Exam 7: Accounting for Receivables

The Angle Corporation accepted a credit card for a sale of $2,000 on December 16, 2013. The credit card company charges a fee of 4%. On January 5, 2014, Angle received payment from the credit card company. Indicate whether each of the following statements is true or false. _____ a) Angle should record the $2,000 revenue in 2013 when the sale is made. _____ b) Angle should record a credit card receivable account receivable of $2,000 on 12/16/13. _____ c) The sale has no impact on the statement of cash flows in 2013. _____ d) The collection of cash increases total assets in 2014. _____ e) The entry on 12/16/13 increases total revenues and total expenses on the 2013 income statement.

Making a loan to another party is considered an investing activity on the statement of cash flows.

Which of the following businesses would most likely have the longest operating cycle?

How do the percent of revenue method and the percent of receivables method to estimate uncollectible accounts expense differ?

The practice of reporting the net realizable value of receivables in the financial statements is commonly called:

Lowe Company has the following account balances: Compute the net realizable value of Lowe's accounts receivable.

Which of the following answers correctly describes the effect of the collection of cash from the credit card company on the financial statements of Yancey Corporation?

The direct write-off method of accounting for uncollectible accounts overstates assets on the balance sheet.

Karma's entry to recognize the write-off of the uncollectible accounts will

Which of the following answers correctly states the effect of recording the reestablishment of the receivable on April 4, 2013?

After the accounts are adjusted at the end of the year, Accounts Receivable has a balance of $450,000, Uncollectible Accounts Expense for the year was $35,000, and Allowance for Doubtful Accounts has a balance of $25,000. What is the net realizable value of the accounts receivable?

After the accounts are adjusted at the end of the year, Accounts Receivable has a balance of $225,000, Uncollectible Accounts Expense has a balance of $17,500, and Allowance for Doubtful Accounts has a balance of $12,500. What is the net realizable value of the accounts receivable?

Harvey Company uses the allowance method to account for uncollectible accounts. An account that had been previously written-off as uncollectible was recovered. How would the recovery affect the company's accounting equation?

The year-end adjusting entry to accrue interest on a note receivable is an asset source transaction.

Barnes Corporation uses the percent of receivables method of accounting for uncollectible accounts. As of December 31, 2013, prior to estimating uncollectible accounts expense, Barnes's balance of accounts receivable was $68,900, the balance of allowance for doubtful accounts was $2,500, and total credit sales for 2013 were $875,000. On December 31, Barnes aged its receivables and determined the following: Indicate whether each of the following statements is true or false. _____ a) Barnes will report Net Realizable Value of Accounts Receivable equal to $63,170 on its December 31, 2013 balance sheet. _____ b) Barnes will report Uncollectible Accounts Expense of $5,730 on its 2013 income statement. _____ c) The December 31 adjusting entry related to uncollectible accounts will decrease assets and equity by $3,230. _____ d) The method Barnes uses to account for uncollectible accounts is known as the balance sheet approach. _____ e) Write-offs of uncollectible accounts in 2014 will reduce Barnes' net realizable value of receivables.

Accepting credit cards is usually more costly to a business than offering credit directly to customers.

Which of the following is not an advantage of accepting credit cards from retail customers?

The direct write-off method does a better job of matching revenues and expenses than does the allowance method.

Robinson Corporation accepted credit cards for $36,200 of services performed in October 2013. The credit card company charged a 3 ½% service fee and paid Robinson as soon as it received the credit card receipts. Required: a) Prepare the general journal entry to record performance of the services. b) Prepare the general journal entry for collection of the receivable from the credit card company.

Using the allowance method of accounting for uncollectible receivables requires an estimate of the amount of receivables that will not be collected.