Q: Which formula correctly calculates interest on a note receivable?

$$Interest = Principal \times Rate \times Time$$

Question 1

Which of the following best describes the difference between accounts receivable and notes receivable?

Accepted Answer

Accounts receivable are informal claims for payment, while notes receivable are formal written promises to pay with interest.

Question 2

A company has a beginning accounts receivable balance of $$200, sales on credit of 1$$,800, and an ending balance of $500. What is the amount of cash collections from customers during the period?

Accepted Answer

$1,500

Question 3

Which journal entry is correct when writing off an uncollectible account using the direct write-off method?

Accepted Answer

Debit Uncollectible-account Expense, Credit Accounts Receivable

Question 4

Why is the direct write-off method considered inferior to the allowance method?

Accepted Answer

It overstates assets on the balance sheet by not estimating uncollectibles.

Question 5

What is the net realizable value of accounts receivable if the gross receivables are $$10,000 and the allowance for uncollectible accounts is 900$$?

Accepted Answer

$9,100

Question 6

Which method focuses on the valuation of accounts receivable based on the time outstanding?

Accepted Answer

Aging-of-receivables method

Question 7

A company estimates $$444 of uncollectible accounts at year-end, but the allowance account already has a 293 $$credit balance. What adjustment is needed?

Accepted Answer

$151

Question 8

After writing off $300 of uncollectible accounts, what is the impact on the income statement under the allowance method?

Accepted Answer

No impact, because the expense was already recognized in a prior period.

Question 9

Which of the following is NOT a benefit of selling on credit?

Accepted Answer

Immediate cash flow

Question 10

A promissory note for $1,000 is issued on August 31 with an annual interest rate of 9%. What is the interest revenue accrued by December 31?

Accepted Answer

$30

Question 11

Which formula correctly calculates interest on a note receivable?

Accepted Answer

$$Interest = Principal 	imes Rate 	imes Time$$

Question 12

If a company estimates that 5% of its $20,000 accounts receivable will be uncollectible, what should the allowance for uncollectible accounts be?

Accepted Answer

$$1,000$$

Question 13

Which account is a contra-asset account related to accounts receivable?

Accepted Answer

Allowance for Uncollectible Accounts

Question 14

A company’s aging schedule shows the following: Not yet due $$11,060 (1% uncollectible), 1-30 days overdue 1$$,363 (5%), 31-60 days overdue $$370 (12.5%), Over 60 days overdue 1$$,093 (20.9%). What is the total estimated uncollectible amount?

Accepted Answer

$$444$$

Question 15

Which of the following best describes the purpose of the Allowance for Uncollectible Accounts?

Accepted Answer

To estimate and record the amount of receivables expected not to be collected.

Question 16

If the beginning allowance for doubtful accounts is $$200, write-offs during the year are 144$$, and the desired ending allowance is $56, what is the bad debt expense for the year?

Accepted Answer

$$0$$

Question 17

Which of the following is NOT a component of a promissory note?

Accepted Answer

Inventory value

Question 18

A company’s accounts receivable balance is $$13,886 and the allowance for uncollectible accounts is 444. $$What is the net accounts receivable reported on the balance sheet?

Accepted Answer

$$13,442$$

Question 19

Which of the following statements about the aging-of-receivables method is TRUE?

Accepted Answer

It analyzes individual customer balances based on time outstanding.

Question 20

Which journal entry is made to record accrued interest revenue on a note receivable at year-end?

Accepted Answer

Debit Interest Receivable, Credit Accrued Interest Revenue

Receivables and Uncollectible Receivables: Financial Accounting Study Notes

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