Exam 9: Accounting for Receivables

Outdoors Unlimited accepts the Explorer credit card from its customers.Explorer charges a 3.5% service fee and pays Outdoors Unlimited the amount net of Explorer charges once a month.During February,Outdoors Unlimited sold $27,000 worth of merchandise to customers using the Explorer charge card.On February 28,Outdoor Unlimited sent the $27,000 worth of credit card receipts to Explorer.On March 4,Outdoors Unlimited received cash proceeds from Explorer for the February credit sales less the service charge.Prepare the journal entries to record February sales and the March 4 cash receipt.

A company uses the percent of receivables method to determine its bad debts expense.At the end of the current year,the company's unadjusted trial balance reported the following selected amounts: All sales are made on credit.Based on past experience,the company estimates 3.5% of credit sales to be uncollectible.What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

A credit sale of $3,275 to a customer would result in:

Converting receivables to cash before they are due is usually done by either (1)_______________________ or (2)________________________________.

____________________________ are amounts owed by customers from credit sales where payment is required in periodic amounts over an extended time period.

A promissory note is a written promise to pay a specified amount of money either on demand or at a definite future date.

A company borrowed $10,000 by signing a 180-day promissory note at 11%.The maturity value of the note is:

A company allows its customers to use bank credit cards to charge purchases.When customers use the credit cards,the net amount is deposited in the company's checking account.The company also is charged a 2.5% service charge for these credit card sales.Assume that on April 13,the company sold $25,000 worth of merchandise to customers who used credit cards.Prepare the company's journal entry to record the credit card sales for April 13 assuming the company deposited the receipts that same day.

The amount due on the maturity date of a $6,000,60-day 8%,note receivable is:

A company had net sales of $500,000 and an average accounts receivable of $80,000.Its accounts receivable turnover equals 6.25.

The accounts receivable turnover is calculated by:

A company uses the percent of sales method to determine its bad debts expense.At the end of the current year,the company's unadjusted trial balance reported the following selected amounts: All sales are made on credit.Based on past experience,the company estimates 0.6% of credit sales to be uncollectible.What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

A company ages its accounts receivables to determine its end of period adjustment for bad debts.At the end of the current year,management estimated that $15,750 of the accounts receivable balance would be uncollectible.Prior to any year-end adjustments,the Allowance for Doubtful Accounts had a debit balance of $175.What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

The materiality constraint permits the use of the direct write-off method of accounting for uncollectible accounts when bad debts are very large in relation to a company's other financial statement items such as sales and net income.

Explain the basic difference between estimating the amount of uncollectible accounts using the percent of sales method and the accounts receivable method.

A 90-day note issued on April 10 matures on:

Notes receivable are always classified as current liabilities.

On December 31,of the current year,a company's unadjusted trial balance revealed the following: Accounts receivable of $185,600; Sales Revenue of $1,280,000; (75% were on credit),and Allowance for Doubtful Accounts of $1,600 (credit balance). Prepare the adjusting journal entry to record the estimate for bad debts assuming: 1.6.0% of the accounts receivable balance is assumed to be uncollectible. 2.Bad debts expense is estimated to be 1.5% of credit sales. 3.Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the balance sheet after adjustment. 4.Prepare the entry to write off a $1,500 account receivable on January 1 of the next year. 5.Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the balance sheet immediately after writing off the account in part 2.

A company has sales of $350,000 and estimates that 0.7% of its sales are uncollectible.The estimated amount of bad debts expense is $2,450.