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Exam 8: Reporting and Analyzing Receivables

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Question 81

True/False

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When a note is written to settle an open account no entry is necessary.

A) True
B) False

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Question 82

Multiple Choice

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When customers make purchases with a national credit card, the retailer

A) is responsible for maintaining customer accounts.
B) is not involved in the collection process.
C) absorbs any losses from uncollectible accounts.
D) receives cash equal to the full price of the merchandise sold from the credit card company.

E) B) and D)
F) A) and B)

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Question 83

Multiple Choice

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Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $45,000. If the balance of the Allowance for Doubtful Accounts is $11,000 debit before adjustment what is the balance after adjustment?

When a note is dishonored, the payee's entry includes a

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

A 90-day note dated June 30, 2014, would mature on:

Under the allowance method, writing off an uncollectible account

Factoring arrangements

When a company receives an interest-bearing note receivable, it will

Wilton sells softball equipment. On November 14, they shipped $3,000 worth of softball uniforms to Paola Middle School, terms 2/10, n/30. On November 21, they received an order from Douglas High School for $1,800 worth of custom printed bats to be produced in December. On November 30, Paola Middle School returned $300 of defective merchandise. Wilton has received no payments from either school as of month end. What amount will be recognized as net accounts receivable on the balance sheet as of November 30?

A note receivable is a written promise by the maker to the payee to pay a specified amount of money at a definite time.

(a) Which company is doing the best job of managing its accounts receivable? Why? Be sure to support your answer with computations. (b) What are your concerns about these companies?

Strickman Company uses the allowance method for estimating uncollectible accounts. Prepare journal entries to record the following transactions:

ABC Company accepted a national credit card for a $7,000 purchase. The cost of the goods sold is $5,600. The credit card company charges a 3% fee. What is the impact of this transaction on net operating income?

The following are sales of The Holiday Store during February. The Store sells seasonal holiday items. 2/3 Sold 50 heart balloons for $5 cash each. 2/8 Sold 100 boxes of chocolates at $10 each, terms 2/10, n/30. Collected within the discount period. 2/10 Sold 50 heart necklaces for $25 each with no discount. Have not collected as of month end. 2/14 Sold 100 bouquets of roses at $30 per bouquet. Half the sales were on account. By month end, 75% of the credit sales were collected. 2/27 Sold 20 leftover heart necklaces to a discount store for $15 each on credit. 2/28 Sold a display cabinet at a swap meet for $100 on account. Determine the balance in Accounts Receivable at 2/28.

Both the gross amount of receivables and the allowance for doubtful accounts should be reported in the balance sheet.

Trent Distributors has the following transactions related to notes receivable during the last two months of the year. Dec. 1 Loaned $16,000 cash to E. Kinder on a 1-year, 6% note. 16 Sold goods to J. Jones, receiving a $4,800, 60-day, 7% note. 31 Accrued interest revenue on all notes receivable. Instructions Journalize the transactions for Trent Distributors.

Presented here is basic financial information (in millions) from the annual reports of Nike and Adidas. Instructions Calculate the accounts receivable turnover and average collection period for both companies. Comment on the difference in their collection experiences.

Which of the following receivables would not be classified as an "other receivable"?

At the beginning of the current period, Emler Corp. had balances in Accounts Receivable of $200,000 and in Allowance for Doubtful Accounts of $9,000 (credit). During the period, it had net credit sales of $650,000 and collections of $590,000. It wrote off as uncollectible accounts receivable of $5,000. However, a $3,000 account previously written off as uncollectible was recovered before the end of the current period. Uncollectible accounts are estimated to total $20,000 at the end of the period. Instructions (a) Prepare the entries to record sales and collections during the period. (b) Prepare the entry to record the write-off of uncollectible accounts during the period. (c) Prepare the entries to record the recovery of the uncollectible account during the period. (d) Prepare the entry to record bad debts expense for the period. (e) Determine the ending balances in Accounts Receivable and Allowance for Doubtful Accounts. (f) Calculate the net realizable value of the receivables at the end of the period.