Exam 8: Receivables

If the balance of the Allowance for Doubtful Accounts account exceeds the amount of a bad debt being written off, the entry to record the write-off against the allowance account results in

TechCom received a $1,000, 90-day, 10% note receivable from Danny Outlaw. The journal entry to record the note includes a debit to notes receivable.

Accounts receivable accounts for specific customers are important because they show

Identify the accounting principle involved in deciding between the allowance method and the direct write-off method. Indicate which principle is associated with each method.

The following information is from the financial statements of Exquisite Ensembles: YR 3 YR 2 YR 1 Net sales \ 1,260,000 \ 1,020,000 \ 850,000 Accounts receivable (Dec 31) 92,800 88,000 84,200 Calculate Exquisite Ensembles' accounts receivable turnover ratio for YR 2 and YR 3. Compare the two results and give a possible explanation for any significant change.

Hasbro had $750 million in accounts receivable and $2,900 million in net sales for the period. Its days' sales uncollected was 29.8.

Capilano Company has a July 31 year-end. You have been provided with the following information for the year just ended:

Each December 31, Charity Company ages its accounts receivable to determine the amount of its adjustment for bad debts. At the end of this year, management estimated that $56,900 of the accounts receivable balance would be uncollectible. The Allowance for Doubtful Accounts account had a credit balance of $4,200. Prepare the adjusting journal entry that Charity Company should make on December 31 of the current year, to estimate bad debts expense.

Joy Co. uses the allowance method of accounting for bad debts. Their Allowance for Doubtful Accounts has a year-end credit balance, prior to adjustment, of $700. The bad debts are estimated at 3% of $600,000, the net credit sales. Prepare the year end adjusting journal entry for bad debt expense.

Triple Mint Gum Co. uses the allowance method of accounting for bad debts. Their Allowance for Doubtful Accounts account has a year-end debit balance, prior to adjustment, of $500. The bad debts are estimated at 5% of $200,000, the year-end accounts receivable. Prepare the year end adjusting journal entry for bad debt expense.

The days' sales uncollected ratio is calculated by

The materiality principle

The direct write-off method of accounting for bad debts records the loss from an uncollectible account receivable at the time it is determined to be uncollectible.

A dishonoured note receivable is reclassified as an account receivable.

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

Stricker Company accepted a $20,000, 6%, 90-day note dated May 16, from Johnson Corp. as an extension on its past-due account. Prepare the necessary general journal entries in Stricker Company's books on May 16 and August 14 (maturity date), for each of the following independent assumptions:(a) Note was held until maturity and collected on time.(b) Note was dishonoured. Amount of note and interest were written off as uncollectible. (Stricker uses the allowance method of accounting for bad debts.)

A note receivable discounted with recourse is

Accounts receivable turnover is calculated by dividing net sales by average accounts receivable.

If a 90-day note receivable is dated June 12, what is the due date of the note?

Refer to part (c). Assume that $2,000 of the amount written off was subsequently collected on October 28, 2021. Prepare the required entry(ies) on October 28, 2021.