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Exam 7: Accounting for Receivables

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Question 1

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Carter Company's sales for 2013 were $8,700,000. Its accounts receivable were $720,000 at the beginning of 2013 and $801,000 at the end of the year. The accounts receivable turnover ratio for the year was 12.1.

A) True
B) False

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Question 2

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Gary, Inc. had the following sales during 2013: Gary also had the following beginning and ending balances in the receivables accounts: Gary, who uses the allowance method of accounting for uncollectible accounts, estimated that 3% of the credit sales will go uncollected. The credit card company charges Gary a 4% service charge. Required: a) Prepare Gary's year-end adjusting journal entry for uncollectible accounts expense. b) Prepare the entry to record the credit card sales. c) What is Gary's cash flow from customers for the year?

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Explanation: a) $600,000 credit sales x...

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Question 3

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Which of the following answers correctly states the effect of recording the collection of the reestablished receivable on April 4, 2014?

On March 31, 2014 Spangler Co. wrote-off a $500 account receivable of one of its customers, Bill Foster. The $500 sale had been made to Foster last year. Spangler uses the "allowance method" to account for uncollectible accounts expense. Show how the write-off of the account would affect the elements of Spangler's financial statements.

The adjusting entry to recognize uncollectible accounts expense does not affect the net realizable value of receivables.

Collection of a credit card receivable is an asset source transaction.

Conrad Co. uses the direct write-off method to account for uncollectible accounts in the amount of $4,000. Show the effect of this write-off.

When a customer's account, previously written off as uncollectible, is reinstated, the net realizable value of Accounts Receivable increases.

The net realizable value of Morgan's receivables at the end of 2011 was

Pence Company began 2013 with a balance of $74,000 in accounts receivable and $4,300 in allowance for doubtful accounts. During the year, it provided $328,000 in services to customers on account and collected $290,000 in cash from its accounts receivable. Pence wrote off $3,250 of uncollectible accounts during 2013. At the end of the year, the company prepared an aging schedule and adjusted its accounts based on the estimate that $6,300 of receivables would not be collected. Required: a) Prepare the journal entries to record all the transactions related to accounts receivable, including the estimate of uncollectible accounts expense. b) What was the net realizable value of Pence's accounts receivable at the end of 2013?

When is uncollectible accounts expense recognized if the direct write-off method is used?

Lanahan Company has the following account balances at the end of 2013: Required: Compute the net realizable value of the above accounts receivable.

Java King Espresso Machine Company makes many of its sales on account. For 2013, its beginning balance in Accounts Receivable was $95,000. Sales on account for the year were $452,000, and the amount of cash collected from its accounts receivable was $414,950. During the year, uncollectible accounts of $5,050 were written off. What was the ending balance in Accounts Receivable?

When is it acceptable to use the direct write-off method of accounting for uncollectible accounts?

On December 31, 2013, Spangler Co. estimated it had $15,000 of uncollectible accounts related to credit sales it made during the year. Spangler, which uses the allowance method, made the proper adjusting entry on this date. Indicate the effects of the adjusting entry.

When a credit card sale is recorded, what is the effect on the accounting equation?

A company that uses the direct write-off method of accounting for uncollectible accounts must still prepare a year-end adjusting entry to estimate its uncollectibles.

The year-end adjusting entry to recognize uncollectible accounts expense will

Gannon Company collected a receivable due from a credit card transaction company; the credit card fee had previously been recognized when the sale was recorded. Show the effect of collection of the receivable on Gannon's financial statements.

Rinehart Company made a loan of $8,000 to one of the company's employees on April 1, 2013. The one-year note carried a 6% rate of interest. The amount of interest revenue that Rinehart would report in 2013 and 2014, respectively would be: