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Notes or accounts receivables that result from sales transactions are often called

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trade receivables

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Three accounting issues associated with accounts receivable are

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recognizing, valuing, and disposing

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A customer charges a treadmill at Mike's Sport Shop. The price is $2,000 and the financing charge is 9% per annum if the bill is not paid in 30 days. The customer fails to pay the bill within 30 days and a finance charge is added to the customer's account.

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$15

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Under the allowance method, writing off an uncollectible account

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affects only balance sheet accounts.

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The net amount expected to be received in cash from receivables is termed the

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cash realizable value

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The existing balance in Allowance for Doubtful Accounts is considered in computing bad debts expense in the

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percentage of receivables basis

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When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when

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management estimates the amount of uncollectibles

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The percentage of sales basis of estimating expected uncollectibles

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emphasizes the matching of expenses with revenues

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An aging of a company's accounts receivable indicates that $9,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,100 credit balance, the adjustment to record bad debts for the period will require a

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debit to Bad Debts Expense for $7,900

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Bad Debts Expense is considered

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a necessary risk of doing business on a credit basis

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The allowance method of accounting for uncollectible accounts is required if

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bad debts are significant in amount.

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Bad Debts Expense is reported on the income statement as

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an operating expense

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To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a

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debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts

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Two bases for estimating uncollectible accounts are

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percentage of receivables and percentage of sales

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The percentage of receivables basis for estimating uncollectible accounts emphasizes

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cash realizable value

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Hahn Company uses the percentage of sales method for recording bad debts expense. For the year, cash sales are $500,000 and credit sales are $2,000,000. Management estimates that 1% is the sales percentage to use. What adjusting entry will Hahn Company make to record the bad debts expense?

answer

Bad Debts Expense 20,000 Allowance for Doubtful Accounts 20,000

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In reviewing the accounts receivable, the cash realizable value is $16,000 before the write-off of a $1,500 account. What is the cash realizable value after the write-off?

answer

16000

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Newland Retailers accepted $75,000 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 Newland Retailers will include a credit to Sales of $75,000 and a debit(s) to

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Cash $72,000 and Service Charge Expense $3,000.

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The sale of receivables by a business

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can be a quick way to generate cash for operating needs

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The retailer considers Visa and MasterCard sales as

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cash sales

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notes receivable are recognized in the accounts at

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face value

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The four subdivisions for plant assets are

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land, land improvements, buildings, and equipment.

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The cost of land does not include

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annual property taxes.

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Angie's Blooms purchased a delivery van with a list price of $30,000. The company was given a $3,000 cash discount by the dealer, and paid $1,500 sales tax. Annual insurance on the van is $750. As a result of the purchase, by how much will Angie's Blooms increase its van account?

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$28500

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The balance in the Accumulated Depreciation account represents the

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amount charged to expense since the acquisition of the plant asset.

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Depreciation is a process of

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cost allocation

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Recording depreciation each period is necessary in accordance with the

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expense recognition principle

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the declining-balance method of depreciation produces

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a decreasing depreciation expense each period.

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Units-of-activity is an appropriate depreciation method to use when

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the productivity of the asset varies significantly from one period to another

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A change in the estimated useful life of equipment requires

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that the amount of periodic depreciation be changed in the current year and in future years

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Costs incurred to increase the operating efficiency or useful life of a plant asset are referred to as

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capital expenditures

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What is not true of ordinary repairs

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they increase the productive capacity of the asset.

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Additions and improvements

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increase the book value of plant assets when incurred.

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A gain or loss on disposal of a plant asset is determined by comparing the

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book value of the asset with the proceeds received from its sale

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The book value of a plant asset is the difference between the

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cost of the asset and the accumulated depreciation to date

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If disposal of a plant asset occurs during the year, depreciation is

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recorded for the fraction of the year to the date of the disposal

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If a fully depreciated plant asset is still used by a company, the

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asset and the accumulated depreciation continue to be reported on the balance sheet without adjustment until the asset is retired

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A loss on disposal of a plant asset is reported in the financial statements

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in the Other Expenses and Losses section of the income statement

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Natural resources are

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physically extracted in operations and are replaceable only by an act of nature.

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Depletion is

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the allocation of the cost of natural resources to expense.

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The entry to record patent amortization usually includes a credit to

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patents

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Cost allocation of an intangible asset is referred to as

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amortization

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Research and development costs

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must be expensed when incurred under generally accepted accounting principles

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