Exam 7: Accounting for Receivables

At December 31 of the current year,a company reported the following: Total sales for the current year: $980,000 includes $160,000 in cash sales Accounts receivable balance at Dec.31,end of current year: $160,000 Allowance for Doubtful Accounts balance at January 1,beginning of current year: $7,300 Bad debts written off during the current year: $5,800. Prepare the necessary adjusting entries to record bad debts expense assuming this company's bad debts are estimated to equal 1.5% of credit sales:

What are some of the considerations management should make when assessing the accounts receivable turnover ratio?

Valley Spa purchased $7,800 in plumbing components from Tubman Co.Valley Spa signed a 60-day,10% promissory note for $7,800.If the note is dishonored,but Tubman intends to continue collection efforts,what is the journal entry to record the dishonored note? (Use 360 days a year.)

Describe the differences in how the direct write-off method and the allowance method are applied in accounting for uncollectible accounts receivables.

The Tulip Company uses the percent of receivables method of accounting for uncollectible accounts receivable,and a perpetual inventory system.As of January 1,its net accounts receivable totaled $485,000 (Accounts Receivable $500,000 less a $15,000 Allowance for Doubtful Accounts).During the current year,the following transactions occurred.

On October 12 of the current year,a company determined that a customer's account receivable was uncollectible and that the account should be written off.Assuming the direct write-off method is used to account for bad debts,what effect will this write-off have on the company's net income and total assets?

At December 31 of the current year,a company reported the following: Total sales for the current year: $980,000 includes $160,000 in cash sales Accounts receivable balance at Dec.31,end of current year: $160,000 Allowance for Doubtful Accounts balance at January 1,beginning of current year: $7,300 credit Bad debts written off during the current year: $5,800. Prepare the necessary adjusting entries to record bad debts expense assuming this company's bad debts are estimated to equal 5% of accounts receivable.

The ________ method of computing uncollectible accounts uses income statement relationships to estimate bad debts and is based on the idea that a given percent of a company's credit sales for a period are uncollectible.

Valley Spa purchased $7,800 in plumbing components from Tubman Co.Valley Spa Studios signed a 60-day,10% promissory note for $7,800.If the note is dishonored,what is the amount due on the note? (Use 360 days a year.)

On November 19,Nicholson Company receives a $15,000,60-day,8% note from a customer as payment on account.What adjusting entry should be made on the December 31 year-end? (Use 360 days a year.)

The following data are taken from the comparative balance sheets of Grayling Company.Compute and interpret its accounts receivable turnover for Year 2.Competitors average a turnover of 7.5.How is the company doing in relation to its competitors?

The accounts receivable turnover indicates how often accounts receivable are collected during the period.

The total amount of the note and interest due on the maturity date of a $6,000,60-day 4%,note receivable is: (Use 360 days a year.)

On July 31,Orwell Co.has $448,800 of accounts receivable. Required: 1.Prepare journal entries to record the following selected August transactions.The company uses the perpetual inventory system. 2.Explain what should be included in the footnotes to the August 31 financial statements as a result of these transactions. 3.Calculate the balance in the Accounts Receivable account as of August 10.

The aging method of determining bad debts expense is based on the knowledge that the longer a receivable is past due,the higher the likelihood of collection.

A company factored $30,000 of its accounts receivable and was charged a 2% factoring fee.The journal entry to record this transaction would include a debit to Cash of $30,000,a debit to Factoring Fee Expense of $600,and credit to Accounts Receivable of $30,600.

Describe how accounts receivable arise and how they accounted for,including the use of a subsidiary ledger and an allowance account.

Bonita Company estimates uncollectible accounts using the allowance method at December 31.It prepared the following aging of receivables analysis. a.Estimate the balance of the Allowance for Doubtful Accounts using the aging of accounts receivable method. b.Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a.Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $550 credit. c.Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a.Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $300 debit.

The unadjusted trial balance at year-end for a company that uses the percent of receivables method to determine its bad debts expense,reports the following selected amounts: All sales are made on credit.Based on past experience,the company estimates 3.5% of ending account receivable to be uncollectible.What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?