Question 1

The maturity value of a note receivable is always the same as its face value.

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Question 2

The interest on a 6%, 60-day note for $5,000 is $300.

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Question 3

Receivables that are expected to be collected in cash in eighteen months or less are reported in the Current Asset section of the balance sheet.

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Question 4

The balance in the Allowance for Doubtful Accounts account at the end of the year includes the total of all accounts written-off since the beginning year.

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Question 5

The number of days' sales in receivables is an estimate of the length of time the accounts receivables have been outstanding.

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Question 6

If a promissory note is dishonored, the payee should still record interest revenue.

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Question 7

When a note is written to settle an open account, no entry is necessary.

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Question 8

The balance of the Allowance for Doubtful Accounts is added to Accounts Receivable on the balance sheet.

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Question 9

The maturity value of a 12%, 60-day note for $5,000 is $5,600.

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Question 10

The accounts receivable turnover measures the length of time in days it takes to collect a receivable.

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Question 11

The party promising to pay a note at maturity is the maker.

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Question 12

When a note is received from a customer on account, it is recorded by debiting Notes Receivable and crediting Accounts Receivable.

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Question 13

The due date of a 60-day note dated July 10 is September 10.

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Question 14

If the maker of a note fails to pay the debt on the due date, the note is said to be dishonored.

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Question 15

A primary difference between the direct write-off and allowance method is whether or not bad debts is based on a percentage of sales.

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Question 16

When using the analysis of receivables method for estimating uncollectible receivables, the amount computed in the analysis is usually the amount that would be recorded in the end-of-period adjusting entry.

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Question 17

The accounts receivables turnover ratio is computed by dividing total gross sales by the average net receivables during the year.

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Question 18

The equation for computing interest on an interest-bearing note is as follows: interest equals maturity value times interest rate times time.

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Question 19

In computing the maturity date of a note, the date the note is issued is included but the due date is omitted.

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Question 20

When accounting for uncollectible receivables and using the percentage of sales method, the matching principle is violated.

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Quiz 9: Receivables