Exam 7: Reporting and Analyzing Receivables

Separate accounts receivable information for each customer is important because it reveals all of the following except:

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.

Winkler Company borrows $85,000 and pledges its receivables as security. The journal entry to record this transaction would be:

Felton Corporation purchased $4,000 in merchandise from Marita Co. Felton signed a 60-day, 10%, $4,000 promissory note. Marita should record the sale with a journal entry debiting ____________________ for $________ and crediting __________________ for $________.

Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. Jasper's entry to record the collection of the note and interest at maturity should be:

The practice of placing dishonored notes receivable into accounts receivable keeps only notes that have not matured in the Notes Receivable account.

A maker who dishonors a note is one who does not pay it at maturity.

The _______________________ method uses both past and current receivables to estimate the allowance amount, and assumes that the longer an amount is past due, the more likely it is to be uncollectible.

When using the allowance method of accounting for uncollectible accounts, the recovery of a bad debt would be recorded as a debit to Cash and a credit to Bad Debts Expense.

The person that borrows money and signs a promissory note is called the maker.

Axle Co's accounts receivable turnover was 9.9 for this year and 11.0 for last year. Betterman's turnover was 9.3 for this year and 9.3 for last year. These results imply that:

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 will be uncollectible?

For legal reasons, it is not advisable to accept a note receivable in exchange for an overdue account receivable.

The Waring Company uses the allowance method of accounting for uncollectible accounts receivable. During the current year, the following transactions occurred: Prepare the general journal entries to record these transactions.

Explain the options a company may use to convert its receivables to cash before they are due.

At December 31 of the current year, a company reported the following: Total sales for the current year: $980,000 includes $160,000 in cash sales Accounts receivable balance at Dec. 31, end of current year: $160,000 Allowance for Doubtful Accounts balance at January 1, beginning of current year: $7,300 Bad debts written off during the current year: $5,800. Prepare the necessary adjusting entries to record bad debts expense assuming this company's bad debts are estimated to equal 1.5% of credit sales:

The quality of receivables refers to:

Prudence Co. receives a $26,000, 90-day, 4% note receivable. What is maturity value of the note?

On May 31, a company had a balance in its accounts receivable of $103,200. Prepare journal entries to record the following transactions for June.

Woods Co. accepts the World Express credit card from its customers. World Express charges a 3.5% service fee and pays Woods the amount net of World Express charges once a month. During February, Woods sold $24,000 worth of merchandise to customers using the World Express charge card. On February 28, Woods sent the $24,000 worth of credit card receipts to World Express. On March 4, Woods received cash proceeds from World Express for the February credit sales less the service charge. Prepare the journal entries to record February sales and the March 4 cash receipt.