Exam 8: Receivables

An analyst notes that ABC Inc.'s allowance for uncollectible accounts as a percentage of year-end accounts receivable has changed.Which of the following would be a plausible explanation for the change?

In U.K.financial reports,receivables are called "creditors."

Under current U.S.and IFRS guidance,most securitization entities will stay on the balance sheet.

When a firm does not adopt the fair value option,it

Under IFRS,firms may elect the fair value option only in cases where it eliminates an accounting mismatch or when a group of assets is managed and evaluated using fair values.

If the note were discounted on August 1 under the terms of agreement with National Bank,which one of the following journal entries would Jones record?

Firms record accounts and notes receivable at net realizable value because that is the only option GAAP permits.

If a transfer of receivables is really a borrowing but is erroneously treated as a sale

Edsel Inc. has the following unadjusted year end trial balance information available for 2014: Cash sales \ 400,000 Credit sales 600,000 Ending accounts receivable balance 180,000 Ending allowance for uncollectibles 1,500 Estimated uncollectibles 2\% -If Edsel uses the gross accounts receivable approach for estimating bad debt expense,the allowance for uncollectibles account after the proper adjustments to the accounts are recorded,should show a balance of

The Fair value adjustment-accounts receivable account is an asset valuation account

What will be the balance in the Notes Receivable-Lewisburg Fabricators account at the end of 2015?

Edsel Inc. has the following unadjusted year end trial balance information available for 2014: Cash sales \ 400,000 Credit sales 600,000 Ending accounts receivable balance 180,000 Ending allowance for uncollectibles 1,500 Estimated uncollectibles 2\% -If Edsel uses the sales revenue approach for estimating bad debt expense,the income statement should show an expense of

Interest must be accounted for on all long-term notes receivable whether the interest rate is stated or not.

In a bill and hold sale,the company recognizes revenue and the associated account receivable,but does not ship the product to the customer until later.

Under the sales revenue approach to estimating uncollectible accounts receivable a percentage of gross uncollectible accounts receivable is determined to establish the bad debts expense.

The allowance for uncollectibles account is

Island Corporation owes Mutual Bank a 10% note payable for $100,000 plus $8,000 accrued interest on October 1, 2014. Island and Mutual Bank enter into an agreement whereby Island will pay Mutual $128,000 on the due date of the note on October 1, 2016. -Island will record this transaction to recognize

Packwood,Inc.sells $250,000 of its accounts receivable to M&B Finance with recourse.M&B charges a fee of 2% and withholds 8% of the face amount of the receivables to cover possible uncollectible accounts and sales returns.Packwood estimates the fair value of the recourse obligation is equal to the $13,500 allowance for uncollectibles associated with these accounts. Required: a.Prepare the journal entry Packwood,Inc.would make to record the factoring. b.Prepare Packwood's journal entry to record any subsequent cash received from M&B if M&B collects all of the receivables except for $6,500 due to a sales return and $12,000 resulting from a bad debt.

Reasons why companies might accelerate cash collections include the following except:

Island Corporation owes Mutual Bank a 10% note payable for $100,000 plus $8,000 accrued interest on October 1, 2014. Island and Mutual Bank enter into an agreement whereby Island will pay Mutual $128,000 on the due date of the note on October 1, 2016. -What effective interest rate will Island use for the restructured note?