Exam 7: Reporting and Analyzing Receivables

The ________________________ methods use balance sheet relationships to estimate bad debts-mainly the relation between accounts receivable and the allowance amount.

The percent of sales method of estimating bad debts is focused more on realizable value of accounts receivable than matching.

The materiality constraint permits the use of the direct write-off method of accounting for uncollectible accounts when bad debts are very large in comparison to the company's other financial statement items such as sales and net income.

The accounts receivable method to estimate bad debts obtains the estimated balance in the Allowance for Doubtful Accounts in one of two ways: (1) the percent uncollectible from the total accounts receivable or (2) aging accounts receivable.

Prepare general journal entries for the following transactions of this company for the current year:

Accounts receivable occur from credit sales to customers.

When using the allowance method of accounting for uncollectible accounts,the recovery of a bad debt would be recorded as a debit to Cash and a credit to Bad Debts Expense.

The maturity date of a note receivable:

A company had the following items and amounts in its unadjusted trial balance as of December 31 of the current year: Prepare the adjusting entry to estimate bad debts under each of the following separate situations. a.Bad debts are estimated to be 2.5% of credit sales. b.An aging analysis estimates that 8% of the outstanding accounts receivable will be uncollectible.

A company borrowed $1,000 by signing a six-month promissory note at 5% interest.The total amount of interest on this promissory note is $25.

The person to whom a note is payable to is known as the ______________.

Installment accounts receivable is another name for aging of accounts receivable.

When a company holds a large number of notes receivable,it sometimes sets up a controlling account and a subsidiary ledger for notes.

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.

Companies follow both the matching principle and the materiality principle when applying the direct write-off method.

Under the allowance method of accounting for uncollectible accounts receivable,no estimate is made to predict bad debts expense.

Wallah Company agreed to accept $5,000 in cash along with an $8,000,90-day,13.5% note from customer Judith Klemper to settle her $13,000 past-due account.How should Wallah record this transaction?

A company factored $35,000 of its accounts receivable and was charged a 2% factoring fee.The journal entry to record this transaction would include a debit to Cash of $35,000,a debit to Factoring Fee Expense of $700,and a credit to Accounts Receivable of $35,700.

What is the maturity date of a six-month note receivable dated February 5?

Mix Recording Studios purchased $7,800 in electronic components from TechCom.Mix Recording Studios signed a 60-day,10% promissory note for $7,800.TechCom's journal entry to record the sales portion of the transaction is: