new chapter 8

Question 1

What is a trade recieveable?

Answer 1

Notes and Accounts receivable

Question 2

What is the definition of a note receivable?

Answer 2

A written promise for an amount to be received.

Question 3

What is the definition of a account receivable?

Answer 3

any amount owed to a seller from the result of a sale of goods or services

Question 4

What are other receivables?

Answer 4

Nontrade receivables such as loans to officers,

advances to employees, and income on taxes refundable.

Question 5

What are the two methods for valuing accounts recievable?

Answer 5

1. ) Direct write off
   - Which is not under GAAP and violates the matching principle.
   - —————————————————————————-
2. ) Allowance method:
   - Better matching
   - Receivable stated at NRV

Question 6

Describe the difference in journal entries between The Direct Write Off Method and The Allowance Method?

Answer 6

Direct write off: 
Dr. Bad Debt Expense:
   Cr.   Accounts Receivable
--------------------------------------------------------------------------
Allowance method:
 Dr. Allowance for doubtful accounts
   Cr. Accounts Receivable

Question 7

What is a factor?

Answer 7

Someone, like a finance company or bank, buys Receivables from businesses and then collects the payments directly from the customer. Typically charges a commission to the company that is selling the Receivables.

Question 8

The payee: ?

Answer 8

receives the promissory note:

Question 9

The maker:?

Answer 9

The person making the note payable.

Question 10

Describe the journal entry for a note payable at its maturity date: Foot Co. took out a $ 10,000 note payable in order to buy a new processing machine. The note was 6 months an 15% interest.

Answer 10

Note payable: 10,000
Interest payable: 625
Interest expense: 125
Cash: 10,750