Exam 7: Accounts and Notes Receivable

On May 31,a company had a balance in its accounts receivable of $103,895.Record the company's following transactions for June: June 2 Sold merchandise on account, \ 14,000 June 8 Sold \ 15,000 worth of accounts receivable to First Bank. First Bank charged a 3\% factoring fee. June 20 Borrowed \ 30,000 cash from First Bank, pledging \ 31,500 worth of accounts receivable as collateral for the loan.

Converting receivables to cash before they are due is usually done by either (1)_______________________ or (2)________________________________.

Cairo Co.uses the allowance method of accounting for uncollectible accounts.Cairo Co.accepted a $5,000,12%,90-day note dated May 16,from Alexandria Co.in exchange for its past-due account receivable.Make the necessary general journal entries for Cairo Co.on May 16 and the August 14 maturity date,assuming that the: a.Note is held until maturity and collected in full at that time. b.Note is dishonored; the amount of the note and its interest are written off as uncollectible.

Hasbro had net sales of $7,875 and average accounts receivables of $1,350.Calculate Hasbro's accounts receivable turnover:

Explain the options a company has when converting its receivables to cash.

Temper Company has credit sales of $3.10 million for year 2013.Temper estimates that .9% of the credit sales will not be collected.On December 31,2013,the company's Allowance for Doubtful Accounts has an unadjusted credit balance of $2,222.Assuming the company uses the percent of sales method,what is the amount that Temper will enter as the Bad Debt Expense in the December 31 adjusting journal entry?

The maturity date of a note refers to the date the note is signed.

The ________________ method of accounting for bad debts records the loss from an uncollectible account receivable at the time it is determined to be uncollectible (and not before).

A company receives a 6.2%,60-day note for $9,650.The total amount of cash due on the maturity date is:

With regard to accounts receivable,both GAAP and IFRS require the allowance method for uncollectibles (unless uncollectibles are immaterial).

If the seller regularly offers customers such terms,installment accounts receivable are classified as current assets,even though the installment period is more than one year.

A company reports the following results in its financial statements: Year 3 Year 2 Year 1 Net sales \ 2,500,000 \ 2,050,000 \ 1,900,000 Accounts receivable, ending balance 175,000 167,000 165,000 Calculate this company's accounts receivable turnover for year 2 and year 3.Compare these two results and give a possible explanation for any significant change.

A company used the percent of sales method to determine its bad debts expense.At the end of the current year,the company's unadjusted trial balance reported the following selected amounts: Accounts receivable \ 245,000 debit Allowance for uncollectible accounts 300 credit Net Sales 900,000 credit All sales are made on credit.Based on past experience,the company estimates 0.5% of credit sales to be uncollectible.What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

After adjustment,the allowance for doubtful accounts has the effect of reducing accounts receivable to its estimated realizable value.

Companies can report a credit card expense as a discount deducted from sales or as a selling expense.

A Company sold $10,000 of its accounts receivable and was charged a 2% factoring fee.How should the company record this transaction in the journal?

Temper Company has credit sales of $3.10 million for year 2013.Temper estimates that .9% of the credit sales will not be collected.On December 31,2013,the company's Allowance for Doubtful Accounts has an unadjusted credit balance of $2,222.Temper prepares a schedule of its December 31,2013,accounts receivable by age.Based on past experience,it estimates the percent of receivables in each age category that will become uncollectible.This information is summarized here: December 31,2013 Age of Accounts Expected Percent Accounts Receivable Receivable Uncollectible \6 20,000 Not yet due 1.05\% 248,000 1 to 30 days past due 1.80 49,600 31 to 60 dlays past due 6.30 24,800 61 to 90 days past due 31.75 4,960 Over 90 days past due 66.00 Assuming the company uses the aging of Accounts Receivable method,what is the amount that Temper will enter as the Bad Debt Expense in the December 31 adjusting journal entry?

Outdoors Unlimited accepts the Explorer credit card from its customers.Explorer charges a 3.5% service fee and pays Outdoors Unlimited the amount net of Explorer charges once a month.During February,Outdoors Unlimited sold $27,000 worth of merchandise to customers using the Explorer charge card.On February 28,Outdoor Unlimited sent the $27,000 worth of credit card receipts to Explorer.On March 4,Outdoors Unlimited received cash proceeds from Explorer for the February credit sales less the service charge.Prepare the general journal entries to record February sales and the March 4 cash receipt.

If a customer owes interest on accounts receivable,the company should debit Interest Revenue and credit Accounts Receivable.