1. Table 5-1
Top Hat, Inc. Unadjusted Trial Balance Year 5

Sales $600,000

Ending Accounts Receivable 180,000

Ending Allowance for Uncollectibles 6,200CR

Bad Debt Expense 5,000

Estimated Uncollectibles 4%


Refer to Table 5-1. If Top Hat uses the sales revenue approach for estimating bad debt expense, after the proper adjustments to the accounts are recorded, the Allowance for Uncollectibles account should show a balance of:

(Points: 5)
$6,200.
$7,200.
$11,200.
$25,200.


2. Refer to Table 5-1. If Top Hat uses the gross accounts receivable approach for estimating bad debt expense, after the proper adjustment to the accounts is recorded the Allowance for Uncollectibles account should show a balance of: (Points: 5)
$6,200.
$7,200.
$11,200.
$25,200.


3. When a specific account becomes uncollectible, the Accounts Receivable account is credited and which one of the following accounts is debited? (Points: 5)
Allowance for Returns and Adjustments
Allowance for Uncollectibles
Bad Debt Expense
Miscellaneous Expense


4. When goods are returned by customers, the seller will debit __________ and credit Accounts Receivable. (Points: 5)
Allowance for Uncollectibles
Sales
Sales Discounts
Sales Returns and Adjustments


5. Table 5-2
The Gerner Corporation sells to customers on a note basis with 10% credit terms with interest payable quarterly. All notes are due in one year. Gerner made the following sales on April 1, Year 6.
Customer
Note Maturity
Interest Due
Interest Rate

Potts
$50,000
Quarterly
10%

Larabee
50,000
NA
None






Future Value
Present Value



of $50,000 in
of $50,000 for



one year:
one year:


$55,191
$45,298


Note: To encourage sales, Larabee was given a special deal on interest.



Refer to Table 5-2. Which one of the following entries would record the sale to Larabee?

(Points: 5)






6. Refer to Table 5-2. As of June 30, Year 6, which one of the following entries will be made to record the interest earned, but not yet received, by Gerner on the Potts note? (Points: 5)






7. Refer to Table 5-2. As of June 30, Year 6, which one of the following entries will be made to record the interest earned, but not yet received, by Gerner on the Larabee note? (Points: 5)
DR Notes Receivable—Larabee 1,132
CR Interest Income 1,132
DR Accrued Interest Receivable 1,250
CR Interest Income 1,250
DR Cash 1,250
CR Interest Income 1,250
There is no entry because the note is non-interest bearing.


8. ABC, Inc. enters into an arrangement with Matt D Corporation whereby Matt D will assume $100,000 of ABC's receivables for a 6% fee. Assuming that the transaction has a factoring arrangement with recourse and a $9,000 holdback, which one of the following entries will ABC make to record this transaction? (Points: 5)
DR Cash 100,000
CR Accounts Receivable 100,000
DR Cash 91,000
DR Interest Expense 9,000
CR Accounts Receivable 100,000
DR Cash 85,000
DR Due from Matt D Corp. 9,000
DR Interest Expense 6,000
CR Accounts Receivable 100,000
DR Cash 85,000
DR Interest Expense 15,000
CR Due to Matt D Corp. 100,000


9. ABC, Inc. enters into an arrangement with Matt D Corporation whereby Matt D will assume $100,000 of ABC's receivables for a 6% fee. Assuming the transaction was a collateralized loan, which one of the following entries will ABC make to record this transaction? (Points: 5)
DR Cash 94,000
DR Prepaid Interest 6,000
CR Accounts Receivable 100,000
DR Cash 94,000
DR Interest Expense 6,000
CR Loan Payable—Matt D 100,000
DR Cash 94,000
DR Prepaid Interest 6,000
CR Loan Payable—Matt D 100,000
DR Cash 94,000
CR Due to Matt D Corp. 94,000


10. Paula Smith accepted a six month 9%, $10,000 Note Receivable from a customer on June 1. Smith has an arrangement with the Regency Bank to discount selected customer notes at 12%. If the note were discounted on July 1 under the terms of agreement with Regency Bank, which one of the following journal entries would Smith record? (Points: 5)
DR Cash 10,000
CR Notes Receivable 10,000
DR Cash 9,928
CR Notes Payable—Regency Bank 9,928
DR Cash 9,928
DR Interest Expense 72
CR Notes Receivable 10,000
DR Cash 9,928
DR Interest Expense 72
CR Notes Payable—Regency Bank 10,000