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Question(s) / Instruction(s):

21. A factor purchases receivables from businesses for a fee and collects the remittances directly from customers.

22. A major advantage of national credit cards to retailers is that there is no charge to the retailer by the credit card companies for their services.

23. Receivables may be sold because they may be the only reasonable source of cash.

24. If a retailer accepts a national credit card such as VISA, the retailer must maintain detailed records of customer accounts.

25. A note receivable is a written promise by the maker to the payee to pay a specified amount of money at a definite time.

26. The maturity date of a 1-month note receivable dated June 30 is July 30.

27. The two key parties to a note are the maker and the payee.

28. When the due date of a note is stated in months, the time factor in computing interest is the number of months divided by 360 days.

29. The accounts receivable turnover ratio is computed by dividing total sales by the average net receivables during the year.

30. Both the gross amount of receivables and the allowance for doubtful accounts should be reported in the balance sheet.

The following questions are from the Study Guide.

s31. Notes receivable represent claims for which formal instruments of credit are issued as evidence of debt.

s32. The two methods of accounting for uncollectible accounts are (a) percentage of sales and (b) percentage of receivables.

s33. The account Allowance for Doubtful Accounts is closed out at the end of the year.

s34. In order to accelerate the receipt of cash from receivables, owners may sell the receivables to another company for cash.

s35. When counting the exact number of days to determine the maturity date of a note, the date of issue is included but the due date is omitted.

s36. A note is dishonored when it is not fully paid at maturity.

s37. Short-term receivables are reported in the current assets section before temporary investments.

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