Exam 9: Accounting for Receivables

A company ages its accounts receivables to determine its end of period adjustment for bad debts. At the end of the current year, management estimated that $15,750 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a debit balance of $175. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

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.

Calculate the amount of interest that would be owed on a $9,000, 60-day, 9% note receivable at maturity.

Pledging receivables:

Paoli Pizza bought $5,000 worth of merchandise from TechCom and signed a 90-day, 10% promissory note for the $5,000. TechCom's journal entry to record the sales portion of the transaction is:

A company receives a 10%, 90-day note for $1,500. The total interest due on the maturity date is:

When the maker of a note is unable or refuses to pay at maturity, the note is said to be _________________.

The following series of transactions occurred during Year 1 and Year 2, when Linwood Co. sold merchandise to John Moore. Linwood's annual accounting period ends on December 31. 10/01/Yr 1 Sold $12,000 of merchandise to John Moore, terms 2/10, n/30. 11/15/Yr 1 Moore reports that he cannot pay the account until early next year. He agrees to exchange the account for a 120-day, 12% note receivable. 12/31/Yr 1 Prepared the adjusting journal entry to record accrued interest on the note. 03/15/Yr 2 Linwood receives a check from Moore for the maturity value (with interest) of the note. 03/22/Yr 2 Linwood receives notification that Moore's check is being returned for nonsufficient funds (NSF). 12/31/Yr 2 Linwood writes off Moore's account as uncollectible. Prepare Linwood Co.'s journal entries to record the above transactions. The company uses the allowance method to account for its bad debt expense.

Crystal Products allows customers to use bank credit cards to charge purchases. The bank used by Crystal Products processes all bank credit cards in exchange for a 3% processing fee. All credit card receipts deposited are credited to the company account on the day of deposit. Assume that on January 18, Crystal Products sold and deposited $19,000 worth of bank credit card receipts. Prepare the general journal entry to record this transaction.

To write off an uncollectible account receivable when the allowance method of accounting for uncollectible accounts is used, a company should debit _______________________ and credit accounts receivable.

TechCom's customer, RDA, paid off an $8,300 balance on its account receivable. TechCom should record the transaction as a debit to Accounts Receivable-RDA and a credit to Cash.

Calco accepts all major bank credit cards, including First Bank's, which assesses a 3.5% charge on sales for using its card. On May 25, Calco had $4,800 in First Bank Card credit sales. What entry should Calco make on May 25 to record the deposit?

Under the allowance method of accounting for uncollectible accounts receivable, no attempt is made to estimate bad debts expense.

Tecom accepts the NOVA credit card for credit card sales. Tecom sends credit card receipts to NOVA on a weekly basis. NOVA charges Tecom a 2% fee. Tecom usually receives payment from NOVA within a week. Prepare journal entries to record the following transactions of Tecom involving the NOVA credit card.

When using the allowance method of accounting for uncollectible accounts, the entry to write off Harold's uncollectible account is a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable - Harold.

For legal reasons, it is always a good business practice to accept a note receivable in exchange for an overdue account receivable.

Notes receivable are classified as current liabilities.

A high accounts receivable turnover in comparison with competitors suggests that the firm should tighten its credit policy.

The aging method of determining bad debts expense is based on the knowledge that the longer a receivable is past due, the lower the likelihood of collection.

How are the direct write-off method and the allowance method applied in accounting for uncollectible accounts receivables?