Exam 8: Receivables

The direct write-off method satisfies generally accepted accounting principles.

Discuss the purpose of the accounts receivable turnover ratio and explain how it is calculated.

Calculate the amount of interest that would be owed on a $10,000, 90-day, 5% note receivable.

Annie's Attic sold $80,000 in accounts receivable to First Bank and incurred a 2% factor fee. Prepare the journal entry to record the sale.

Fife Company has the following account balances at December 31 of the current year: Accounts Receivable $44,000 and Allowance for Doubtful Accounts $600 (credit balance). Fife uses the aging of accounts receivable to estimate bad debts. The following aging schedule reflects the situation at year-end: $\text { Schedule af Accounts Receivable by Age }$ Customers Name Total Not yet due 1-30 days past due 31-60 days past due 61-90 days past due Over 90 days past due S. Milken 12,000 5,000 3,000 2,000 1,000 1,000 F. Filip 7,000 1,000 2,000 1,000 800 2,200 J. Riley 14,000 8,000 3,000 2,000 100 900 R. Cash 3,000 2,000 1,000 L. Faraday 8,000 1,000 7,000 Totals 44,000 17,000 16,000 5,000 1,900 4,100 Percent 2\% 5\% 10\% 25\% 40\% Uncollectible (1) Calculate the amount of the Allowance for Doubtful Accounts that should appear on the December 31, current year, balance sheet. (2) Prepare the journal entry to record bad debts expense for the current year.

Dell had net sales of $8,739 million and average accounts receivable of $864 million. Its accounts receivable turnover was

The direct write-off method is used because it is simpler than the allowance method.