Exam 8: Receivables

Copper Company had a January 1, current year, balance in Allowance for Doubtful Accounts of $7,000 credit. The following events required journal entries during the current year: What amount of allowance for doubtful accounts should appear in the December31, current year, balance sheet?

Zero Co. uses the allowance method of accounting for bad debts. TheirAllowance for Doubtful Accounts account has a year-end debit balance, prior to adjustment, of $800. The bad debts are estimated at 5% of $160,000, theyear-end accounts receivable. Prepare the year end adjusting journal entry forbad debt expense.

On October 12, 2015, Golf Co. received from one of its customers, Ping Co., a$25,500, 7% 90 day note receivable in granting a time extension on Ping's past due account receivable. Golf Co. has a December 31 year end. Ping Co.honoured the note at maturity. Prepare the entries for the issuance of the note,the end of year interest adjustment and the collection of the note at maturity.

How are the direct write-off and allowance methods applied to accounting for uncollectible receivables?

TechCom had net sales of $480,000 and average accounts receivable of $64,000. Its accounts receivable turnover was 7.5.

The use of an allowance for bad debts is required under the materiality principle.

Stiller Company uses the allowance method to account for bad debts.In the first year of operations (2014), Stiller sold $540,000 of merchandise on credit, including a $2,500 sale to Bubba LongOn December 31, 2014, to increase the allowance for doubtful accountsOn June 1, 2015, to write off the bad debt.(c)On December 25, 2015, to record the unexpected collection from BubbaLong.

TechCom ages its accounts receivables to determine the end of the period adjustment for bad debts. At the end of the year, management estimated that $12,750 of theaccounts receivable balances would be uncollectible. The Allowance for DoubtfulAccounts had a debit balance of $175. What entry should TechCom make at the end of the year, for the estimated bad debts expense?

Gomez Management Services Inc. accepts an 18-month, 12%, $5,000 note receivablefrom a client in settlement of an outstanding accounts receivable on November 1, 2018. The client pays off the note on April 30, 2020. Gomez should recognize interestrevenue in 2020 of:

The matching principle requires use of the direct write-off method.

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

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

On June 18, 2015, Woods Co. received from one of its customers, Webb Co., a90 day, 12%, $12,000 note receivable, in exchange for contract servicesprovided. Woods Co. has a March 31 year end. Webb Co. honoured the note at maturity. Prepare the entries for the issuance and the maturity of the note.

How can a company convert its receivables to cash?

The buyer who pays cash for accounts receivable is called:

TechCom had net sales of $315,000 and average accounts receivable of $75,600.Its competitor, ZCom, had net sales of $299,000 and average accountsreceivable of $81,350?

Kader Company had the following balances on January 1, 2015: Prepare general journal entries for the following transactions of Kader Company:

The amount of bad debt expense can be estimated by:

TechCom has $40,000 in outstanding accounts receivable. Past experience suggests that5% of outstanding receivables are uncollectible. The current balance in the allowance for doubtful accounts is $2,500 debit. The required adjusting journal entry includes a debit to bad debt expense for $4,500.

A contingent liability is an obligation to make a future payment if an uncertain future event occurs.