Exam 8: Receivables

TechCom has $40,000 in outstanding accounts receivable. Past experience suggests that 5% of outstanding receivables are uncollectible. The current balance in the allowance for doubtful accounts is $2,500 debit. The required adjusting journal entry includes a debit to bad debt expense for $4,500.

In April, Hasbro had $3,875 million in sales and $990 million in accounts receivable. For the same period, Mattel had $4,595 million in sales and $834 million in accounts receivable. Calculate the days' sales uncollected for both companies. Which company appears to be doing a better job in managing collection of its receivables (all other things assumed to be equal)?

Notes receivable do not require a subsidiary ledger.

On December 31, Burrell, Inc.'s books showed accounts receivable of $385,600; sales revenue of $1,480,000 (70% were on credit); and Allowance for Doubtful Accounts of $1,600 (credit balance). -Calculate and prepare journal entries to record the estimate for bad debts, assuming: (1) Ten percent of the accounts receivable balance is assumed to be uncollectible. (2) Bad debts expense is estimated to be 2% of credit sales.

An accounting procedure that (1) estimates and reports bad debt expense from credit sales during the period of the sales and (2) reports accounts receivable at the amount of cash inflow that is expected from their collection is the

The person that borrows money and signs a promissory note is called the payee.

Failure by the maker of a promissory note to pay the amount due at maturity is known as

Quality of receivables refers to the likelihood of collection without loss.

Wasson Corp had the following items in its unadjusted trial balance at December 31: Debit Credit Cash sales \ 77,000 Credit sales 130,000 Accourts receivable \ 56,000 Allowance for doubtful 500 accounts Prepare the adjusting entry to estimate bad debts under each of the following independent situations. (Show all work.) (1) Bad debts are estimated to be 5% of credit sales. (2) An analysis shows that 6% of outstanding accounts receivable will not be collected.

The amount of bad debt expense can be estimated by

Electron borrowed $75,000 from TechCom by signing a promissory note and pledging $85,000 in accounts receivable as security. TechCom's entry to record the transaction should include a

A 90-day note issued on July 10 matures on

The person who signs a note receivable and promises to pay is the

The percentage of sales approach for estimating bad debts is based on the idea that a percent of a company's credit sales for the period are uncollectible.

TechCom receives a 10%, 90-day note for $2,500. The interest on the note is

TechCom had net sales of $480,000 and average accounts receivable of $64,000. Its accounts receivable turnover was 7.5.

The days' sales uncollected ratio is used to

Accounts receivable turnover measures

A company must have less than 30 days' sales uncollected to be adequately liquid.

A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and that is usually the most reliable is the