Exam 9: Accounting for Receivables

Compute bad debt expense based on the following information: (a) LRP Company estimates that 3% of net credit sales will become uncollectible. Sales revenue are $600000 sales returns and allowances are $30000 and the allowance for doubtful accounts has a $5000 credit balance. (b) LRP Company estimates that 10% of accounts receivable will become uncollectible. Accounts receivable are $160000 at the end of the year and the allowance for doubtful accounts has a $400 debit balance.

When customers make purchases with a national credit card the retailer

Generally accepted accounting principles require that the direct write-off method be used for financial reporting purposes if it is also used for tax purposes.

If an account is collected after having been previously written off

Under the allowance method writing off an uncollectible account

A 90-day note receivable dated June 10 would mature on ______________.

Notes receivable represent claims for which formal instruments of credit are issued as evidence of debt.

Leek Company receives a $12000 3-month 5% promissory note from Rey Company in settlement of an open accounts receivable. What entry will Leek Company make upon receiving the note? a. Notes Receivable 12,150 Accounts Receivable-Rey Company 12,150 b. Notes Receivable 12,150 Accounts Receivable-Rey Company 12,000 Interest Revenue 150 c. Notes Receivable 12,000 Interest Revenue 150 Accounts Receivable-Rey Company 12,000 Interest Revenue 150 d. Notes Receivable 12,000 Accounts Receivable-Rey Company 12,000

The financial statements of Daye Manufacturing Company report net sales of $720000 and accounts receivable of $70000 and $90000 at the beginning and end of the year respectively. What is the accounts receivable turnover for Daye?

The receivable that is usually evidenced by a formal instrument of credit is a(n)

The average collection period is computed by dividing

If a retailer accepts a national credit card such as Visa the retailer must maintain detailed records of customer accounts.

Valli Company uses the percentage of sales method for recording bad debts expense. For the year cash sales are $700000 and credit sales are $2500000. Management estimates that 1% is the sales percentage to use. What adjusting entry will Valli Company make to record the bad debts expense? a. Bad Debt Expense 32,000 Allowance for Doubtful Accounts 32,000 b. Bad Debt Expense 25,000 Allowance for Doubtful Accounts 25,000 c. Bad Debt Expense 25,000 Accounts Receivable 25,000 d. Bad Debt Expense 32,000 Accounts Receivable 32,000

A cash discount is usually granted to all of the following except

If a company uses the allowance method to account for uncollectible accounts the entry to write off an uncollectible account only involves balance sheet accounts.

Accounts receivable which are also referred to as ______________ receivables are amounts owed by customers on account.

Using the following information: Accounts receivable \ 525,000 Allowance Cash realizable value - During 2016 sales on account were $145000 and collections on account were $100000. Also during 2016 the company wrote off $5000 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that uncollectible accounts should be estimated at $45000. Bad debt expense for 2016 is

The percentage of sales basis for estimating uncollectible accounts always results in more Bad Debt Expense being recognized than the percentage of receivables basis.

The accounts receivable turnover is computed by dividing

In 2016 Yale Company had credit sales of $1050000 and granted sales discounts of $25000. On January 1 2016 Allowance for Doubtful Accounts had a credit balance of $26400. During 2016 $43000 of uncollectible accounts receivable were written off. Past experience indicates that 3% of net credit sales become uncollectible. What should be the adjusted balance of Allowance for Doubtful Accounts at December 31 2016?