Exam 8: Receivables

For the fiscal years 1 and 2, Grange Co. reported the following: ​ (a) Compute the accounts receivable turnover for Year 2. Round to two decimals. (b) Compute the number of days' sales in receivables at the end of Year 2. Round to two decimals.

Two methods of accounting for uncollectible accounts are the

If a promissory note is dishonored, the payee should still record interest revenue.

Allowance for Doubtful Accounts has a credit balance of $2,100 at the end of the year (before adjustment), and an analysis of customers' accounts indicates uncollectible receivables of $19,700. Which of the following entries records the proper adjustment for bad debt expense?

Discuss the two methods for recording bad debt expense. What type of company uses each method?

An aging of a company's accounts receivable indicates the estimate of uncollectible receivables totals $7,900. If Allowance for Doubtful Accounts has a $700 credit balance, the adjustment to record the bad debt expense for the period will require a

After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance of $340,000 and Allowance for Doubtful Accounts has a balance of $51,000. What is the net realizable value of the accounts receivable?

The direct write-off method records bad debt expense when an account is determined to be uncollectible.

Sunshine Service Center received a 120-day, 6% note for $40,000, dated April 12 from a customer on account. (a) Determine the due date of the note. (b) Determine the maturity value of the note. (c) Journalize the entry to record the receipt of the payment of the note at maturity.

When a company uses the allowance method of accounting for uncollectible receivables, the entry to reinstate a previously written off account would include a

For each of the following scenarios, indicate the amount of the adjusting journal entry for bad debt expense to be recorded, the balance in Allowance for Doubtful Accounts after adjustment at December 31, and the net realizable value of accounts receivable at December 31. (a) Based on an analysis of Simmon's Company's $380,000 balance in Accounts Receivable at December 31, it was estimated that $15,500 will be uncollectible. There is a credit balance of $1,200 in Allowance for Doubtful Accounts before adjustment. (b) Blake Company had credit sales of $900,000 at year-end, and has an Accounts Receivable balance of $425,000 at December 31, and an Allowance for Doubtful Accounts credit balance of $11,000 before adjustment. Blake estimates bad debt expense as 3/4 of 1% of credit sales. (c) Hidgon Inc. has a balance of $812,000 in Accounts Receivable at December 31. An analysis of those receivables shows $24,000 will probably not be collected. Before adjusting entries are prepared, the Allowance for Doubtful Accounts has a debit balance of $750.

When using the percent of sales method of estimating uncollectibles, the entry to record bad debt expense includes a credit to Accounts Receivable.

On August 1, Kim Company accepted a 90-day note receivable as payment for services provided to Hsu Company. The terms of the note were $20,000 face value and 6% interest. On October 30, the journal entry to record the collection of the note should include a

The equation for computing interest on an interest-bearing note is as follows: Interest = Maturity Value × Interest Rate × Time.

Journalize the following transactions for Lucite Company. November 14 Received a $4,800.00, 90-day, 9% note from Alan Albertson in payment of his account. December 31 Accrued interest on the Albertson note. February 12 Received the amount due from Albertson on his note. Date Description Post. Ref. Debit Credit

When comparing the direct write-off method and the allowance method of accounting for uncollectible receivables, a major difference is that the direct write-off method

The number of days' sales in receivables

The allowance method of estimating uncollectible accounts receivable based on an analysis of receivables shows that $640 of accounts receivable are uncollectible. The Allowance for Doubtful Accounts has a debit balance of $110. The adjusting entry at the end of the year will include a credit to Allowance for Doubtful Accounts in the amount of:

Allowance for Doubtful Accounts is a liability account.

Roe's Renovations utilizes the direct write-off method of accounting for uncollectible receivables. On September 15 the company is notified by the attorneys for Jacob Marley that Jacob Marley is bankrupt and no cash is expected in the liquidation. Write off the $675 of accounts receivable due from Jacob Marley.