Exam 7: Accounts and Notes Receivable

The accounts receivable turnover is calculated by:

60 million for year 2011. The company estimates that 2% of sales will be uncollectible. On December 31, 2011, the company's Allowance for Doubtful Accounts has an unadjusted credit balance of $13,164. Corona prepares a schedule of its December 31, 2011, 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 31,2011 Age of Accounts Expected Percent Accounts Receivable Receivable Uncollectible \ 720,000 Not yet due 1.05\% 252,000 1 to 30 days past due 1.80 49,600 31 to 60 days past due 6.30 14,100 61 to 90 days past due 31.75 2,850 Over 90 days past due 66.00 Assuming the company used the percent of sales method determine the amount that should be recorded for Bad Debt Expense on December 31, 2011.

Acme Company has an agreement with a major credit card company which calls for cash to be received immediately upon deposit of Acme customers' credit card sales receipts. The credit card company receives 3.5% of card sales as its fee. If Acme has $2,000 in credit card sales, which of the following statements are true?

The following information is from the annual financial statements of Nancy Company. 2010 2009 2008 Net Sales \ 307,000 \ 238,000 \ 285,000 Accounts Receivable, net (year-end) 47,900 45,700 42,400 What is the accounts receivable turnover ratio for 2009?

Corona Company has credit sales of $4.60 million for year 2011. The company estimates that 1.42% of accounts receivable will be uncollectible. On December 31, 2011, the company's Allowance for Doubtful Accounts has an unadjusted credit balance of $13,164. Corona prepares a schedule of its December 31, 2011, 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 31,2011 Age of Accounts Expected Percent Accounts Receivable Receivable Uncollectible \ 720,000 Not yet due 1.05\% 252,000 1 to 30 days past due 1.80 49,600 31 to 60 days past due 6.30 14,100 61 to 90 days past due 31.75 2,850 Over 90 days past due 66.00 Assuming the company uses the percent of accounts receivable method, determine the amount that should be recorded for Bad Debt Expense on December 31, 2011.

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

The maturity date of a note receivable:

A company had an accounts receivable turnover ratio of 8 and net sales of $600,000 for a given period. What was the average accounts receivable amount for this period?

Receivables can be used to obtain cash by either selling them or using them as security for a loan.

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

Welles Company uses the direct write-off method of accounting for uncollectible accounts receivable. On December 6, 2010, Welles sold $6,300 of merchandise to the Fleming Company. On August 8, 2011, after numerous attempts to collect the account, Welles determined that the $6,300 account of the Fleming Company was uncollectible. A. Prepare the general journal entries required to record the transactions on August 8, 2011 B. Assuming that the $6,300 is material, explain how the direct write-off method violates the matching principle in this case

The percent of sales method for estimating bad debts assumes that a given percent of a company's credit sales for the period are uncollectible.

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

Temper Company has credit sales of $3.10 million for year 2010. Temper estimates that 2% of accounts receivable will remain uncollectible. Historically, .9% of sales have been uncollectible. On December 31, 2010, the company's Allowance for Doubtful Accounts has an unadjusted credit balance of $2,575. Temper prepares a schedule of its December 31, 2010, 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: Assuming the company uses the percent of accounts receivable method, what is the amount that Temper will enter as the Bad Debt Expense in the December 31 adjusting journal entry?

The aging method of determining bad debts expense is based on the knowledge that the longer a receivable is past due, the lower the likelihood of collection.

Credit sales are recorded by crediting an account receivable for the specific customer who is making the purchase.

Chiller Company has credit sales of $5.60 million for year 2010. Chiller estimates that 1.32% of the credit sales will not be collected. Historically, 4% of outstanding accounts receivable is uncollectible. On December 31, 2010, the company's Allowance for Doubtful Accounts has an unadjusted credit balance of $3,561. Chiller prepares a schedule of its December 31, 2010, 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 31,2010 Age of Accounts Expected Percent Accounts Receivable Receivable Uncollectible \ 1,095,000 Not yet due 0.85\% 322,550 1 to 30 days past due 1.42 84,700 31 to 60 days past due 7.60 50,420 61 to 90 days past due 42.50 12,500 Over 90 days past due 81.00 Assuming the company uses the aging of accounts receivable method, what is the amount that Chiller will enter as the Bad Debt Expense in the December 31 adjusting journal entry?

Describe how accounts receivable arise and how they are accounted for, including the use of a subsidiary ledger and an allowance account.

The quality of receivables refers to the likelihood of collection without loss.

The process of using accounts receivable as security for a loan is known as factoring accounts receivable.