Exam 8: Cash and Receivables

Under the direct charge-off method,uncollectible accounts must be estimated if the matching rule is to be followed.

Companies that experience seasonal cycles of business activity need not manage their cash as carefully as companies whose business is not cyclical.

The following data exist for Alcona Company: Calculate the receivable turnover and the average days' sales uncollected for 2013.Round answers to one decimal place.

Assume that the $2,000,90-day,8 percent note was received on August 31 and that the fiscal year ended on September 30.The adjusting entry that would be made to record the interest receivable is (amounts rounded to nearest dollar):

A 60-day note dated December 10 is due on February 10.

Cottage Sales Company made most of its sales on credit during its first year of operation,2013.At the end of the year,accounts receivable amounted to $100,000.On December 31,2013,management reviewed the collectible status of the accounts receivable.Approximately $6,000 of the $100,000 of accounts receivable were estimated to be uncollectible.As per the accounts receivable aging method the adjusting entry that would be made on December 31 of that year is:

Which of the following would not be a valid reason to keep some currency on hand at a place of business?

Why do businesses need to keep some currency on hand?

A petty cash fund is an example of an imprest system.

The receivable turnover is expressed in terms of

How is the account Allowance for Uncollectible Accounts presented in the financial statements,and what purpose does this presentation serve?

Which of the following methods of recording uncollectible accounts expense would be described best as a balance sheet method?

The higher the receivable turnover,the lower the days' sales uncollected.

Match each definition with the correct term below. -Interest

A bank reconciliation begins with the balances as of the beginning of the month.

During the month,a company learns that a check it issued has been accidentally destroyed.On the bank reconciliation,the company would

In a petty cash fund,the current cash amount plus the receipts submitted should equal the original fixed amount.

Caplan Corporation uses the accounts receivable aging method to account for Uncollectible Accounts Expense.As of December 31,Caplan's accountant prepared the following data about ending receivables: $20,000 was not yet due (1 percent expected not to be collected),$10,000 was 1-60 days past due (4 percent expected not to be collected),and $2,000 was over 60 days past due (8 percent expected not to be collected).At December 31,Allowance for Uncollectible Accounts had a credit balance prior to adjustment of $200.In the journal provided,prepare Caplan's end-of-period adjustment for estimated uncollectible accounts.Also prepare the entry that would have been made had the credit balance instead been a debit balance.Omit explanations.

The general ledger account for Accounts Receivable shows a debit balance of $50,000.Allowance for Uncollectible Accounts has a credit balance of $3,000.Net sales for the year were $500,000.In the past,3 percent of sales have proved uncollectible,and an aging of accounts receivable resulted in an estimate of $20,000 of uncollectible accounts receivable. Using the percentage of net sales method,the entry to record the Uncollectible Accounts Expense is: a.Uncollectible Accounts Expense 12,000 Allowance for Uncollectible Accounts 12,000 b.Uncollectible Accounts Expense 15,000 Allowance for Uncollectible Accounts 15,000 c.Uncollectible Accounts Expense 18,000 Allowance for Uncollectible Accounts 18,000 d.Uncollectible Accounts Expense 20,000 Allowance for Uncollectible Accounts 20,000

Explain the difference between the two methods used to estimate uncollectible accounts and identify which financial statement is emphasized by each method.