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Exam 9: Accounting for Receivables

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Question 21

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The percent of sales method for estimating bad debts assumes that a given percent of a company's credit sales for the period are uncollectible.

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Question 22

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If a 60-day note receivable is dated September 22, what is the maturity date of the note?

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Question 23

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A company using the percentage of sales method for estimating bad debts has sales of $350,000 and estimates that 1.0% of its sales are uncollectible. The estimated amount of bad debts expense is $3,500.

Match the following definitions with the appropriate term

Explain how to record the receipt (acceptance) of a note receivable.

Prepare general journal entries for the following transactions for the current year: Apr. 25 Sold $4,500 of merchandise to Dunn Corp., receiving a 10%, 60-day. $4,500 note receivable. June 24 The note of Dunn Corp., received on April 25 was dishonored.

The accounts receivable turnover indicates how often accounts receivable are received and collected during the period.

The ________ method of computing uncollectible accounts uses income statement relationships to estimate bad debts and is based on the idea that a given percent of a company's credit sales for a period are uncollectible.

A receivable is an amount due from another party.

On November 1, Orpheum Company accepted a $10,000, 90-day, 8% note from a customer settle an account. What entry should be made on the November 1 to record the acceptance of the note?

Pepperdine reported net sales of $8,600 million, net income of $126 million and average accounts receivable of $890 million. Its accounts receivable turnover is:

A note that the maker is unable or refuses to pay at maturity is called a dishonored note.

When using the allowance method of accounting for uncollectible accounts, the recovery of a bad debt would be recorded as a debit to Cash and a credit to Bad Debts Expense.

Gideon Company uses the direct write-off method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $2,000 uncollectible account of its customer, A. Hopkins. On July 10, Gideon received a check for the full amount of $2,000 from Hopkins. On July 10, the entry or entries Gideon makes to record the recovery of the bad debt is:

________ are amounts owed by customers from credit sales where payment is required in periodic amounts over an extended time period.

Explain the options a company may use to convert its receivables to cash before they are due.

A company has $80,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 6% of outstanding receivables are uncollectible. The current credit balance (before adjustments) in the allowance for doubtful accounts is $1,200. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for $4,800.

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 October 12 of the current year, a company determined that a customer's account receivable was uncollectible and that the account should be written off. -Assuming the direct write-off method is used to account for bad debts, what effect will this write-off have on the company's net income and total assets?

When using the allowance method of accounting for uncollectible accounts, the entry to write off Jeannie's uncollectible account is a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable-Jeannie.