Accounts Receivable Multiple Choice assignment

Multiple Choice (2 points each)

Use the following information about Heart Corporation to answer the next four questions.

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The Accounts Receivable balance for Heart Corporation is $180,000 at January 31, 2021. Before calculating and recording January 2021 bad debt expense, the Allowance for Doubtful Accounts has a debit balance of $2,000. Net sales for the month are $700,000. An aging of accounts receivable results in a $13,000 estimate for the Allowance for Doubtful Accounts as of January 31, 2021. In the past several years, 2% of net sales have proven uncollectible.

 

  1. If Heart uses the analysis of receivables method, Bad Debt Expense on the January 2021 Income Statement will be:
    1. $12,000.
    2. $13,000.
    3. $14,000.
    4. $15,000.

 

 

 

 

  1. If Heart uses the analysis of receivables method, the Allowance for Doubtful Accounts reflected on the January 31, 2021 Balance Sheet will be:
    1. $12,000.
    2. $13,000.
    3. $14,000.
    4. $15,000.

 

 

 

 

  1. If Heart uses the percent of sales method, Bad Debt Expense on the January 2021 Income Statement will be:
    1. $12,000.
    2. $13,000.
    3. $14,000.
    4. $15,000.

 

 

 

 

  1. If Heart uses the percent of sales method, the Allowance for Doubtful Accounts reflected on the January 31, 2021 Balance Sheet will be:
    1. $12,000.
    2. $13,000.
    3. $14,000.
    4. $15,000.

 

 

 

  1. Champion sells $5,000,000 of products to Target Corporation. Target signs a promissory note that has the following terms: annual interest rate of 6% and principal plus interest due in 8 months. Assuming that Target repays the entire amount as scheduled after 8 months, what is the Maturity Value of Champion’s note receivable?
    1. $4,800,000
    2. $5,000,000
    3. $5,200,000
    4. $5,300,000

 

 

 

 

  1. Which of the following statements is TRUE?
    1. Allowance for Doubtful Accounts is a liability account.
    2. The allowance method is not approved by GAAP.
    3. If an account receivable was written off, it cannot be reinstated.
    4. Bad Debt Expense is an operating expense.

 

 

 

 

  1. Assume that the $6,500, 60-day, 7% note was received on January 4 and that the fiscal year ended on January 31. Interest will be paid by the borrower on the maturity date of the note. The adjusting entry to record the accrued interest revenue as of January 31 would be (amounts rounded to nearest dollar, use 360-day year):
    1. Debit Interest Receivable 34; Credit Interest Revenue 34
    2. Debit Interest Receivable 76; Credit Interest Revenue 76
    3. Debit Notes Receivable 205; Credit Interest Revenue 205
    4. Debit Cash 455; Credit Interest Revenue 455

 

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