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Exam 7: Reporting and Analyzing Receivables

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Question 91

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What is the accounts receivable turnover ratio? How is it calculated and how is it used to assess financial condition?

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The accounts receivable turnover ratio i...

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Question 92

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On February 1,a customer's account balance of $2,300 was deemed to be uncollectible.What entry should be recorded on February 1 to record the write-off assuming the company uses the allowance method?

A) Debit Bad Debts Expense $2,300; credit Accounts Receivable $2,300.
B) Debit Allowance for Doubtful Accounts $2,300; credit Bad Debts Expense $2,300.
C) Debit Allowance for Doubtful Accounts $2,300; credit Accounts Receivable $2,300.
D) Debit Bad Debts Expense $2,300; credit Allowance for Doubtful Accounts $2,300.
E) Debit Accounts Receivable $250; credit Allowance for Doubtful Accounts $2,300.

F) A) and E)
G) B) and D)

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Question 93

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Orman Co.sold $80,000 of accounts receivable to First Savings and incurred a 3% factoring fee.Prepare the journal entry for Orman Co.to record the sale.

On July 9,Mifflin Company receives an $8,500,90-day,8% note from customer Payton Summers as payment on account.What entry should be made on the maturity date assuming the maker pays in full,and no adjusting entries have been made related to the note? (Use 360 days a year.)

A company had the following items and amounts in its unadjusted trial balance as of December 31 of the current year: Prepare the adjusting entry to estimate bad debts assuming bad debts are estimated to be 2.5% of credit sales.

A company borrowed $10,000 by signing a six-month promissory note at 5% interest.The amount of interest to be paid at maturity is $25.

At December 31 of the current year,a company reported the following: Total sales for the current year: $980,000 includes $160,000 in cash sales Accounts receivable balance at Dec.31,end of current year: $160,000 Allowance for Doubtful Accounts balance at January 1,beginning of current year: $7,300 credit Bad debts written off during the current year: $5,800. Prepare the necessary adjusting entries to record bad debts expense assuming this company's bad debts are estimated to equal 5% of accounts receivable.

Owens Company uses the direct write-off method of accounting for uncollectible accounts receivable.On December 6,Year 1,Owens sold $6,300 of merchandise to the Valley Company.On August 8,Year 2,after numerous attempts to collect the account,Owens determined that the account of the Valley Company was uncollectible. a.Prepare the journal entry required to record the transactions on August 8. b.Assuming that the $6,300 is material,explain how the direct write-off method violates the expense recognition (matching)principle in this case.

A company received a $15,000,90-day,10% note receivable.The journal entry to record receipt of the note includes a debit to Notes Receivable.

The percent of sales method of estimating bad debts focuses more on the realizable value of accounts receivable than on expense recognition.

Bonita Company estimates uncollectible accounts using the allowance method at December 31.It prepared the following aging of receivables analysis. a.Estimate the balance of the Allowance for Doubtful Accounts using the aging of accounts receivable method. b.Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a.Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $550 credit. c.Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a.Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $300 debit.

Under IFRS,the term provision:

The Links Company uses the percent of sales method of accounting for uncollectible accounts receivable.During the current year,the following transactions occurred: 1.Prepare the general journal entries to record these transactions. 2.If the balance of the allowance for uncollectible accounts was a $4,000 credit on January 1 of the current year,determine the balance of the allowance for uncollectible accounts at December 31 of the current year.Assume that the transactions above are the only transactions affecting the allowance for uncollectible accounts during the year.

The Lily Company uses the percent of receivables method of accounting for uncollectible accounts receivable.,and a perpetual inventory system.As of January 1,its net accounts receivable totaled $192,000 (Accounts Receivable $200,000 less an $8,000 Allowance for Doubtful Accounts).During the current year,the following transactions occurred.

Flax had net sales of $7,875 and its average accounts receivables is $1,250.Calculate Flax's accounts receivable turnover:

Jasper makes a $25,000,90-day,7% cash loan to Clayborn Co.Jasper's entry to record the collection of the note and interest at maturity should be: (Use 360 days a year.)

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.

Winkler Company borrows $85,000 and pledges its receivables as security.The journal entry to record this transaction would be:

The following series of transactions occurred during Year 1 and Year 2,when Foxworth Co.sold merchandise to Kevin Lewis.Foxworth's annual accounting period ends on December 31. 10/01/Yr.1 Sold $12,000 of merchandise to K.Lewis,terms 2/10,n/30. 11/15/Yr.1 Lewis 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 Foxworth receives a check from Lewis for the maturity value (with interest)of the note. 03/22/Yr.2 Foxworth receives notification that Lewis' check is being returned for nonsufficient funds (NSF). 12/31/Yr.2 Foxworth writes off Lewis' account as uncollectible. Prepare Foxworth Co.'s journal entries to record the above transactions.The company uses the allowance method to account for its bad debt expense.

Kenai Company sold $600 of merchandise to a customer who used a National Bank credit card.National Bank deducts a 3% service charge for sales on its credit cards.Kenai electronically remits the credit card sales receipts to the credit card company and receives payment immediately.The journal entry to record the collection from the credit card company would be: