Exam 8: Receivables

The days' sales uncollected ratio

Accounts receivable turnover shows how often a company converts its average accounts receivable balance into cash during the period.

Selected financial statement data for California Ltd, at its December 31 year end is below: Current Assets Pash \ 32,000 \ 21,750 Accounts Receivable \ 247,500 \ 299,000 Invertory \ 2,762,300 \ 2,668,425 Prepaid expenses Total Current Assets Current Liabilities \ 3,048,000 \ 2,999,050 Net Credit Sales \ 2,238,000 \ 2,448,000 California's credit terms are net 30 days. A 2% discount can be taken if the bill is paid within 10 days from the invoice date. In 2018, California collects its accounts receivable

On December 31 of the current year, TechCom's unadjusted trial balance included the following items: Accounts Receivable, debit balance of $107,250; Allowance for Doubtful Accounts, credit balance of $1,900. What amount should be debited to Bad Debt Expense, assuming 6% of outstanding accounts receivable as of December 31 of the current year, are estimated to be uncollectible?

S & R Company uses the aging of accounts receivable approach to estimate bad debt expense. On December 31, 2020, an analysis of accounts receivable revealed the following: $\text { Schedule df Accounts Receivuble by Age }$ December 31, 2020 Accounts Receivable Age of Accounts Receivable Expected Percentage Uncollectible Allowance for doubtful accounts 140,000 Not yet due 0.75\% 60,000 1-30 days past due 4\% 19,000 31-60 days past due 10\% 5,000 61-90 days past due 60\% 7,000 Over 90 days past due 90\% Required: (a) Calculate the amount of allowance for doubtful accounts that should be reported on the balance sheet at December 31, 2020. (b) Calculate the amount of bad debts expense that should be reported on the 2020 income statement, assuming that the balance of Allowance for Doubtful Accounts on January 1 was $44,000 (credit balance) and accounts receivable written off during the year totaled $49,200. (c) Present the appropriate general journal entry to record bad debts expense on December 31, 2020. (d) Show how accounts receivable will appear on the balance sheet at December 31, 2020.

If a 60-day note receivable is dated September 22, what is the due date of the note?

On October 12, 2020, Golf Co. received from one of its customers, Ping Co., a $30,500, 8% 90 day note receivable in granting a time extension on Ping's past due account receivable. Golf Co. has a December 31 year end. Ping Co. honoured the note at maturity. Prepare the entries for the issuance of the note, the end of year interest adjustment and the collection of the note at maturity.

TechCom customer RDA Electronics paid off an $8,300 balance on its account receivable. TechCom should record the transaction as a debit to Accounts Receivable-RDA Electronics and a credit to Cash.

Pledging receivables

A maker who dishonours a note does not pay it at maturity.

Hasbro had net sales of $7,875 and average accounts receivable of $1,350. To one decimal, Hasbro's accounts receivable turnover ratio was:

Credit sales are recorded by crediting an account receivable for a specific customer.

The recording of accounts receivable is linked to the

The maturity date of a note is the day the note is signed.

If the allowance method is used, the journal entry to record the reinstatement of an account previously written off in the current period includes a debit to Accounts Receivable and a credit to Bad Debt Expense.

Prepare general journal entries for the following transactions of Laurier Company, who use the perpetual inventory system: Apr. 1 Sold \ 12,500 of merchandise (Cost \ 10,500) to flight Co., receiving a 10\%,120 -day note. 15 Wrote off \ 2,000 owed by FCB Co. as worthless. (The allowance method of accounting for bad debts is used.) 30 Received a \ 10,800,10\%,30 -day note receivable from Cruise Co. as an extension of credit. May 1 Issued a \ 7,000,9\%,60 day note to Auggie Co. for cash. 30 Note received on April 30 was collected. June 30 Auggie Co. honoured May 1 st note. 30 Accrued interest on outstanding notes. July 15 FCB Co. paid \ 1,000 of the amount written off on April 15 above. Laurier doesnot expect to receive any further payments.

Z-Mart had $12,000 in accounts receivable and $320,000 in net sales for the period. To one decimal, Z-Mart's days' sales uncollected was 13.7 days.

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

Accounts receivable turnover is calculated by

Interest on $8,400 at 7% for 60 days is