Exam 7: Accounting for Receivables

What are some of the costs a business incurs in making credit sales to customers? What are some of the benefits of making credit sales?

The net realizable value of accounts receivable is the amount of receivables a company expects to collect.

In the first year of operations, 2013, Jake's Repair Service recognized $110,000 of service revenue on account. The ending accounts receivable balance was $7,550. Jake estimates that 3% of sales on account will not be collected; no accounts receivable had been written off by year end. Assume there were no other transactions affecting accounts receivable. a) What amount of cash was collected in 2013? b) What amount of uncollectible accounts expense was recognized in 2013?

Under what condition is the direct write-off method of accounting for uncollectible accounts acceptable under GAAP?

The balance in Accounts Receivable at the beginning of the period amounted to $1,600. During the period $6,400 of credit sales were made to customers. If the ending balance in Accounts Receivable amounted to $1,000, and uncollectible accounts expense amounted to $400, then the amount of cash inflow from customers that would appear in the operating section of the cash statement would be: