Exam 5: Sales and Receivables

The following data are from the company's records for 2013: -Refer to A-One Construction. If the aging approach is used to estimate bad debts, what should the balance in the Allowance for Doubtful Accounts be after the bad debts adjustment?

On January 1, 2013, Alliance Company had the following balances for accounts receivable and allowance for doubtful accounts: During 2013 the company made $3,200,000 in credit sales, collected $3,000,000 of accounts receivable and wrote off $20,000 of accounts receivable as uncollected.Required:

Accounts receivable are shown on the balance sheet at their net realizable value.

The following information is available for All-4-U Company for the year ending December 31, 2013:

-Refer to Aardvark Resale. Assume that the company estimates bad debts at 2% of net credit sales.

Match each statement to the item listed below a.Accounts receivable e.Notes receivable b.Aging method f.Realized c.Allowance for Doubtful Accounts g.Securitization d.Earned -Indicates that the earnings process is substantially complete.

The following information was presented in the balance sheet of Acworth Pools as of December 31, 2013: Select the incorrect statement from the following.

Gross profit divided by net sales is called the ____________________ ratio.

Trade receivables represent a stronger legal claim against the debtor than do non-trade receivables.

The following information was obtained from the company's records for 2013: -Refer to A Better Mousetrap. What amount should the company recognize as interest revenue on the maturity date of the note?

The longer a customer's account balance remains outstanding, the greater the likelihood that it will be collected in the near future.

On December 1, 2013, Anson's Drug Store concluded that a customer's $325 account receivable was uncollected and that the account should be written off. What effect will this write-off have on the company's 2013 net income and balance sheet totals assuming the direct write-off method is used to account for bad debts?

If a company accepts a major credit card such as VISA from a customer, then the company is responsible for the amount of the sale in a case of nonpayment from a cardholder.

-Refer to Abundant Returns. The firm estimates that bad debts could be 2% of net sales.

The following data are from the company's records for 2013: -Refer to A&B Foods. If the company estimates its bad debts at 4% of net credit sales, what amount will be reported as bad debt expense for 2013?

-Refer to AT&U Company. If the company uses the aging of accounts receivable approach to estimate its bad debts, what will be the net realizable value of its accounts receivable after the adjustment for bad debt expense?

Match each statement to the item listed below a.Accounts receivable e.Notes receivable b.Aging method f.Realized c.Allowance for Doubtful Accounts g.Securitization d.Earned -The packaging of receivables as financial instruments or securities for sale to investors.

Under the allowance method of accounting for bad debts, the company estimates the amount of bad debts before those debts actually occur.

Selling on credit protects a company from the risk that some of its receivables will never be collected.

What are the criteria the SEC uses to determine if revenue is realized or realizable and earned?