MULTIPLE CHOICES

1. B
2. A
3. C
4. D
5. A
6. B
7. B
8. A - D
9. KLEIN
10 C
11. B – C

SHARK COMPANY
1. B
2. B
3. B - A

SHE COMPANY
1. A
2. C
3. C
4. B
KLEIN COMPANY
July 1
Notes Receivables 6,000
Sales 6,000
To record acceptance of Sue Height note as payment on account.

Oct. 1
Interest Receivable 120
Interest Income 120

Accounts Receivable 6,000

Notes receivable 6,000
To record dishonored note.

Nov. 15
Cash 6, 120
Accounts Receivables 6,000
Interest Receivables 120
To record payment of previously dishonored notes.

SAVIOUR COMPANY
May 1
Accounts Receivable-assigned 800,000
Accounts Receivable 800,000
To record the assignment of accounts receivable.

 Cash (640,000-20,000) 620,000

Service Charge 20,000
 Notes Payable-Bank 640,000
To record cash advance made.

5 Sales Return 30,000

Accounts Receivable 30,000
To record returned merchandise.

10 Cash 490,000
Sales Discount (2%8 * 500,000) 10,000
Accounts Receivables- assigned 500,000
To record collections with discounts.

June 1
Notes Payable -Bank 490,000
Interest expense (2% * 640,000) 12,800
Cash 502,800
To record the remittance of the collections to the bank plus interest.

7 Allowance for doubtful accounts 10,000

Accounts Receivable – assigned 10,000
To record the worthless assigned accounts receivable.

20 Cash 200,000
Accounts Receivable- assigned 200,000
To record collections from assigned accounts receivable.

July 1
Notes Payable -Bank (640k-490k) 150,000
Interest expense 3,000
 Cash 153,000
To record the final settlement with the bank.

 Accounts Receivable 60,000

Accounts Receivable -assigned 60,000
To record in bringing back the balance of assigned accounts receivable to
accounts receivable.

Solution:
Accounts Receivable 800,000
Less: Collections 690,000
Sales Discounts 10,000
Sales Return 30,000
Worthless Accounts 10,000 740,000
Balance 60,000
PITTANCE COMPANY
March 1
Cash 2,000,000
Notes Payable- bank 2,000,000
To record borrowing with pledged account.

April 1
Cash 980,000
Sales Discount 20,000
Accounts Receivable 1,000,000
To record the collections.

June 1
Cash 2,000,000
Accounts Receivable 2,000,000
 To record the collection of the remaining pledge account.

Sept. 1
Notes Payable-Bank 2,000,000
Interest Expense (12% * 2M *6/12) 120,000
Cash 2,120,000
To record the loan payment.

DOCILE COMPANY
July 1
Accounts Receivable – assigned 1,500,000
Accounts Receivable 1,500,000
To record the assignment of accounts receivable.

 Cash (1,125,000 - 60,000) 1,065,000

Service Charge (4% * 1.5M) 60,000
Notes Payable- bank 1,125,000

To record cash advance made.

Aug. 1
Notes Payable – Bank 800,000
Accounts Receivable – assigned 800,000
To record collections of assigned accounts receivables.

 Interest expense (2% * 1, 125,000) 22,500

Cash 22,500
To record interest charge.

Sept. 1
Cash 168,500
Interest Expense 6,500
 Notes Payable – bank 325,000
Accounts Receivable- assigned 500,000
To record the full collection of accounts receivable assigned.

Accounts Receivable 200,000

Accounts Receivable – assigned 200,000
To record in bringing back the balance of assigned accounts receivable to
accounts receivable.

Solutions:
Collection by bank 500,000
Less: Payment of loan (1,125,000-800,000) 325,000
Excess collections 175,000
Less: Interest (2% * 325,000) 6,500
Cash Remittance from Bank 168,500

GENEROUS COMPANY
July 1
Cash 680,000
Service Charge (5% * 800K) 40,000
Receivable from factor (10% * 800K) 80,000
Accounts Receivable 800,000
To record the factoring.

15 Sales Return and Allowance 20,000

Receivable from factor 20,000
To record the subsequent allowed credit for returned merchandise.

31 Cash (80,000-20,000) 60,000

Receivable from factor 60,000
To record the final settlement.