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Exam 9: Accounting for Receivables

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Question 71

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At December 31, Warren Company reports the following results for its calendar year from the adjusted trial balance. a. Prepare the adjusting entry to record Bad Debts Expense assuming uncollectibles are estimated to be 1.1% of credit sales. b. Prepare the adjusting entry to record Bad Debts Expense assuming uncollectibles are estimated to be .8% of total sales. c. Prepare the adjusting entry to record Bad Debts Expense assuming uncollectibles are estimated to be 7.0% of year-end accounts receivable.

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Question 72

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How are the direct write-off method and the allowance method applied in accounting for uncollectible accounts receivables?

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The direct write-off method charges Bad ...

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Question 73

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Tecom accepts the NOVA credit card for credit card sales. Tecom sends credit card receipts to NOVA on a weekly basis. NOVA charges Tecom a 2% fee. Tecom usually receives payment from NOVA within a week. Prepare journal entries to record the following transactions of Tecom involving the NOVA credit card.

Converting receivables to cash before they are due is usually done by either _______________________ or ______________________________.

The _______________________ method uses both past and current receivables to estimate the allowance amount, and assumes that the longer an amount is past due, the more likely it is to be uncollectible.

Bardo Company allows customers to make purchases on credit. The terms of all credit sales are 2/10, n/30, and all sales are recorded at the gross price. Other customers can use a bank credit card where the bank deducts a 4% service charge for credit card sales and credits the bank account of Bardo immediately when credit card receipts are deposited. Bardo uses the perpetual inventory method. Prepare journal entries to record the following selected transactions and events.

The person that borrows money and signs a promissory note is called the payee.

On May 31, Rayco has $375,800 of accounts receivable. Rayco uses the allowance method of accounting for bad debts and has an existing credit balance in the allowance for doubtful accounts of $14,250. 1. Prepare journal entries to record the following selected May transactions. The company uses the perpetual inventory system. 2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its May 31 balance sheet. a. Sold $415,200 of merchandise (that cost $249,000) to customers on credit. b. Received $465,800 cash in payment of accounts receivable. c. Wrote off $15,800 of uncollectible accounts receivable. d. In adjusting the accounts on May 31, its fiscal year-end, the company estimated that 4.0% of accounts receivable will be uncollectible.

The accounts receivable turnover is calculated by dividing net sales by average accounts receivable.

Griggs Company uses the direct write-off method of accounting for uncollectible accounts receivable. On December 6, Year 1, Griggs sold $6,300 of merchandise to the Hillman Company. On August 8, Year 2, after numerous attempts to collect the account, Griggs determined that the $6,300 account of the Hillman Company was uncollectible. a. Prepare the journal entry required to record the transactions on August 8. b. Assuming that the $6,300 is material, explain how the direct write-off method violates the matching principle in this case.

The _________________________ method uses income statement relationships to estimate bad debts and is based on the idea that a given percent of a company's credit sales for a period are uncollectible.

Accounts receivable occur from credit sales to customers.

If the credit balance of the Allowance for Doubtful Accounts account exceeds the amount of a bad debt being written off, the entry to record the write-off against the allowance account results in:

_______________ refers to the expected proceeds from converting an asset into cash.

A company had net sales of $600,000, total sales of $750,000, and an average accounts receivable of $75,000. Its accounts receivable turnover equals:

The person who signs a note receivable and promises to pay the principal and interest is the:

____________________________ are amounts owed by customers from credit sales where payment is required in periodic amounts over an extended time period.

A company borrowed $10,000 by signing a 180-day promissory note at 11%. The maturity value of the note is:

Prepare general journal entries for the following transactions of Viking Company, assuming they use the allowance method to account for uncollectible accounts.

What is the amount of interest that is due on a $36,000, 90-day, 4% note receivable at maturity?