Exam 8: Receivables

The materiality principle is justification for using the direct-write-off method.

Quality of receivables refers to the likelihood of collection without loss.

When a note is discounted to a bank without recourse, the bank assumes the risk of a bad debt loss and the original payee doesn't have a contingent liability.

A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and that is usually the most reliable is the:

A contingent liability:

Because pledged receivables only serve as collateral for a loan and are not sold, it is not necessary to disclose the pledging.

A note receivable discounted with recourse is:

On December 31 of the current year, TechCom's unadjusted trial balance included the following items: Accounts Receivable, debit balance of $107,250; Allowance forDoubtful 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?

Zero Co. uses the allowance method of accounting for bad debts. TheirAllowance for Doubtful Accounts has a year-end credit balance, prior toadjustment, of $650. The bad debts are estimated at 3% of $560,000, the netcredit sales. Prepare the year end adjusting journal entry for bad debt expense.

A high accounts receivable turnover rate in comparison with that of competitors suggests that the firm should tighten its credit policy.

In October, Z-Mart had $475,000 in net credit sales and $75,000 in accounts receivable. Calculate the days' sales uncollected for October.

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

If a customer owes interest on a bill, Accounts Receivable is debited and InterestExpense is credited.

S & R Company uses the aging of accounts receivable approach to estimate bad debt expenseCalculate the amount of allowance for doubtful accounts that should be reported on the balance sheet at December 31, 2015.(b)Calculate the amount of bad debts expense that should be reported on the2015 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 onDecember 31, 2015.(d)Show how accounts receivable will appear on the balance sheet at December31, 2015.

As long as a company accurately records credit sales information, it is not necessary to have accounts for specific customers.

Accounts receivable arise from credit sales to customers by both retailers and wholesalers.

A company can raise cash by borrowing money, and then factoring its accounts receivable as security for the loan.

The days' sales uncollected ratio is used to:

The accounts receivable approach uses income statement relationships to estimate bad debts.

Assume bad debts are estimated and recorded as 2% of credit sales.(1)Show how Accounts Receivable and Allowance for Doubtful Accounts would appear on the balance sheet.(2)Present the entry to write off a $1,500 account.(3)Show how Accounts Receivable and Allowance for Doubtful Accounts would appear on a balance sheet immediately after writing off the account in (2)above.