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Exam 7: Accounting for Receivables

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Question 31

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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 September 1,2016,Diaz Company loaned $10,000 to Ace Company.Show the effect of this transaction on Diaz's financial statements.

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Question 32

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Use the following to answer questions The Miller Company earned $190,000 of revenue on account during 2016.There was no beginning balance in the accounts receivable and allowance accounts.During 2016 Miller collected $136,000 of cash from its receivables accounts.The company estimates that it will be unable to collect 3% of its sales on account. 37.The amount of uncollectible accounts expense recognized on the 2016 income statement was A.$5,700. B.$1,320. C.$4,080. D.$54,000. Answer: A Learning Objective: 07-01 Topic Area: Uncollectible accounts ― Percent of revenue method AACSB: Knowledge Application AICPA: FN Measurement AICPA: BB Critical Thinking Blooms: Apply Level of Difficulty: 2 Medium Feedback: $190,000 revenue on account x 3% = $5,700 -The balance in Accounts Receivable at the beginning of the period amounted to $16,000.During the period $64,000 of credit sales were made to customers.If the ending balance in Accounts Receivable amounted to $10,000,and uncollectible accounts expense amounted to $4,000,then the amount of cash inflow from customers that would appear in the operating activities section of the cash flow statement would be:

A) $66,000.
B) $64,000.
C) $80,000.
D) None of these answers are correct.

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Question 33

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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. -Which of the following reflects the effect of the year-end adjusting entry to record estimated uncollectible accounts expense using the allowance method?

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. -Powell Co.uses the allowance method to account for uncollectible accounts expense.On June 20,2016,Powell wrote-off an uncollectible account in the amount of $5,000.Show the effect of this entry.

How is the accounts receivable turnover computed? What information does this ratio provide?

When is uncollectible accounts expense recognized if the direct write-off method is used?

What does the accounts receivable turnover ratio measure?

The year-end adjusting entry to recognize uncollectible accounts expense will

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. -The amount of uncollectible accounts expense recognized in the 2016 income statement will be:

Indicate whether each of the following statements is true or false assuming use of the allowance method of accounting for uncollectible accounts. _____ a)The Allowance for Doubtful Accounts is a contra-asset account. _____ b)The net realizable value of receivables is the difference between the ending balance of accounts receivable and the ending balance in the allowance for doubtful accounts. _____ c)The recognition of uncollectible accounts expense at the end of an accounting period does not affect the net realizable value of accounts receivable. _____ d)The write-off of an uncollectible account reduces the net realizable value of accounts receivable. _____ e)The write-off of an uncollectible account does not affect the amount of a company's equity.

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

The net effect of the entries to recognize the receipt of a previously written-off account under the allowance method is to:

Use the following to answer questions The Yankee Corporation has recently begun to accept credit cards.On July 7,2016,Yankee made a credit card sale of $600.The credit card company charges a fee of 3%. -Which of the following correctly shows the effects of the sale on July 7? Assume that the credit card fee is recorded on the date of sale.

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

A firm's operating cycle can be determined by:

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 31,2017 Sparkes Co.wrote-off a $400 account receivable of one of its customers,Amy Gates.The $400 sale had been made to Gates last year.Sparkes uses the "allowance method" to account for uncollectible accounts expense.Show how the write-off of the account would affect the elements of Sparkes's financial statements.

When an uncollectible account receivable is written off,the amount of total assets is unchanged.

The best estimate for the amount of cash a company expects to collect from its accounts receivable is the face value of the receivables.

Use the following to answer questions The Yankee Corporation has recently begun to accept credit cards.On July 7,2016,Yankee made a credit card sale of $600.The credit card company charges a fee of 3%. -Which of the following answers correctly describes the effect of the collection of cash from the credit card company on the financial statements of Yankee Corporation?

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's recording the reestablishment of the receivable on April 4,2016?