Exam 7: Reporting and Analyzing Receivables

On October 29 of the current year,a company concluded that a customer's $4,400 account receivable was uncollectible and that the account should be written off.What effect will this write-off have on this company's net income and total assets assuming the allowance method is used to account for bad debts?

Newton Company uses the allowance method of accounting for uncollectible accounts.On May 3,the Newton Company wrote off the $3,000 uncollectible account of its customer,P.Best.On July 10,Newton received a check for the full amount of $3,000 from Best.On July 10,the entry or entries Newton makes to record the recovery of the bad debt is:

The ________________ method of accounting for bad debts records the loss from an uncollectible account receivable at the time it is determined to be uncollectible (and not before).

The percent of sales method for estimating bad debts assumes that a given percentage of a company's credit sales for the period are uncollectible.

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.

A promissory note:

The materiality constraint:

A maker who dishonors a note is one who does not pay it upon maturity.

There are two methods of accounting for uncollectible accounts: the direct write-off method and the allowance method.

Paoli Pizza bought $5,000 worth of merchandise from TechCom and signed a 90-day,10% promissory note for the $5,000.TechCom's journal entry to record the sales portion of the transaction is:

A company receives a 6.2%,60-day note for $9,650.The total amount of cash due on the maturity date is:

The quality of receivables refers to the likelihood of collection without loss.

An accounting procedure that (1) estimates and reports bad debts expense from credit sales during the period of the sales and (2) reports accounts receivable at the amount of cash to be collected is the:

A credit sale of $2,500 to a customer would result in a:

Dell reported net sales of $8,739 million and average accounts receivable of $864 million.Its accounts receivable turnover is:

Explain the options a company has when converting its receivables to cash.

The accounts receivable turnover is calculated by dividing _________________ by _____________________.

A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and their length of time past due is the:

Frontline Company holds a $1,000,12%,90-day note of J.Candioto.At maturity,Candioto dishonors the note.How would the company record dishonoring of the note?

Chiller Company has credit sales of $5.60 million for year 2013.Chiller estimates that 1.32% of the credit sales will not be collected.Historically,4% of outstanding accounts receivable is uncollectible.On December 31,2013,the company's Allowance for Doubtful Accounts has an unadjusted credit balance of $3,561.Chiller prepares a schedule of its December 31,2013,accounts receivable by age.Based on past experience,it estimates the percent of receivables in each age category that will become uncollectible.This information is summarized here: Assuming the company uses the percent of sales method, -What is the amount that Chiller will enter as the Bad Debt Expense in the December 31 adjusting journal entry?