Exam 7: Receivables and Investments

Dillsburg Company sells on credit with terms of n/30. For the $800,000 of accounts at the end of the year 2017 that are not overdue, there is a 92% probability of collection. For the $300,000 of accounts that are less than a month past due, Dillsburg estimates the likelihood of collection going down to 75%. The probability of collecting the $150,000 of accounts more than a month past due is estimated to be 30%. Required 1. Prepare an aging schedule to estimate the amount of uncollectible accounts. 2. On the basis of the schedule in (1), analyze the impact of the adjustment as of December 31, 2017, to estimate bad debts. Assume that the credit balance in Allowance for Doubtful Accounts is $30,000.

Bad Debts Expense is a contra account that is used to reduce accounts receivable to its net realizable value.

Genuine Parts received a promissory note from a customer on March 1,2017.The face amount of the note is $8,000;the terms are 90 days and 9% interest.At the maturity date,the customer pays the amount due for the note and interest.What entry is required on the books of Genuine Parts on the maturity date assuming none of the interest had already been recognized?

Mellon Corporation The data presented below are for Mellon Corporation for the year ended December 31,2017: ?? Sales (100\% on credit) \ 1,500,000 Sales returns 60,000 Accounts receivable (December 31, 2017) 250,000 Allowance for doubtful accounts (credit balance) (before adjustment at December 31,2017 3,000 Estimated amount of uncoll ectible accounts based on an aging analysis 31,000 -Refer to the information for Mellon Corporation. ? If Mellon uses the aging of accounts receivable approach to estimate its bad debts,what will be the net realizable value of its accounts receivable after the adjustment for bad debts expense?

For what reason would a company buy 10% of the common stock of a second company?

The most common type of receivables is accounts receivable.

Both stock and bond investments have maturity dates.

An increase in accounts receivable is reported on the statement of cash flows under the indirect method as an addition.

What is the purpose of an accounts receivable subsidiary ledger?

When are consolidated financial statements prepared?

Rafter.com received a 10%,90-day promissory note with a face amount of $12,000 from Joyce Company,for the sale of merchandise on November 1,2017. A) Identify the maturity date of the note. $\underline{\quad\quad}$ B) How much interest income (to the nearest whole month) will Rafter.com earn over the term of the note? C) How much interest income will Rafter com recognize during 2017 ?

A general ledger account that is supported by a subsidiary ledger is called a(n)__________.