EXAM 4

Question 1

WHen calculating the interest (usually on notes receivable) on a sum on a 60-day note with 7% interest. how do you do that?

Answer 1

Interest rates % are calculated for a year. to get the interest sum you must take the % of interest multiply it by the noted amount and then multiply it by 60/360. It’s 360 because that number is total amounts of 60 day periods in a year.

Question 2

the account Allowance for Doubtful Accounts is classified as a(n

Answer 2

contra account to Accounts Receivable

Question 3

AN interest bearing note will be journalizes as…

Answer 3

Debit Notes receivable, credit Accounts recievable

when it is paid off then
Debit cash for the amount plus the interest (see how to calculate interest)
Credit Interest Revenue for the amount of interest (make sure you calculate the time frame)
Credit Notes receivable for the amount it was originally written for (no interest)

Question 4

trade receivables

Answer 4

amounts billed to a customer not including interest

Question 5

If interest is accrued at the end of the year but note maturity date is after that, how will you journalize that?

Answer 5

debit cash for interest + amount

credit notes receivable orignal amount
credit interest receivable for interest accrued.
Credit Interest revenue for the remaining interest after the year end.

Question 6

When calculating a discount on an account that is 3900 terms 2/10 for 30 days and they return 1500… what is the amount of cash received if they paid it off in time?

Answer 6

you will calculate the discount with the new total (amount - returned items)

Question 7

Turn over ratio or receivable turnover

Answer 7

take the net credit sales divided by net receivables ( [beginning receivables + ending receivables] divided by two )

Question 8

average collection period-

Answer 8

365/ recevables turnover rate

Question 9

four expenditure categories of GDP

Answer 9

personal consumption, government expenditures, net exports and, investments