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Exam 7: Accounting for Receivables

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Question 41

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The following information is available for Plains Company,which uses the allowance method of accounting for uncollectible accounts. Plains estimated that 1% of sales on account will be uncollectible.After several attempts at collection,Plains wrote off an account of $900 that could not be collected. Required: Prepare journal entries for the following events: a)2016 service revenue b)2016 collections on account c)Write-off of the uncollectible account d)Uncollectible accounts expense for 2016

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Question 42

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Alberta Company accepts a credit card as payment for $450 of services provided for the customer.The credit card company charges a 4% handling charge for its collection services.Select the answer that shows how the entry to record the sale would affect Alberta's financial statements.

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Question 43

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Indicate whether each of the following statements is true or false. _____ a)Other things being equal,an operating cycle of 49 days is more desirable than an operating cycle of 120 days. _____ b)The operating cycle is longer for a winery than a fast-food restaurant. _____ c)The length of an operating cycle is not relevant to the profitability of a business. _____ d)The length of an operating cycle equals the average days to collect accounts receivable. _____ e)The length of an operating cycle is computed by adding the sum of the average days in inventory and the average number of days to collect accounts receivable.

Which accounting concept can be used by some companies to justify the use of the direct write-off method of accounting for uncollectible accounts?

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

Why would cash sales companies,such as Wendy's,Domino's,and Krispy Kreme have accounts receivables on their financial statements?

Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Enter only one letter for each element.You do not need to enter amounts. -Gable Company collected a receivable due from a credit card transaction company;the credit card fee had previously been recognized when the sale was recorded.Show the effect of collection of the receivable on Gables financial statements.

When a company receives payment from a customer whose account was previously written off,the customer's account should be reinstated.

Explain the computation of the length of the operating cycle.

Use the following to answer questions On December 31,2015,the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible.Loudoun uses the allowance method of accounting for uncollectible accounts.In February 2016,one of Loudoun's customers failed to pay his $1,050 account and the account was written off.On April 4,2016,this customer paid Loudoun the $1,050. -Which of the following answers correctly states the effect of recording the collection of the reestablished receivable on April 4,2016?

Use the following to answer questions On December 31,2015,the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible.Loudoun uses the allowance method of accounting for uncollectible accounts.In February 2016,one of Loudoun's customers failed to pay his $1,050 account and the account was written off.On April 4,2016,this customer paid Loudoun the $1,050. -Which of the following answers correctly states the effect of Loudoun Company's February 2016 entry to write off the customer's account?

After the accounts are adjusted at the end of the year,Accounts Receivable has a balance of $235,000,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?

Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Enter only one letter for each element.You do not need to enter amounts. -Cole Co.uses the direct write-off method to account for uncollectible accounts in the amount of $4,000.Show the effect of this write-off.

The operating cycle is the length of time that a company spends acquiring inventory to sell.

On June 1,2016,Carolina Company collected a $24,000 note receivable that had been issued on June 1,2015.The note carried a 6% interest rate.The interest revenue recognized on the maturity date is $1,440.

The Griffin Corporation accepted a credit card for a sale of $3,000 on December 16,2016.The credit card company charges a fee of 4%.On January 5,2017,Griffin received payment from the credit card company.Indicate whether each of the following statements is true or false. _____ a)Griffin should record $2,880 revenue in 2016 when the sale is made. _____ b)Griffin should record a credit card receivable account receivable of $3,000 on 12/16/16. _____ c)The sale has no impact on the statement of cash flows in 2016. _____ d)The collection of cash increases total assets in 2017. _____ e)The entry on 12/16/16 increases total revenues and total expenses on the 2016 income statement.

Use the following to answer questions On January 1,2016,Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $31,000 and $500,respectively.During the year Kincaid reported $72,500 of credit sales.Kincaid wrote off $550 of receivables as uncollectible in 2016.Cash collections of receivables amounted to $74,550.Kincaid estimates that it will be unable to collect one percent (1%) of credit sales. -Kincaid's entry required to recognize the uncollectible accounts expense for 2016 will

Which one of the following is not an accurate description of the Allowance for Doubtful Accounts?

When a company accepts a credit card payment for a sale,the amount of sales revenue to be recorded is reduced by the amount of the credit card company's fee.

Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Enter only one letter for each element.You do not need to enter amounts. -On March 1,2016,King Co.collected a note receivable and related interest from Havilland Co.The note had been issued one year earlier.Indicate the effects of this event on the elements of King's financial statements.