Exam 9: Receivables

A three-month note dated April 8 matures on:

The acid-test ratio tells whether the entity could pay all its current liabilities if they came due immediately.

Table 9-5 The Ritchie Company gathered the following information pertaining to its year ended December 31, 2019, prior to any adjustments: Net credit sales for the year \ 780,000 Accounts receivable, Dec. 31,2019 170,000 Allowance for doubtful accounts, December 31,2019 3,200 . Aging of accounts receivable at December 31, 2019: 1-30 days \ 95,000 31-60 days 38,000 61-90 days 23,000 Over 90 days 14,000 Total \ 170,000 -Refer to Table 9-5. Assume Ritchie uses the aging-of-accounts-receivable method for estimating uncollectible accounts. Ritchie estimates that uncollectible accounts will be aged as follows: 3% for 1-30 days; 5% for 31-60 days; 8% for 61-90 days; and 20% for over 90 days. The adjusting entry to record bad-debt expense for the year is:

Table 9-13 Davidson Services At January 1, Davidson Services has the following balances: Date Accounts Receivable Debit Credit Balance 9,000 Dr. Date Allowance for Doubtful Accounts Debit Credit Balance 800 . Date Bad Debts Expense Debit Credit Balance During the year, Davidson has $104,000 of credit sales, collections of $100,000, and write-offs of $1,400. -Refer to Table 9-13 to answer the following assuming that Davidson records uncollectible account expense at the end of the year using the percent-of-sales method, and applies a rate of 1.1% based on past history. 1. Prior to the year-end entry to adjust the bad debts expense, what is the balance in accounts receivable? 2. After the year-end entry to adjust the bad debts expense, what is the ending balance in the allowance for uncollectible accounts? 3. After the year-end to adjust the bad debts expense, what is the ending balance of net accounts receivable? 4. If the business uses the direct-write-off method what will be the amount for uncollectible accounts expense?

Accounts receivable has a debit balance of $5,000, and the allowance for doubtful accounts has a credit balance of $440. A specific account of $160 is written off. What is the amount of net receivables after the write-off?

If the maker of a note does not pay at maturity, the maker is said to dishonour the note.

The person or business to which the maker of a note promises future payment is called the payee.

Describe two common events that create receivables and provide the generic names of the two parties involved in a credit transaction.

The allowance for doubtful accounts has a current debit balance of $2,550. Bad-debt expense is estimated to be 3% of net credit sales. If net credit sales were $250,000, which of the following would be part of the adjusting entry for bad-debt expense?

All of the following duties should be performed by a credit department except:

The direct write-off method is the preferred way to apply the accrual basis for measuring bad-debt expense since it matches revenues and expenses on the income statement.

Fresh Dairy Company uses the allowance method and estimates uncollectible accounts based on a percent of sales. Net credit sales represent 75% of total sales. Total sales for 2019 were $840,000. Historically, 1/2 of 1% of net credit sales have been uncollectible. At December 31, 2019, the balance in allowance for doubtful accounts is a $120 credit. What is the balance in bad-debt expense after the adjusting entry is made?

Table 9-5 The Ritchie Company gathered the following information pertaining to its year ended December 31, 2019, prior to any adjustments: Net credit sales for the year \ 780,000 Accounts receivable, Dec. 31,2019 170,000 Allowance for doubtful accounts, December 31,2019 3,200 . Aging of accounts receivable at December 31, 2019: 1-30 days \ 95,000 31-60 days 38,000 61-90 days 23,000 Over 90 days 14,000 Total \ 170,000 -Refer to Table 9-5. Assume Ritchie uses the percent-of-sales method for estimating uncollectible accounts. Ritchie estimates that bad-debt expense will be 1.3% of net credit sales. After the adjustment for uncollectible accounts is made, the net realizable value of accounts receivable will be:

Table 9-13 Davidson Services At January 1, Davidson Services has the following balances: Date Accounts Receivable Debit Credit Balance 9,000 Dr. Date Allowance for Doubtful Accounts Debit Credit Balance 800 . Date Bad Debts Expense Debit Credit Balance During the year, Davidson has $104,000 of credit sales, collections of $100,000, and write-offs of $1,400. -Refer to Table 9-13 to answer the following assuming that Davidson records uncollectible account expense at the end of the year using the aging method. At the end of the year, the aging analysis produces a figure of $700, being the estimate of uncollectible accounts at the end of year. 1. What is the amount that should be recorded for bad debts expense? 2. After the year-end entry to adjust the bad debts expense, what is the ending balance in the allowance for uncollectible accounts? 3. After the year-end to adjust the bad debts expense, what is the ending balance of net accounts receivable?

Table 9-10 Armadillo Camera Shop The following information is from the 2019 records of Armadillo Camera Shop: Accounts receivable, December 31,2019 \ 20,000 (debit) Allowance for doubtful accounts, December 31,2019, prior to adjustment 600( debit) Net credit sales for 2019 95,000 Accounts written off as uncollectible during 2019 7,000 Cash sales during 2019 27,000 -Refer to Table 9-10. Bad debts expense is estimated by the percent-of-sales method. Management estimates that 3% of net credit sales will be uncollectible. Which of the following will be the balance of the allowance for uncollectible accounts after adjustment?

The current credit balance in allowance for doubtful accounts before adjustment is $658. An aging schedule reveals $3,500 of uncollectible accounts. The journal entry for estimated uncollectible accounts should be prepared for:

A 60-day, 12% note for $11,000, dated May 15, is received from a customer. The principal amount of the note is:

A critical element of internal control over collections of accounts receivable is:

Table 9-1 Ringo Company had the following information relating to net credit sales for 2019: Accounts receivable, Jan. 1, 2019 \ 18,000 Dr. Allowance for doubtful accounts, Dec. 31, 2019, prior to adjustment 600 . Net credit sales during 2019 95,000 Collections on account during 2019 87,000 Cash sales during 2019 27,000 -Referring to Table 9-1, if uncollectible accounts are determined by the percent-of-sales method to be 3% of net credit sales, the bad-debt expense for 2019 would be:

Munich Company's total sales for the year amounted to $100,000, of which 60 percent was on credit. The unadjusted trial balance showed accounts receivable of $20,000, and the allowance for doubtful accounts reflected a $800 credit balance (before the write-off of a bad account of $500). Munich uses 3% of accounts receivable as an estimate of bad-debt expense. Calculate the bad-debt expense for the year for Munich Company.