Receivable 45
Accounts Receivable—Dag Company 3,000
Interest Revenue 45
ANS: A DIF: Easy OBJ: 09-06
NAT: AACSB Analytic | AICPA FN-Measurement
64. The maturity value of a $20,000, 9%, 40-day note receivable dated July 3 is
a. $20,000.
b. $20,200.
c. $21,800.
d. $22,000.
ANS: B DIF: Easy OBJ: 09-06
NAT: AACSB Analytic | AICPA FN-Measurement
Chapter 9—Receivables ? 449 65. Harper Company lends Hewell Company $20,000 on March 1, accepting a four-month, 6% interest
note. Harper Company prepares financial statements on March 31. What adjusting entry should be made before the financial statements can be prepared?
a.
Cash 100
Interest Revenue 100
b.
Interest Receivable 300
Interest Revenue 300
c.
Interest Receivable 100
Interest Revenue 100
d.
Note Receivable 20,000
Cash 20,000
ANS: C DIF: Easy OBJ: 09-06
NAT: AACSB Analytic | AICPA FN-Measurement
66. Bright Co. holds Park Co.’s $20,000, 120 day, 9% n ote. The entry made by Bright Co. when the
note is collected, assuming no interest has previously been accrued is:
a.
Cash 20,000
Notes Receivable 20,000
b.
Accounts Receivable 20,600
Notes Receivable 20,000
Interest Revenue 600
c.
Cash 20,600
Notes Receivable 20,000
Interest Revenue 600
d.
Accounts Receivable 20,600
Notes Revenue 20,000
Interest Revenue 600
ANS: C DIF: Moderate OBJ: 09-06
NAT: AACSB Analytic | AICPA FN-Measurement
67. Receivables are usually listed on the balance sheet after Cash in what order?
a. Accounts Receivable, Notes Receivable, Interest Receivable
b. Interest Receivable, Notes Receivable, Accounts Receivable
c. Notes Receivable, Interest Receivable, Accounts Receivable
d. Notes Receivable, Accounts Receivable, Interest Receivable
ANS: D DIF: Easy OBJ: 09-07
NAT: AACSB Analytic | AICPA FN-Measurement
450 Chapter 9—Receivables
68. Receivables are usually listed in order
a. of the due date
b. of the size
c. alphabetically
d. of liquidity
ANS: D DIF: Easy OBJ: 09-07
NAT: AACSB Analytic | AICPA FN-Measurement
69. Accounts Receivable Turnover measures
a. how frequently during the year the accounts receivable are converted to cash
b. the number of days outstanding
c. the fair market value of accounts receivable
d. the efficiency of the accounts payable function
ANS: A DIF: Easy OBJ: 09-07
NAT: AACSB Analytic | AICPA FN-Measurement
70. The number of days' sales in receivables
a. is an estimate of the length of time the receivables have been outstanding
b. measures the number of times the receivables turn over each year
c. is Net Credit Sales divided by Average Receivables
d. is not meaningful and therefore is not used
ANS: A DIF: Easy OBJ: 09-07
NAT: AACSB Analytic | AICPA FN-Measurement
71. In reference to a promissory note, another word for "discount" is
a. maturity
b. sale
c. purchase
d. interest
ANS: D DIF: Easy OBJ: 09-App
NAT: AACSB Analytic | AICPA FN-Measurement
72. The amount received by the endorser after discounting a note receivable at the bank is called the
a. proceeds
b. maturity value
c. face value
d. realizable value
ANS: A DIF: Easy OBJ: 09-App
NAT: AACSB Analytic | AICPA FN-Measurement
Chapter 9—Receivables ? 451 73. A 60-day, 12% note for $10,000, dated May 1, is received from a customer on account. If the note
is discounted on May 21 at 15%, the proceeds are
a. $170
b. $9,830
c. $10,000
d. $10,030
ANS: D DIF: Moderate OBJ: 09-App
NAT: AACSB Analytic | AICPA FN-Measurement
74. A 60-day, 12% note for $10,000, dated May 1, is received from a customer on account. If the note
is discounted on June 10 at 15%, the proceeds are
a. $10,115
b. $10,200
c. $10,000
d. $10,030
ANS: A DIF: Moderate OBJ: 09-App
NAT: AACSB Analytic | AICPA FN-Measurement
75. A 60-day, 12% note for $10,000, dated May 1, is received from a customer on account. If the note
is discounted on May 21 at 15%, the amount of interest revenue or expense to be recorded by the payee of the note on May 21 is
a. $30 interest expense
b. $30 interest revenue
c. $170 interest revenue
d. $170 interest expense
ANS: B DIF: Moderate OBJ: 09-App
NAT: AACSB Analytic | AICPA FN-Measurement
76. A 60-day, 12% note received from a customer for $50,000, dated May 15, is endorsed to the bank
on May 25, and the bank discounts the note at 15%. If the note is dishonored by the maker and the bank charges a $20 protest fee, what is the amount payable to the bank on July 14?
a. $51,000
b. $51,020
c. $56,020
d. $50,000
ANS: B DIF: Moderate OBJ: 09-App
NAT: AACSB Analytic | AICPA FN-Measurement
452 Chapter 9—Receivables
77. A 90-day, 12% note for $20,000, dated April 10, is received from a customer on account. If the
note is discounted at 15% on May 10, the due date is
a. July 9
b. July 10
c. July 11
d. July 8
ANS: A DIF: Difficult OBJ: 09-App
NAT: AACSB Analytic | AICPA FN-Measurement
78. A 90-day, 12% note for $20,000, dated April 10, is received from a customer on account. If the
note is discounted at 15% on May 10, the days in the discount period are
a. 60
b. 90
c. 120
d. 30
ANS: A DIF: Moderate OBJ: 09-App
NAT: AACSB Analytic | AICPA FN-Measurement