Exam 9: Accounting for Receivables

A company has sales of $350,000 and estimates that 0.7% of its sales are uncollectible. The estimated amount of bad debts expense is $2,450. $350,000 x .007 = $2,450

A company has $90,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 6% of outstanding receivables are uncollectible. The current credit balance (before adjustments) in the allowance for doubtful accounts is $800. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for $7,000.

Newton Company uses the allowance method of accounting for uncollectible accounts. On May 3, the Newton Company wrote off the $3,000 uncollectible account of its customer, P. Best. On July 10, Newton received a check for the full amount of $3,000 from Best. On July 10, the entry or entries Newton makes to record the recovery of the bad debt is:

Cairo Co. uses the allowance method of accounting for uncollectible accounts. Cairo Co. accepted a $5,000, 12%, 90-day note dated May 16, from Alexandria Co. in exchange for its past-due account receivable. Make the necessary general journal entries for Cairo Co. on May 16 and the August 14 maturity date, assuming that the: a. Note is held until maturity and collected in full at that time. b. Note is dishonored; the amount of the note and its interest are written off as uncollectible.

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

Bardo Company allows customers to make purchases on credit. The terms of all credit sales are 2/10, n/30, and all sales are recorded at the gross price. Other customers can use a bank credit card where the bank deducts a 4% service charge for credit card sales and credits the bank account of Bardo immediately when credit card receipts are deposited. Bardo uses the perpetual inventory method. Prepare journal entries to record the following selected transactions and events.

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

On October 29 of the current year, a company concluded that a customer's $4,400 account receivable was uncollectible and that the account should be written off. What effect will this write-off have on this company's net income and total assets assuming the allowance method is used to account for bad debts?

On November 19, Hayes Company receives a $15,000, 60-day, 10% note from a customer as payment on his account. What adjusting entry should be made on the December 31 year-end?

Hankco accepts all major bank credit cards, including Omni Bank's, which assesses a 4% charge on sales for using its card. On June 28, Hankco had $3,500 in Omni Card credit sales. What entry should Hankco make on June 28 to record the deposit?

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

A company has the following unadjusted account balances at December 31, of the current year; Accounts Receivable of $185,700 and Allowance for Doubtful Accounts of $1,600 (credit balance). The company uses the aging of accounts receivable to estimate its bad debts. The following aging schedule reflects its accounts receivable at the current year-end: 1. Calculate the amount of the Allowance for Doubtful Accounts that should appear on the December 31, of the current year, balance sheet. 2. Prepare the adjusting journal entry to record bad debts expense for the current year.

The Allowance for Doubtful Accounts:

A company that uses the percent of sales to account for its bad debts had credit sales of $740,000 in Year 1, including a $720 sale to Helen Sweet. On December 31, Year 1, the company estimated its bad debts at 1.5% of its credit sales. On June 1, Year 2, the company wrote off, as uncollectible, the $720 account of Helen Sweet. On December 21, Year 2, Helen Sweet unexpectedly paid her account in full. Prepare the necessary journal entries: (a) On December 31, Year 1, to reflect the estimate of bad debts expense. (b) On June 1, Year 2, to write off the bad debt. (c) On December 21, Year 2, to record the unexpected collection.

Hasbro had net sales of $7,875 and its average accounts receivables is $1,350. Calculate Hasbro's accounts receivable turnover:

The allowance method based on the idea that a given percent of a company's credit sales for the period are uncollectible is:

A company factored $45,000 of its accounts receivable and was charged a 3% factoring fee. The journal entry to record this transaction would include a:

A ____________________ is a signed promise to pay a specified amount of money either on demand or at a definite future date.

Installment accounts receivable are classified as current assets, even though the installment period is more than one year, if the seller regularly offers customers such terms.

A supplementary record created to maintain a separate account for each customer is called the ______________________.