The face value of a note
refers to the amount
borrowed plus interest received at maturity from the maker.
remaining after a service charge has been deducted.
that can be received if sold to a factor.
that is identified on the formal instrument of credit.
The allowance method of
accounting for uncollectible accounts is required if
the company charges interest on accounts receivable.
the company makes any credit sales.
the company is a retailer.
bad debts are significant in amount.
When a note receivable is
honored, Cash is debited for the note’s
maturity value.
net realizable value.
gross realizable value.
face value.
Receivables might be sold
to
take advantage of deep discounts on the cash realizable value of
receivables.
generate cash quickly.
finance companies at an amount greater than cash realizable
value.
lengthen the cash-to-cash operating cycle.
On March 1, 2014, Dick Miles
purchased a suit at Kenny’s Fine Apparel Store. The suit cost $600 and Dick
used his Kenny credit card. Kenny charges 2% per month interest if payment on
credit charges is not made within 30 days. On April 30, 2014, Dick had not yet
made his payment. What entry should Kenny make on April 30th?
Accounts Receivable612Interest Revenue12Sales Revenue600
Uncollectible Account
600
Accounts Receivable
600
Accounts Receivable
12
Interest Revenue
12
Bad Debt Expense
588
Interest Expense
12
Accounts Receivable
600
The interest on a $9,000,
6%, 90-day note receivable is
$270.
$405.
$540.
$135.
The retailer considers Visa
and MasterCard sales as
cash sales.
promissory sales.
contingent sales.
credit sales.
T’Pol Furniture factors
$900,000 of receivables to Trip Factors, Inc. Trip Factors assesses a 2%
service charge on the amount of receivables sold. T’Pol Furniture factors its
receivables regularly with Trip Factors. What journal entry does T’Pol make
when factoring these receivables?
Cash882,000Service Charge Expense18,000Accounts Receivable900,000
Cash
882,000
Loss on Sale of
Receivables
18,000
Accounts Receivable
900,000
Cash
882,000
Accounts Receivable
882,000
Cash
900,000
Accounts Receivable
882,000
Gain on Sale of
Receivables
18,000
Reck Company receives a
$15,000, 3-month, 8% promissory note from Fey Company in settlement of an open
accounts receivable. What entry will Reck Company make upon receiving the note?
Notes Receivable15,300Accounts ReceivableâFey
Company15,000Interest Revenue300
Notes Receivable
15,000
Interest Receivable
300
Accounts ReceivableâFey
Company
15,000
Interest Revenue
300
Notes Receivable
15,000
Accounts ReceivableâFey
Company
15,000
Notes Receivable
15,300
Accounts ReceivableâFey
Company
15,300
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