Exam 8: Receivables

The general ledger account for Accounts Receivable shows a debit balance of $40,000.The Allowance for Uncollectible Accounts has a credit balance of $2,000.Net sales for the year were $250,000.In the past,3 percent of net sales have proved uncollectible.An aging of accounts receivable accounts results in an estimate of $9,000 of uncollectible accounts receivable.Calculate (1)Uncollectible Accounts Expense and (2)the ending balance of the Allowance for Uncollectible Accounts using (a)the percentage of net sales method and (b)the accounts receivable aging method for both (1)and (2).

Assume that on February 25,a customer who owes Berry Sales Company $2,000 is declared bankrupt by a federal court.The entry that would be made to write off this account is:

The matching rule

Which of the following statements is true about factoring without recourse?

The percentage of net sales method of estimating uncollectible accounts is in violation of the matching principle.

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

The holder of a note adjusts for accrued interest by debiting Interest Receivable and crediting Interest Income.

Days' sales uncollected cannot be calculated without first knowing the receivables turnover.

The Allowance for Uncollectible Accounts is a contra-asset account.

The receivables turnover is expressed in terms of

When an account receivable that was previously written off is collected,it is necessary to reverse the entry for the write-off before recording the collection.

The allowance for uncollectible accounts is necessary because

The allowance method of handling bad debts violates the matching principle.

Both the allowance method and the direct charge-off method are acceptable for tax purposes.

Assume that part of accounts and other receivables on Trejada's Toys' balance sheet is $8 million and that Thompson estimates its uncollectible accounts as 1 percent of accounts receivable not yet due,2 percent of accounts receivable between 1 and 60 days past due,and 10 percent of accounts receivable over 60 days past due.Determine the amount of Trejada's adjusting entry to recognize uncollectible accounts using the accounts receivable aging method,based on the following information:

If average accounts receivable is $35,000 and net sales total $100,000,what is the receivables turnover?

Following a lenient credit-granting policy will probably result in fewer defaults by customers.

The principal of a non-interest-bearing note includes an implied interest cost.

When a note is dishonored,the payee's journal entry includes a

Which of the following situations results in a contingent liability?