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Exam 9: Accounting for Receivables

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Question 1

True/False

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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.

A) True
B) False

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Question 2

True/False

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Under the direct write-off method no attempt is made to match bad debts expense to sales revenues in the same accounting period.

A) True
B) False

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Question 3

True/False

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Under the allowance method the cash realizable value of receivables is the same both before and after an account has been written off.

Collection of a note receivable will result in a credit to ______________ for the face value of the note and a credit to ______________.

On February 1 Carson Company received a $9000 4% four-month note receivable. The cash to be received by Carson Company when the note becomes due is

Notes receivable are recognized in the accounts at

The income statement approach to estimating uncollectible accounts expense is used by Kerley Company. On February 28 the firm had accounts receivable in the amount of $437000 and Allowance for Doubtful Accounts had a credit balance of $2140 before adjustment. Net credit sales for February amounted to $3000000. The credit manager estimated that uncollectible accounts expense would amount to 1% of net credit sales made during February. On March 10 an accounts receivable from Kathy Black for $6100 was determined to be uncollectible and written off. However on March 31 Black received an inheritance and immediately paid her past due account in full. Instructions (a) Prepare the journal entries made by Kerley Company on the following dates: 1. February 28 2. March 10 3. March 31 (b) Assume no other transactions occurred that affected the allowance account during March. Determine the balance of Allowance for Doubtful Accounts at March 31.

If a retailer regularly sells its receivables to a factor the service charge of the factor should be classified as a(n)

Which of the following would be considered as an unlikely occurrence?

Twain Company has the following accounts in its general ledger at July 31: Accounts Receivable $40000 and Allowance for Doubtful Accounts $2500. During August the following transactions occurred. Oct. 15 Sold $16000 of accounts receivable to Nelson Factors Inc. who assesses a 4% finance charge. 25 Made sales of $900 on VISA credit cards. The credit card service charge is 3%. Instructions Journalize the transactions.

Allowance for Doubtful Accounts on the balance sheet

The collection of an account that had been previously written off under the allowance method of accounting for uncollectibles

Using the percentage-of-receivables basis the uncollectible accounts for the year is estimated to be $33000. If the balance for the Allowance for Doubtful Accounts is a $5000 debit before adjustment what is the amount of bad debt expense for the period?

The maturity value of a $60000 6% 3-month note receivable is

Trade receivables occur when two companies trade or exchange notes receivables.

enox Company had net credit sales during the year of $1300000 and cost of goods sold of $800000. The balance in accounts receivable at the beginning of the year was $185000 and the end of the year it was $140000. What was the accounts receivable turnover?

Stine Co. sells Christmas angels. Stine determines that at the end of December it has the following aging schedule of Accounts Receivable: Compute the net receivables based on the above information at the end of December. (There was no beginning balance in the Allowance for Doubtful Accounts).

Tubbs Sign Company uses the allowance method in accounting for uncollectible accounts. Past experience indicates that 1% of net credit sales will eventually be uncollectible. Selected account balances at December 31 2015 and December 31 2016 appear below: $\begin{array}{lrr}&21/31/15&12/31/16\\\text { Net Credit Sales } & \$ 300,000 & \$ 400,000 \\\text { Accounts Receivable } & 60,000 & 80,000 \\\text { Allowance for Doubtful Accounts } & 4,800 & ?\end{array}$ Instructions (a) Record the following events in 2016. Aug. 10 Determined that the account of L. Young for $600 is uncollectible. Sept. 12 Determined that the account of J. E. Ford for $3400 is uncollectible. Oct. 10 Received a check for $400 as payment on account from L. Young whose account had previously been written off as uncollectible. She indicated the remainder of her account would be paid in November. Nov. 15 Received a check for $200 from L. Young as payment on her account. (b) Prepare the adjusting journal entry to record the bad debt provision for the year ended December 31 2016. (c) What is the balance of Allowance for Doubtful Accounts at December 31 2016?

The direct write-off method

On November 1 Tacoma Company received a $4000 5% three-month note receivable. The cash to be received by Tacoma Company when the note becomes due is: