Exam 7: Reporting and Analyzing Receivables

At December 31 of the current year, a company reported the following: Total sales for the current year: $980,000 includes $160,000 in cash sales Accounts receivable balance at Dec. 31, end of current year: $160,000 Allowance for Doubtful Accounts balance at January 1, beginning of current year: $7,300 credit Bad debts written off during the current year: $5,800. Prepare the necessary adjusting entries to record bad debts expense assuming this company's bad debts are estimated to equal 5% of accounts receivable.

Companies use two methods to account for uncollectible accounts, the direct write-off method and the allowance method.

On July 9, Mifflin Company receives a $8,500, 90-day, 8% note from customer Payton Summers as payment on account. Compute the maturity date for the note.

Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. The amount of interest that Jasper will collect on the loan is:

A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and the length of time past due is the:

Notes receivable are classified as current liabilities regardless of the time to maturity.

Giorgio Italian Market bought $4,000 worth of merchandise from Food Suppliers and signed a 90-day, 6% promissory note for the $4,000. Food Supplier's journal entry to record the sales transaction is:

On September 30, Waldon Co. has $540,250 of accounts receivable. Waldon uses the allowance method of accounting for bad debts and has an existing credit balance in the allowance for doubtful accounts of $13,750. 1. Prepare journal entries to record the following selected October transactions. The company uses the perpetual inventory system. 2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its October 31 balance sheet. a. Sold $305,000 of merchandise (that cost $178,500) to customers on credit. b. Received $395,100 cash in payment of accounts receivable. c. Wrote off $15,700 of uncollectible accounts receivable. d. In adjusting the accounts on October 31, its fiscal year-end, the company estimated that 4.0% of accounts receivable will be uncollectible.

_______________ refers to the expected proceeds from converting an asset into cash.

Describe the differences in how the direct write-off method and the allowance method are applied in accounting for uncollectible accounts receivables.

Uniform Supply accepted a $4,800, 90-day, 10% note from Tracy Janitorial on October 17. What entry should Uniform Supply make on December 31, to record the accrued interest on the note?

Bonita Company estimates uncollectible accounts using the allowance method at December 31. It prepared the following aging of receivables analysis. a. Estimate the balance of the Allowance for Doubtful Accounts using the aging of accounts receivable method. b. Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $550 credit. c. Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $300 debit.

Music World sold $7,800 in electronic components to Jax Recording Studio. Jax signed a 60-day, 8% promissory note for $7,800. Music World's journal entry to record the sales transaction is:

The accounts receivable turnover is calculated by dividing _________________ by ________________.

Uniform Supply accepted a $4,800, 90-day, 10% note from Tracy Janitorial on October 17. If the note is dishonored, what entry should Uniform Supply make on January 15 of the next year, assuming interest was properly accrued at the previous December 31 year end?

Jones Cement Company has an Accounts Receivable balance on December 31 of $217,000, Sales for the year of $3,633,000, and an Allowance for Doubtful Accounts balance after adjustment of $4,340. The Realizable value of Jones' Accounts Receivables is:

MacKenzie Company sold $300 of merchandise to a customer who used a Regional Bank credit card. Regional Bank deducts a 1.5% service charge for sales on its credit cards and credits MacKenzie's account immediately when sales are made. The journal entry to record this sale transaction would be:

The account receivable turnover measures:

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

A note that the maker is unable or refuses to pay at maturity is called a dishonored note.