Exam 9: Accounting for Receivables

The accounts receivable method to estimate bad debts obtains the estimated balance in the Allowance for Doubtful Accounts in one of two ways: (1) computing the percent uncollectible from the total accounts receivable or (2) aging accounts receivable.

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

On September 30, Emerson Co. has $540,250 of accounts receivable. Emerson uses the allowance method of accounting for bad debts and has an existing credit balance in the allowance for doubtful accounts of $13,750. 1. Prepare journal entries to record the following selected October transactions. The company uses the perpetual inventory system. 2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its October 31 balance sheet. a. Sold $325,000 of merchandise (that cost $178,500) to customers on credit. b. Received $425,100 cash in payment of accounts receivable. c. Wrote off $16,700 of uncollectible accounts receivable. d. In adjusting the accounts on October 31, its fiscal year-end, the company estimated that 3.0% of accounts receivable will be uncollectible.

_______________ refers to the expected proceeds from converting an asset into cash.

When a company holds a large number of notes receivable it sometimes sets up a controlling account and a subsidiary ledger for notes.

At December 31, Warren Company reports the following results for its calendar year from the adjusted trial balance. Prepare the adjusting entry to record Bad Debts Expense assuming uncollectibles are estimated to be 7.0% of year-end accounts receivable.

Explain the difference between honoring and dishonoring a note receivable.

The ____________________ of a note is the day the principle plus interest of a note must be repaid.

A company factored $35,000 of its accounts receivable and was charged a 2% factoring fee. The journal entry to record this transaction would include a debit to Cash of $35,000, a debit to Factoring Fee Expense of $700, and credit to Accounts Receivable of $35,700.

A company has net sales of $900,000 and average accounts receivable of $300,000. What is its accounts receivable turnover for the period?

What is the maturity date of a 6-month note receivable dated February 5?

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

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

Accounts receivable information for specific customers is important because it reveals:

The Allowance for Doubtful Accounts:

Sellers generally prefer to receive notes receivable rather than accounts receivable when the credit period is long and the receivable is for a large amount.

When using the allowance method of accounting for uncollectible accounts, the entry to record the bad debts expense is a debit to Bad Debts Expense and a credit to Accounts Receivable.

On August 9, Pierce Company receives a $8,500, 90-day, 8% note from customer Eric Simms as payment on his account. What entry should be made on August 9 to record receipt of the note?

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

If the credit balance of the Allowance for Doubtful Accounts account exceeds the amount of a bad debt being written off, the entry to record the write-off against the allowance account results in: