____ 16. A 180-day, 12 percent interest-bearing note receivable is sold to a ban
ID: 2579013 • Letter: #
Question
____ 16. A 180-day, 12 percent interest-bearing note receivable is sold to a bank after being held for 45 days. The proceeds are calculated using a 15 percent interest rate. The note receivable has been
Discounted
Pledged
a.
Yes Yes
b.
Yes No
c.
No Yes
d.
No No
____ 17. Based on its past collection experience, Ace Company provides for bad debts at the rate of 2 percent of net credit sales. On January 1, 2016, the allowance for doubtful accounts credit balance was $10,000. During 2016, Ace wrote off $8,000 of uncollectible receivables and recovered $5,000 on accounts written off in prior years. If net credit sales for 2016 are $1,000,000, the doubtful accounts expense for 2015 should be
a.
$7,000.
b.
$20,000.
c.
$23,000.
d.
$35,000.
____ 18. Millward Corporation's books disclosed the following information for the year ended December 31, 2015:
Net credit sales .....................................
$1,500,000
Net cash sales .......................................
240,000
Accounts Receivable at beginning of year .............
200,000
Accounts Receivable at end of year ...................
400,000
Millward's accounts receivable turnover is
a.
3.75 times.
b.
4.35 times.
c.
5.00 times.
d.
5.80 times.
____ 19. Assume the following facts for Kurt Company: The month-end bank statement shows a balance of $40,000; outstanding checks total $2,000; a deposit of $8,000 is in transit at month-end; and a check for $400 was erroneously charged against the account by the bank. What is the correct cash balance at the end of the month?
a.
$33,600
b.
$34,400
c.
$45,600
d.
$46,400
____ 20. On June 1, Clinton Corporation accepted a customer's $10,000, 9 percent, 3 month note. On July 1, the note was discounted at a bank at a rate of 12 percent.
a. What is the maturity value of the note (10,000*.09*3/12)? _______
b. How much cash did Clinton receive from the bank on the discounted note (MV * .12*2/12)? $10,225- ?
a.
$9,800.00
b.
$9,942.50
c.
$10,020.50
d.
$10,250.00
Discounted
Pledged
Explanation / Answer
16 Answer is option.(b) Discounted Yes Pledged No 17 Doubtful account expense=Net credit sales*2%=1000000*2%=20000 Answer is option.(b) 18 Accounts receivable turnover=Net credit sales/Average accounts receivable Average accounts receivable=(accounts receivable at beginning of year+accounts receivable at end of year)/2=(200000+400000)/2=300000 Accounts receivable turnover=1500000/300000=5 Answer is option.(c) 19 Balance as per bank statement 40000 adjustments: Outstanding checks -2000 Deposit in transit 8000 Bank error 400 Correct cash balance 46400 Answer is option.(d) 20 a. Maturity vale of the note=principal*(1+Rate*time) Maturity vale of the note=10000*(1+0.09*3/12)=10225 b.amount received from the bank=Maturity value-(Maturity value*Rate*time) amount received from the bank=10225-(10225*0.12*2/12)=10020.50 Answer is option.(c)
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