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10 Cards in this Set
- Front
- Back
- 3rd side (hint)
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How will the payee of the promissory note record the note on its books?
A. The promissory note will be recorded as revenue B. The promissory note will be recorded as an asset C. The promissory note will be recorded as a liability D. The promissory note will be recorded as an expense |
B. The promissory note will be recorded as an asset
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Joshua’s Bookstore acquires a 6% $12,000 certificate of deposit on September 1. The term of the CD is six months. At that time, all principal and accrued interest will be paid in cash. Indicate the effect on the financial statements at December 31.
A. Interest Receivable increases $480, Interest Revenue increases $480 B. Interest Receivable increases $720, Interest Revenue increases $720 C. Interest Receivable increases $240, Interest Revenue increases $240 D. Interest Receivable increases $360, Interest Revenue increases $360 |
C. Interest Receivable increases $240, Interest Revenue increases $240
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$12,000 (Principal) x .06 (Interest Rate) x 4/12 (Time Period) = $240
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The total amount of interest calculated annually on a $7,000 promissory note payable for 3 years at 12% that is not compounded is
A. 840 B. 280 C. 2520 D. 8260 |
C. 2520
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$7,000 (Principal) x .12 or 12% (Interest Rate) x 3 (Time Period) = $2,520
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Vail Corporation
The data below is for Vail Corporation for 2010. Accounts Receivable - January 1, 2010 $334,000 Credit sales during 2010 850,000 Collections from credit customers during 2010 725,000 Customer accounts written off as uncollectible during 2010 12,000 Allowance for Doubtful Accounts (After write-off of uncollectible accounts) 1,700 Estimated uncollectible accounts based on an aging analysis 13,200 Refer to Vail, Inc. If the aging approach is used to estimate bad debts, what should the balance in the Allowance for Doubtful Accounts be after the bad debts adjustment? A. 26900 B. 13200 C. 14900 D. 11500 |
B. 13200
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The accounts receivable balance after posting net collections from customers for 2010 for Mix Corp. is $100,000. The customers took advantage of sales discounts of $11,000 and returned $4,000 of merchandise on account. Management feels that approximately 2% of its accounts receivable will be uncollectible. The net realizable value of the accounts receivable is
A. $85,000 B. $89,000 C. $98,000 D. $83,300 |
C. 98000
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$100,000 (Accounts Receivable Balance) - ($100,000 x .02 or $2,000 Estimated Uncollectible) = $98,000
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Vail Corporation
The data below is for Vail Corporation for 2010. Accounts Receivable - January 1, 2010 $334,000 Credit sales during 2010 850,000 Collections from credit customers during 2010 725,000 Customer accounts written off as uncollectible during 2010 12,000 Allowance for Doubtful Accounts (After write-off of uncollectible accounts) 1,700 Estimated uncollectible accounts based on an aging analysis 13,200 Refer to Vail, Inc. What is the balance of Accounts Receivable at December 31, 2010? A. $447,000 B. $225,000 C. $459,000 D. $209,000 |
A. 447000
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$334,000 (Accounts Receivable - Jan. 1) + $850,000 (Credit Sales) - $725,000 (Cash Collections) - $12,000 (Accounts written off) = $447,000
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What should a company do to improve its accounts receivable turnover rate?
A. Reduce the number of employees working in the credit department. B. Give customers credit terms of 2/10, n/30 rather than 1/10, n/30. C. Lower its selling prices. D. Increase its sales force. |
B. Give customers credit terms of 2/10, n/30 rather than 1/10, n/30.
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Lubing Company
Lubing Company sold merchandise to Midwestern Corp. on November 1, 2010, for $10,000. Lubing accepted a promissory note from Midwestern Corp. for $10,000. The note has a term of 5 months and a stated interest rate of 7%. Lubing's accounting period ends on December 31, 2010. Refer to Lubing Company. What amount should Lubing recognize as interest revenue on the maturity date of the note? A. $ 291.67 B. $ 175.00 C. $ 420.00 D. -0- |
B. 175.00
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$10,000 (Principal) x .07 or 7% (Rate) x 3/12 (Time Period) = $175.00
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Lubing Company
Lubing Company sold merchandise to Midwestern Corp. on November 1, 2010, for $10,000. Lubing accepted a promissory note from Midwestern Corp. for $10,000. The note has a term of 5 months and a stated interest rate of 7%. Lubing's accounting period ends on December 31, 2010. Refer to Lubing Company. What amount should Lubing recognize as interest revenue on December 31, 2010? A. $ -0- B. $ 280.00 C. $ 291.67 D. $ 116.67 |
D. $ 116.67
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$10,000 (Principal) x .07 or 7% (Rate) x 2/12 (Time Period) = $116.67
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Hermitage Corporation
The data presented below for Hermitage Corp. is for the year ended December 31, 2010 Sales (100% on credit) $1,400,000 Sales returns 30,000 Accounts Receivable (December 31, 2010) 170,000 Allowance for Doubtful Accounts (Before adjustment at December 31, 2010) 1,300 Estimated amount of uncollectible accounts based on aging analysis 14,000 Refer to Hermitage Corp. If Hermitage estimates its bad debts at 1% of net credit sales, what amount will be reported as bad debt expense for 2010? A. $14,300 B. $12,400 C. $13,700 D. $14,000 |
C. $13,700
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[$1,400,000 (Sales) - $30,000 (Sales Returns) = $1,370,000] x (.01 or 1%) = $13,700
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