Exam 7: Accounting for Receivables

The following series of transactions occurred during Year 1 and Year 2,when Foxworth Co.sold merchandise to Kevin Lewis.Foxworth's annual accounting period ends on December 31. Prepare Foxworth Co.'s journal entries to record the above transactions.The company uses the allowance method to account for its bad debt expense.

Morgan had net sales of $310,000 and average accounts receivable of $75,600.Its competitor,Stanley,had net sales of $290,000 and average accounts receivables of $61,350.Calculate the accounts receivable turnover for both companies.Which company is doing a better job of managing its accounts receivables?

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: Accounts receivable \ 375,000 debit Allowance for uncollectible accounts 500 credit Net Sales 800,000 credit All sales are made on credit.Based on past experience,the company estimates that 0.6% of net credit sales are uncollectible.What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

All of the following statements regarding valuation of receivables under U.S.GAAP and IFRS are true except:

Giorgio Italian Market bought $4,000 worth of merchandise from Food Suppliers and signed a 90-day,6% promissory note for the $4,000.Food Supplier's journal entry to record the sales transaction is:

The allowance method of accounting for bad debts requires an estimate of bad debt expense at the end of each accounting period.The two common methods to determine the estimate amount are the percent of sales method and the percent of receivables method.Explain the basic differences between the two methods.

The expense recognition (matching)principle requires use of the allowance method of accounting for bad debts.

When the maker of a note is unable or refuses to pay at maturity,the note is said to be ________.

Frederick Company borrows $63,000 from First City Bank and pledges its receivables as security.Which of the following is true regarding this transaction:

Prepare general journal entries for the following transactions for the current year:

Which of the following is not true about the Allowance for Doubtful Accounts?

Flax had net sales of $7,875 and its average accounts receivables is $1,250.Calculate Flax's accounts receivable turnover:

Gideon Company uses the allowance method of accounting for uncollectible accounts.On May 3,the Gideon Company wrote off the $2,000 uncollectible account of its customer,A.Hopkins.The entry or entries Gideon makes to record the write off of the account on May 3 is:

Which of the following is not true regarding a credit card expense?

A company using the percentage of sales method for estimating bad debts has sales of $350,000 and estimates that 1.0% of its sales are uncollectible. -The estimated amount of bad debts expense is $3,500.

At December 31,Yarrow Company reports the following results for its calendar year from the adjusted trial balance. Credit sales \ 2,300,000 Cash sales 1,050,000 Accounts Receivable 295,000 Allowance for doubtful accounts (credit balance) 750 a.Prepare the adjusting entry to record Bad Debts Expense assuming uncollectibles are estimated to be 1.1% of credit sales. b.Prepare the adjusting entry to record Bad Debts Expense assuming uncollectibles are estimated to be .8% of total sales. c.Prepare the adjusting entry to record Bad Debts Expense assuming uncollectibles are estimated to be 7.0% of year-end accounts receivable.

A promissory note received from a customer in exchange for an account receivable is recorded by the payee as:

Match each of the following terms with the appropriate definitions. -Amounts due from customers for credit sales.

The advantage of the allowance method of accounting for bad debts is that it identifies the specific customers who will not pay their bills.

When using the allowance method of accounting for uncollectible accounts,the entry to write off Jeannie's uncollectible account is a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable-Jeannie.