ACCT 1 - Ch07 MC

21 terms by lyjing

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A 90-day note issued on April 20 has a maturity date of:

July 19

A promissory note received from a customer in exchange for an account receivable

Is a note receivable for the recipient

Failure by a promissory note's maker to pay the amount due at maturity is known as

Dishonoring a note

A company receives a 7.5%, six-month note for $8,900. The total interest due on the maturity date is:

$333.75

The amount of bad debt expense can be estimated by:

Bad debt expense can be estimated by any of the three methods listed above

A company receives a 10%, 90-day note for $1,500. The total interest due upon the maturity date is:

$37.50

An accounting procedure that (1) estimates and reports bad debts expense from credit sales during the period of the sales and (2) reports accounts receivable at the amount of cash to be collected is the:

Allowance method of accounting for bad debts

The amount due on the date of maturity for a $6,000, 60-day 8%, note receivable is:

$6,080

Pepsi's accounts receivable turnover was 9.9 for this year and 11.0 for last year. Coke's turnover was 9.3 for this year and 9.3 for last year. These results imply that:

Pepsi has the better turnover for both years

The buyer who pays cash for an account receivable referred to as a:

Factor

The maturity date of a note receivable:

Is the day the note is due to be paid

The accounting principle that requires financial statements (including notes) to report all relevant information about the operations and financial condition of a company is called:

Full disclosure

Acme Company has an agreement with a major credit card company which calls for cash to be received immediately upon deposit of Acme customers' credit card sales receipts. The credit card company receives 3.5% of card sales as its fee. If Acme has $2,000 in credit card sales, which of the following statements is true?

Acme debits Cash $1,930

The interest accrued on $3,600 at 7% for 60 days is:

$42

If the credit balance of the Allowance for Doubtful Accounts account exceeds the amount of a bad debt being written off, the entry to record the write-off against the allowance account results in:

No effect on the expenses of the current period

The accounts receivable turnover is calculated by:

Dividing net sales by average accounts receivable

The materiality principle:

States that an amount can be ignored if its effect on financial statements is unimportant to the user's business decisions

On October 29 of the current year, a company concluded that a customer's $4,400 account receivable was uncollectible and that the account should be written off. What effect will this write-off have on this company's net income and total assets assuming the allowance method is used to account for bad debts?

No effect on net income; no effect on total assets

A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and their length of time past due is the:

Aging of accounts receivable method

The person who signs a note receivable and promises to pay the principal and interest is the:

Maker

Ace Credit Card Company agrees to transfer cash to Seller Company immediately upon deposit of that company's credit card sales receipts. Ace charges a 2% fee for all credit card sales. If Seller Company deposits $57,300 credit card sales receipts, which of the following statements is true?

Seller Company will receive cash $56,154 from Ace

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