Exam 7: Accounting for Receivables

On December 31 of the current year,the unadjusted trial balance of a company using the percent of receivables method to estimate bad debt included the following: Accounts Receivable,debit balance of $95,250; Allowance for Doubtful Accounts,credit balance of $921.What amount should be debited to Bad Debts Expense,assuming 6% of outstanding accounts receivable at the end of the current year are estimated to be uncollectible?

Match each of the following terms with the appropriate definitions. -A written promise to pay a specified amount of money,usually with interest,either on demand or at a definite future date.

Brinker accepts all major bank credit cards,including First Savings Bank's,which assesses a 2.5% charge on sales for using its card.On May 26,Brinker had $4,800 in First Savings Bank Card credit sales.What entry should Brinker make on May 26 to record the deposit?

The ________ methods of computing uncollectible accounts use balance sheet relations to estimate bad debts-mainly the relation between accounts receivable and the allowance amount.

MacKenzie Company sold $180 of merchandise to a customer who used a Regional Bank credit card.Regional Bank deducts a 4% service charge for sales on its credit cards.MacKenzie electronically remits the credit card sales receipts to the credit card company and receives payment immediately.The journal entry to record this sale transaction would be:

A company had net sales of $550,000 and an average accounts receivable of $110,000.Its accounts receivable turnover equals 5.0.

Lemming makes an $18,750,120-day,8% cash loan to Notions Co.on November 1.Lemming's end-of-period adjusting entry on December 31 should be:

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

After adjustment,the balance in the Allowance for Doubtful Accounts has the effect of reducing Accounts Receivable to its estimated realizable value.

A company receives a 10%,120-day note for $1,500.The total interest due on the maturity date is: (Use 360 days a year.)

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.On July 10,Gideon received a check for the full amount of $2,000 from Hopkins.On July 10,the entry or entries Gideon makes to record the recovery of the bad debt is:

Gideon Company uses the direct write-off 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:

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

MacKenzie Company sold $300 of merchandise to a customer who used a Regional Bank credit card.Regional Bank deducts a 1.5% service charge for sales on its credit cards and credits MacKenzie's account immediately when sales are made.The journal entry to record this sale transaction would be:

On December 31,of the current year,Spectrum Company's unadjusted trial balance revealed the following: Accounts receivable of $185,600; Sales Revenue of $1,280,000; (75% were on credit),and Allowance for Doubtful Accounts of $1,600 (credit balance). Prepare the adjusting journal entry to record Spectrum's estimate for bad debts assuming: 1.6.0% of the accounts receivable balance is assumed to be uncollectible. 2.Bad debts expense is estimated to be 1.5% of credit sales. 3.Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the balance sheet after adjustment assuming the percentage of sales method is used. 4.Prepare the entry to write off a $1,500 account receivable on January 1 of the next year. 5.Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the balance sheet immediately after writing off the account in part 4 assuming the percentage of sales method is used.

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.)

A company has $90,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts.Experience suggests that 4% of outstanding receivables are uncollectible.The current balance (before adjustments)in the allowance for doubtful accounts is an $800 credit.The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for:

Match each of the following terms with the appropriate definitions. -A method of accounting for bad debts that matches the estimated loss from uncollectible accounts receivable against the sales they helped to produce.

If a 60-day note receivable is dated September 22,what is the maturity date of the note?

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.