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Exam 5: Receivables and Sales

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Question 61

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A company has the following balances on December 31,2012,after year-end adjustments: Accounts Receivable = $62,000; Allowance for Uncollectible Accounts = $6,000.Calculate the net realizable value of accounts receivable.

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Question 62

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What does it mean to report accounts receivable at their net realizable value.

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Net realizable value is the amount of ca...

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Question 63

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The aging method for estimating uncollectible accounts considers that a higher percentage of "older" accounts will not be collected compared to "newer" accounts.

Gershwin Wallcovering Inc.shipped the wrong shade of paint to a customer.The customer agreed to keep the paint upon being offered a 15% price reduction.The price reduction is an example of a:

Using the allowance method,writing off an actual bad debts would include a:

The adjustment to account for future bad debts has the effect of (1)reducing assets and (2)increasing liabilities.

When using an aging method for estimating uncollectible accounts:

How is the receivables turnover ratio measured? What does this ratio indicate? Is a higher or lower receivables turnover preferable?

Credit sales transfer products and services to a customer today while bearing the risk of collecting payment from that customer in the future.

Boynton Jewelers reported the following amounts at the end of the year: total sales = $550,000; sales discounts = $12,000; sales returns = $44,000; sales allowances = $17,000.What was the company's net sales for the year?

The average collection period shows the approximate number of days the average accounts receivable balance is outstanding.

Notes receivable are similar to accounts receivable but are more formal credit arrangements evidenced by a written debt instrument,or note.

At the end of 2012,Murray State Lenders had a balance in its Allowance for Uncollectible Accounts of $4,500 (credit) before any adjustment.The company estimated its future uncollectible accounts to be $12,000 using the percentage-of-receivables method.Murray State's adjustment on December 31,2012,to record its estimated uncollectible accounts included a:

At the beginning of the year,a company had an Allowance for Uncollectible Accounts of $22,000.By the end of the year,actual bad debts total $24,000.What is the balance of the Allowance for Uncollectible Accounts after the write-offs (before any year-end adjustment)?

The Sales Discounts account is an expense account.

Even though the percentage-of-receivables method and the percentage-of-credit-sales method use different accounts to estimate future uncollectible accounts,the amount of bad debt expense reported in the income statement will always be the same under the two methods.

The receivables turnover ratio equals average accounts receivable divided by net credit sales.

A debit balance in the Allowance for Uncollectible Accounts before adjustment indicates that last year's estimate of uncollectible accounts was too low.

The direct write-off method violates the matching principle.

Interest on a note receivable is calculated as the face value of the note times the annual interest rate stated on the note times the fraction of the year the note is outstanding.