Exam 5: Sales And Receivables

The following data are from the company's records for the year ended December 31: -Refer to Accelerated Solutions. If the aging approach is used to estimate bad debts, find the balance in the Allowance for Doubtful Accounts after the bad debt expense adjustment.

Art Shoes This company received a promissory note from a customer on July 1, 2019. The face amount of the note is $45,000; the terms are 12 months and 10% annual interest. -Refer to Art Shoes. How much interest revenue will the company recognize for the year ended December 31, 2019?

All American Storage Corporation sold merchandise with credit terms of 2/10, n/30, for $100,000 to a customer on January 1, 2019. Nine months later, on October 1, 2019 the company accepted a 12%, 6-month note receivable in settlement of the account. The customer paid the maturity value of the note on the due date. Prepare the following journal entries: A) Record the sale of merchandise on January 1, 2019. B)Record the receipt of the note receivable on October 1, 2019. C) Record the adjusting entry to accrue interest on December 31, 2019. D)What is the due date of the note? E) Record the collection of the note on the due date.

Ace Computing Company On January 1, the Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $40,000 and $1,500 respectively. During the year, the company reported $80,000 of credit sales. There were $500 of receivables written off as uncollected during the year. Cash collections of receivables amounted to $78,200. The company estimates that it will be unable to collect 4% of the year-end accounts receivable balance. -Refer to the Ace Computing Company. The amount of bad debts expense recognized in the income statement will be:

A company receiving payment of a $20,000 accounts receivable within 10 days with terms of 2/10, n/30, would record a sales discount of:

Special forms of factoring are called ____________________.

The longer a customer's account balance remains outstanding, the greater the likelihood that it will be collected in the near future.

Accent Flooring The company received a promissory note from a customer on March 1, 2019. The principal amount of the note is $20,000; the terms are 3 months and 9% annual interest. -Refer to the information for Accent Flooring. At the maturity date, the customer pays the amount due for the note and interest. What entry is required on the books of Accent Flooring on the maturity date assuming that none of the interest had already been recognized?

Internal control for sales involve which of the following documentation?

The amount of money borrowed when a promissory note is issued is called the ____________________.

Allgood Pet Supplies reported net credit sales of $3,200,000 and cost of goods sold of $2,600,000 for 2019. On January 1, 2019, accounts receivable was $450,000. Amounts owed by customers increased by $50,000 during 2019. Rounding to two decimal places, what is the company's accounts receivable turnover rate for 2019?

Absolute Appliances The company sold merchandise to a customer on December 1, 2019, for $120,000. The company accepted a promissory note as payment. The note has a term of three months and an annual interest rate of 10%. The company's accounting period ends on December 31. -Refer to Absolute Appliances. What amount should the company recognize as interest revenue in 2020?

The following information was obtained from the company's records for the year ended December 31: -Refer to Abbot Safe & Lock. What is the effect on liquidity when the company records its estimate for bad debt expense using the allowance method?

A company uses the direct write-off method to account for bad debts. What are the effects on the accounting equation of the entry to record the write-off of a customer's account balance?

A primary advantage of the allowance method to account for bad debts is that it supports the matching principle.

On January 1, Alliance Company had the following balances for accounts receivable and allowance for doubtful accounts: During the year, the company made $3,200,000 in credit sales, collected $3,000,000 of accounts receivable and wrote off $20,000 of accounts receivable as uncollected. Required: A)What is the company's preadjustment balance in accounts receivable at December 31? B)What is the preadjustment balance in allowance for doubtful accounts at December 31? C)Assume an analysis of aging of accounts receivable indicates that $45,000 of the current accounts receivable balance is uncollected. By what amount will the allowance for doubtful accounts need to be adjusted? D)Prepare the adjusting entry for the year ended December 31 for Allowance for Doubtful Accounts.

Which one of the approaches for the allowance procedure emphasizes the net realizable value of accounts receivable on the balance sheet?

This company sells merchandise only on credit. For the year ended December 31, the following data are available: -Refer to Aardvark Resale. Can the company use the direct write-off method rather than the allowance method to account for bad debts expense? Explain why or why not.

If a company uses the allowance method to account for doubtful accounts, when will the company's Stockholders' equity decrease?

A company needs to record 6 months of accrued interest on a 4-year, 12%, $12,000 promissory note payable. How much interest expense should be accrued?