Exam 8: Accounting for Receivables

Which receivables accounting and reporting issue is not essentially the same for IFRS and GAAP?

In order to encourage prompt payment of a trade receivable, companies often offer ______________ to customers.

Claims for which formal instruments of credit are issued as proof of the debt are

On January 15, 2018, Craig Company received a two-month, 9%, $9,000 note from William Pentel for the settlement of his open account. The entry by Craig Company on January 15, 2018 would include a:

Sales resulting from the use of Visa and MasterCard are considered credit sales by the retailer.

A 30-day note dated June 18 has a maturity date of

Morton Company had the following select transactions. Instructions Prepare journal entries to record the transactions. Morton prepares adjusting entries once a year on December 31.

Avett Furniture Store has credit sales of $400,000 in 2018 and a debit balance of $600 in the Allowance for Doubtful Accounts at year end. As of December 31, 2018, $130,000 of accounts receivable remain uncollected. The credit manager prepared an aging schedule of accounts receivable and estimates that $7,000 will prove to be uncollectible. On March 4, 2019, the credit manager authorizes a write-off of the $1,200 balance owed by B. Fernitti. Instructions (a) Prepare the adjusting entry to record the estimated uncollectible accounts expense in 2018. (b) Show the balance sheet presentation of accounts receivable on December 31, 2018. (c) On March 4, before the write-off, assume the balance of Accounts Receivable account is $160,000 and the balance of Allowance for Doubtful Accounts is a credit of $3,000. Make the appropriate entry to record the write-off of the Fernetti account. Also show the balance sheet presentation of accounts receivable before and after the write-off.

Under the allowance method, the cash realizable value of receivables is the same both before and after an account has been written off.

An inexperienced accountant made the following entries. In each case, the explanation to the entry is correct. Instructions Prepare the correcting entries.

Stine Co. sells Christmas angels. Stine determines that at the end of December, it has the following aging schedule of Accounts Receivable: Compute the net receivables based on the above information at the end of December. (There was no beginning balance in the Allowance for Doubtful Accounts).

Haven Company uses the percentage of receivables method for recording bad debt expense. The accounts receivable balance is $600,000 and credit sales are $2,700,000. Management estimates that 4% of accounts receivable will be uncollectible. What adjusting entry will Haven Company make to record bad debt expense if the Allowance for Doubtful Accounts has a $5,000 credit balance before adjustment?

The face value of a note refers to the amount

Renfro Company had accounts receivable of $100,000 on January 1, 2015. The only transactions that affected accounts receivable during 2015 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 for 2015. (c) Compute the average collection period in days.

Interest is usually associated with

Fleming Sign Company uses the allowance method in accounting for uncollectible accounts. Past experience indicates that 6% of accounts receivable will eventually be uncollectible. Selected account balances at December 31, 2017, and December 31, 2018, appear below: 12/31/17 12/31/18 Net Credit Sales $400,000 $500,000 Accounts Receivable 60,000 80,000 Allowance for Doubtful Accounts 5,200 ? Instructions (a) Record the following events in 2018. Aug. 10 Determined that the account of Sue King for $800 is uncollectible. Sept. 12 Determined that the account of Tom Young for $3,700 is uncollectible. Oct. 10 Received a check for $500 as payment on account from Sue King, whose account had previously been written off as uncollectible. She indicated the remainder of her account would be paid in November. Nov. 15 Received a check for $300 from Sue King as payment on her account. (b) Prepare the adjusting journal entry to record the bad debt provision for the year ended December 31, 2018. (c) What is the balance of Allowance for Doubtful Accounts at December 31, 2018?

The December 31, 2017 balance sheet of Barone Company had Accounts Receivable of $400,000 and a credit balance in Allowance for Doubtful Accounts of $32,000. During 2018, the following transactions occurred: sales on account $1,500,000; sales returns and allowances, $50,000; collections from customers, $1,250,000; accounts written off $36,000; previously written off accounts of $6,000 were collected. Instructions (a) Journalize the 2018 transactions. (b) If the company uses the percentage of receivables basis to estimate bad debt expense and determines that uncollectible accounts are expected to be 8% of accounts receivable, what is the adjusting entry at December 31, 2018?

Accounts receivable are the result of cash and credit sales.

Customer purchases using credit cards are a significant source of revenue for many retailers. From the standpoint of a retailer, briefly discuss some advantages and disadvantages of a retail store having its own credit card as opposed to accepting one of the national credit cards (e.g., Visa, MasterCard).