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Exam 9: Accounting for Receivables

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Question 91

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The _____________ basis of estimating uncollectibles provides a better _____________ of bad debt expense with sales revenue and therefore emphasizes income statement relationships.

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percentage...

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Question 92

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If a company sells its accounts receivables to a factor,

A) the seller pays a commission to the factor.
B) the factor pays a commission to the seller.
C) there is a gain on the sale of the receivables.
D) the seller defers recognition of sales revenue until the account is collected.

E) All of the above
F) B) and C)

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Question 93

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On January 6, Stegner Co. sells merchandise on account to Molina Inc. for $7,000, terms 2/10, n/30. On January 16, Molina Inc. pays the amount due. Prepare the entries on Stegner's books to record the sale and related collection. (b) On January 10, Jill Flynn uses her Calhoun Co. credit card to purchase merchandise from Calhoun Co. for $9,000. On February 10, Flynn is billed for the amount due of $9,000. On February 12, Flynn pays $4,000 on the balance due. On March 10, Flynn is billed for the amount due, including interest at 2% per month on the unpaid balance as of February 12. Prepare the entries on Calhoun Co.'s books related to the transactions that occurred on January 10, February 12, and March 10.

The percentage of sales basis of estimating expected uncollectibles

The face value of a note refers to the amount

If a company fails to record estimated bad debts expense,

Compute the maturity value for each of the following notes receivable. 1. A $5,000, 6%, 3-month note dated July 20. Maturity value $____________. 2. A $12,000, 9%, 150-day note dated August 5. Maturity value $____________.

Using the percentage of receivables method for recording bad debts expense, estimated uncollectible accounts are $10,000. If the balance of the Allowance for Doubtful Accounts is $2,000 credit before adjustment, what is the amount of bad debts expense for that period?

On October 1, 2010, Brosnan Company sells (factors) $400,000 of receivables to Nation Factors, Inc. Nation assesses a service charge of 3% of the amount of receivables sold. The journal entry to record the sale by Brosnan will include:

Allowance for Doubtful Accounts on the balance sheet

The financial statements of Gentry Manufacturing Company report net sales of $400,000 and accounts receivable of $80,000 and $40,000 at the beginning and end of the year, respectively. What is the receivables turnover ratio for Gentry?

Under the direct write-off method, no attempt is made to match bad debts expense to sales revenues in the same accounting period.

A customer charges a treadmill at Mike's Sport Shop. The price is $2,000 and the financing charge is 9% per annum if the bill is not paid in 30 days. The customer fails to pay the bill within 30 days and a finance charge is added to the customer's account. The accounts affected by the journal entry made by Mike's Sport Shop to record the finance charge are

The three primary accounting problems with accounts receivable are: (1) recognizing, (2) depreciating, and (3) disposing.

In reviewing the accounts receivable, the cash realizable value is $16,000 before the write-off of a $1,500 account. What is the cash realizable value after the write-off?

Parks Company receives a $5,000, 3-month, 8% promissory note from Todd Company in settlement of an open accounts receivable. What entry will Parks Company make upon receiving the note?

Scully Company had accounts receivable of $100,000 on January 1, 2010. The only transactions that affected accounts receivable during 2010 were net credit sales of $1,200,000, cash collections of $1,000,000, and accounts written off of $30,000. Instructions (a) Compute the ending balance of accounts receivable. (b) Compute the accounts receivable turnover ratio for 2010. (c) Compute the average collection period in days.

Ripken Supply Co. has the following transactions related to notes receivable during the last 2 months of 2010. Nov. 1 Loaned $30,000 cash to Linda Waters on a 1-year, 10% note. Dec. 11 Sold goods to Wainwright, Inc., receiving a $10,800, 90-day, 8% note. 16 Received an $8,000, 6-month, 9% note in exchange for Don Garbo's outstanding accounts receivable. 31 Accrued interest revenue on all notes receivable. Instructions (a) Journalize the transactions for Ripken Supply Co. (b) Record the collection of the Waters note at its maturity in 2011.

Prepare journal entries to record the following transactions entered into by Glaser Company: 2010 June 1 Received a $20,000, 12%, 1-year note from Ann Duff as full payment on her account. Nov. 1 Sold merchandise on account to Malone, Inc. for $10,000, terms 2/10, n/30. Nov. 5 Malone, Inc. returned merchandise worth $500. Nov. 9 Received payment in full from Malone, Inc. Dec. 31 Accrued interest on Duff's note. 2011 June 1 Ann Duff honored her promissory note by sending the face amount plus interest. No interest has been accrued in 2011.

In 2010, Freeze Company had credit sales of $900,000 and granted sales discounts of $18,000. On January 1, 2010, Allowance for Doubtful Accounts had a credit balance of $22,500. During 2010, $37,500 of uncollectible accounts receivable were written off. Past experience indicates that 3% of net credit sales become uncollectible. What should be the adjusted balance of Allowance for Doubtful Accounts at December 31, 2010?