1- Paper Company receives a $4,916, three-month, 6% promissory note from Dame Co

Question

1- Paper Company receives a $4,916, three-month, 6% promissory note from Dame Company in settlement of an open accounts receivable. What entry will Paper Company make upon receiving the note?

a.

b.

c.

d.

2- Selling receivables

a. results in bad debt expense

b. occurs when an account becomes uncollectible

c. shifts some of the risk to the buyer

d. delays the receipt of cash

3- Allowance for Doubtful Accounts has a credit balance of $600 at the end of the year (before adjustment), and bad debt expense is estimated at 1% of credit sales. If credit sales are $655,200, the amount of the adjusting entry to record the estimated uncollectible accounts receivable

a. is $7,152

b. is $6,552

c. is $5,952

d. Cannot be determined.

4- Allowance for Doubtful Accounts has a debit balance of $900 at the end of the year (before adjustment), and bad debt expense is estimated at 1% of credit sales. If credit sales are $655,000, the amount of the adjusting entry to record the estimate of the uncollectible accounts

a. is $5,650

b. is $900

c. is $6,550

d. is $7,450

Notes Receivable, Dame Company $4,990       Accounts Receivable, Dame Company $4,916       Interest Revenue $74

Explanation / Answer

Question Answer Explanation 1 d) It will currently book $ 4,916 as notes receivable. Interest will be recorded on per month basis. 2 c) Selling receivable shifts risks to buyer 3 b) 1% of credit sales (6,552) need to be recorded as bad debt. 4 d) =6550+900=7,450 as provision balance is debit so need to be added with 1% of credit sales.

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