Exam 8: Reporting and Analyzing Receivables

Gipson Furniture factors $700,000 of receivables to Kwik Factors, Inc.Kwik Factors assesses a 3% service charge on the amount of receivables sold.Gipson Furniture factors its receivables regularly with Kwik Factors.What journal entry does Gipson make when factoring these receivables?

Under the allowance method, when a year-end adjustment is made for estimated uncollectible accounts

An aging of a company's accounts receivable indicates that $9,000 are estimated to be uncollectible.If Allowance for Doubtful Accounts has a $2,400 credit balance, the adjustment to record bad debts for the period will require a

A company regularly sells its receivables to a factor who assesses a 2% service charge on the amount of receivables purchased.Which of the following statements is true for the seller of the receivables?

Ramos Company has a 90-day note that carries an annual interest rate of 8%.If the amount of the total interest on the note is equal to $900, then what is the principal of the note?

On April 5, Donna's Boutique accepted a Visa card for a $750 purchase.Visa charges a 2% service fee.The entry to record this transaction would include a

If bad debt losses are significant, the direct write-off method is acceptable for financial reporting purposes.

When the due date of a note is stated in months, the time factor in computing interest is the number of months divided by 360 days.

The expense recognition principle

The interest rate for a three-month loan would normally be stated in terms of which of the following rates of interest?

Uncollectible accounts must be estimated because it is not possible to know which accounts will not be collected.

The following information is related to December 31, 2021 balances. During 2022, sales on account were $870,000 and collections on account were $516,000.The company wrote off $48,000 in uncollectible accounts.An analysis of outstanding receivable accounts at year-end indicated that bad debts should be estimated at $324,000.The change in the cash realizable value from the balance at 12/31/21 to 12/31/22 was a

The expense recognition principle relates to credit losses by stating that bad debt expense should be recorded

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

The percentage of receivables basis of estimating uncollectible accounts ignores the existing balance in the Allowance for Doubtful Accounts in the calculation of bad debts expense.

The allowance method of accounting for bad debts violates the matching principle.

One might infer from a debit balance in Allowance for Doubtful Accounts that

When calculating interest on a promissory note of less than one year, with the maturity date stated in terms of days, the

The allowance method of accounting for bad debts violates the matching principle.

A captive finance company refers to