ACG Ch. 8 – Flashcard
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Notes and accounts receivable that result from sales transactions are often called trade receivables.
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True
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A service organization records a receivable at the point of sale of merchandise on account.
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False
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If a company fails to record estimated bad debt expense,
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expenses are understated and assets are overstated
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Cash (net) realizable value is the net amount the company expects to receive in cash.
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true
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The existing balance in Allowance for Doubtful Accounts is considered in computing bad debt expense in the
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percentage-of-receivables basis.
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Voight Company's account balances at December 31 for Accounts Receivable and Allowance for Doubtful Accounts were $1,400,000 and $70,000 (Cr.), respectively. An aging of accounts receivable indicated that $128,000 are expected to become uncollectible. The amount of the adjusting entry for bad debts at December 31 is
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128,000-70,000=58,000
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Which of the following approaches for bad debts is best described as a balance sheet method?
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Percentage-of-receivables basis.
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Hughes Company has a credit balance of $5,000 in its Allowance for Doubtful Accounts before any adjustments are made at the end of the year. Based on the review and aging of its accounts receivable at the end of the year, Hughes estimates that $60,000 of its receivables are uncollectible. The amount of bad debt expense which should be reported for the year is
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60,000-5,000=$55,000.
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Hughes has a debit balance of $5,000 in its Allowance for Doubtful Accounts before any adjustments are made at the end of the year. Based on the review and aging of its accounts receivable at the end of the year, Hughes estimates that $60,000 of its receivables are uncollectible. In this situation, the amount of bad debt expense that should be reported for the year is
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60,000+5,000=65,000
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Net sales for the month are $800,000, and bad debts are expected to be 1.5% of net sales. The company uses the percentage-of-sales basis. If the Allowance for Doubtful Accounts has a credit balance of $15,000 before adjustment, what is the balance after adjustment?
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15,000+12,000=27,000
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In 2015, Roso Carlson Company had net credit sales of $750,000. On January 1, 2015, Allowance for Doubtful Accounts had a credit balance of $18,000. During 2015, $30,000 of uncollectible accounts receivable were written off. Past experience indicates that 3% of net credit sales become uncollectible. What should be the adjusted balance of Allowance for Doubtful Accounts at December 31, 2015?
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10,500
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An analysis and aging of the accounts receivable of Prince Company at December 31 reveals the following data: Accounts receivable $800,000 Allowance for doubtful accounts per books before adjustment $50,000 Amounts expected to become uncollectible $65,000 The cash realizable value of the accounts receivable at December 31, after adjustment, is
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800,000-65,000=735,000
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Companies report accounts receivable on the balance sheet at
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cash (net) realizable value
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Allowance for Doubtful Accounts is
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contra asset account
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Under the allowance method, estimated uncollectible receivables are credited to
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Allowance for Doubtful Accounts.
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Writing off an uncollectible account under the allowance method requires a debit to
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Uncollectible Accounts Expense.
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The percentage-of-sales basis of estimating uncollectibles
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results in a better matching of expenses with revenues.
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The percentage-of-receivables basis of estimating uncollectibles
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produces a better estimate of cash realizable value.
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The direct write-off method
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shows only actual losses from uncollectible accounts.
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The balance of the Allowance for Doubtful Accounts account at January 1 of the current year was $6,800 credit. During the year, accounts receivable in the amount of $9,000 were written off. Estimated uncollectible accounts expense for the year amounts to $7,200. The balance of the Allowance for Doubtful Accounts account to be reported on the balance sheet at year-end is
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6,800-9,000+7,200=5,000
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Bond Company recorded bad debt expense of $35,000 and wrote off accounts receivable of $20,000 during the current year. The net effect of these two transactions on net income was
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a decrease of $35,000
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Sanders Company has a debit balance of $7,000 in its Allowance for Doubtful Accounts before any adjustments are made. Based on a review of its accounts receivable at the end of the year, Sanders estimates that $70,000 of its receivables are uncollectible. The amount of bad debt expense which should be reported for the year is
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7,000+70,000=$77,000
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Gudenas Company makes a credit card sale to a customer for $500. The credit card sale has a grace period of 30 days and then an interest charge of 18% per year or 1.5% per month is added to the balance. If the unpaid balance on the above sale is $300 at the end of the grace period, the interest charge is
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300x1.5=4.50 interest charge
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Which of the following statements about Visa credit card sales is correct?
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The credit card issuer makes the credit investigation of the customer. The retailer is not involved in the collection process. The retailer receives cash more quickly than it would from individual customers on account.
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Blinka Retailers accepted $50,000 of Citibank Visa credit card charges for merchandise sold on July 1. Citibank charges 4% for its credit card use. The entry to record this transaction by Blinka Retailers will include a credit to Sales Revenue of $50,000 and a debit(s) to
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Cash $48,000 and Service Charge Expense $2,000
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In recording the sale of accounts receivable, the commission charged by a factor is recorded as
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Service Charge Expense.
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Sales resulting from the use of Visa and MasterCard credit cards are considered
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cash sales
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In a promissory note, the party making the promise to pay is called the maker.
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True
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A 60-day note receivable dated April 13 has a maturity date of
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April 30-13=17 days June 12
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On February 1, Kline Company received a $6,000, 10%, four-month note receivable. The cash to be received by Kline Company when the note becomes due is
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6,000x10x4/12=200 6,000+200=6,200
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The maturity date of a 90-day note dated April 12 is
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18 days in april +31 days in may +30 days in june +11 days in july = july 11
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The interest rate specified in a note is for a
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year
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A company that receives an interest-bearing note receivable will
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debit Notes Receivable for the face value of the note.
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Companies report short-term notes receivable at their cash (net) realizable value.
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true
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A dishonored note receivable is no longer negotiable and the payee has no claim against the maker of the note.
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false
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When a note receivable is dishonored,
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Accounts Receivable is debited if eventual collection is expected.
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When a note receivable is honored, Cash is debited for the note's
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maturity value.
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Ginter Co. holds Kolar Inc.'s $10,000, 120-day, 9% note. The entry made by Ginter Co. when the note is collected, assuming no interest has been previously accrued, is
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Cash 10,300 Notes Receivable 10,300
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For an interest-bearing note, the amount due at maturity is the
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face value of the note plus interest.
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The entry to record the dishonor of a note receivable assuming the payee expects eventual collection includes a debit to
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Accounts Receivable
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On May 1, Kingston Company received a $9,000, 10%, four-month note receivable. The cash to be received by Kingston Company when the note becomes due is
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9,000x10%X4/12=9,300
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The average collection period is computed by dividing
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365 days by the accounts receivable turnover.
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The accounts receivable turnover is computed by dividing
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net credit sales by average net accounts receivable.
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Accounts receivable are reported in the current assets section of the balance sheet at
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the gross amount less allowance for doubtful accounts.
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Oliveras Company had net credit sales during the year of $800,000 and cost of goods sold of $500,000. The balance in accounts receivable at the beginning of the year was $100,000, and the end of the year it was $150,000. What were the accounts receivable turnover and the average collection period in days?
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800,000/10,000+150,000/2= 6.4 365/6.4=57 days
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Which of the following is the value at which loans and receivables should be reported under IFRS?
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Amortized cost
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What approach does IFRS require when testing whether the value of loans and receivables are impaired?
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A company should look at specific loans and receivables to determine if impaired, and then evaluate as a group.
