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Exam 8: Receivables

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Question 21

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Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is $390,000 and credit sales are $1,300,000. An aging of accounts receivable shows that approximately 5% of the outstanding receivables will be uncollectible. What adjusting entry will Tanning Company make if the Allowance for Doubtful Accounts has a credit balance of $2,500 before adjustment?

A) Bad Debt Expense 17,000 Allowance for Doubtful Accounts 17,000
B) Bad Debt Expense 19,500 Allowance for Doubtful Accounts 19,500
C) Bad Debt Expense 22,000 Allowance for Doubtful Accounts 22,000
D) Bad Debt Expense 65,000 Allowance for Doubtful Accounts 65,000

E) C) and D)
F) All of the above

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Question 22

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When using the direct write-off method off accounting for uncollectible receivables, the account Allowance for Doubtful Accounts is debited when a specific account is determined to be uncollectible.

A) True
B) False

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Question 23

Multiple Choice

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The receivable that is usually evidenced by a formal instrument of credit is a(n)

Allowance for Doubtful Accounts is classified as a(n) ______ and has a normal ______ balance.

The direct write-off method records Bad Debt Expense in the year the specific account receivable is determined to be uncollectible.

Allowance for Doubtful Accounts has a debit balance of $2,300 at the end of the year (before adjustment) . The company prepares an analysis of customers' accounts and estimates the amount of uncollectible accounts to be $31,900. Which of the following adjusting entries is needed to record the Bad Debt Expense for the year?

At the end of the current year, Accounts Receivable has a balance of $675,000; Allowance for Doubtful Accounts has a debit balance of $5,400; and net sales for the year total $3,000,000. An analysis of receivables indicates the uncollectible receivables are estimated to be $45,000. Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value of accounts receivable.

The amount of a promissory note is called the

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

At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful Accounts has a credit balance of $5,500; and net sales for the year total $2,500,000. An analysis of receivables estimates uncollectible receivables as $25,000. Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted balances of Accounts Receivable, Allowance of Doubtful Accounts; and Bad Debt Expense; and (c) the net realizable value of accounts receivable.

When companies sell their receivables to other companies, the transaction is called factoring.

A debit balance in the Allowance for Doubtful Accounts

For each of the following scenarios, indicate the amount of the adjusting journal entry for Bad Debt Expense to be recorded in 2014, the balance in Allowance for Doubtful Accounts after adjustment at December 31, 2014, and the net realizable value of Accounts Receivable at December 31, 2014: a) Based on an analysis of Simmon's Company's $380,000 balance in Accounts Receivable at December 31, 2014, is was estimated that $15,500 will be uncollectible. There is a credit balance of $1,200 in Allowance for Doubtful Accounts before adjustment. b) Blake Company had net credit sales of $900,000 during 2014, and has an Accounts Receivable balance of $425,000 at December 31, 2014, and an Allowance for Doubtful Accounts credit balance of $11,000 before adjustment. Blake estimates Bad Debt Expense as 3/4 of 1% of net credit sales. c) Hidgon Inc. has a balance of $812,000 in Accounts Receivable at December 31, 2014. An analysis of those receivables shows $24,000 will probably not be collected. Before adjusting entries are prepared, the Allowance for Doubtful Accounts has a debit balance of $750.

The balance of the Allowance for Doubtful Accounts is added to Accounts Receivable on the balance sheet.

When accounting for uncollectible receivables and using the percentage of sales method, the matching principle is violated.

Financial Statement data for the years ended December 31 for Parker Corporation is as follows: 2012 2011 Net Sales $2,595,600 $2,409,500 Accounts Receivable Beginning of the year $ 390,000 $400,000 End of the year 434,000 390,000 a) Determine the accounts receivable turnover for 2012 and 2011. b) Determine the number of days' sales in receivables for 2012 and 2011. c) Does the change in accounts receivable turnover and number of days' sales in receivables from 2011 to 2012 indicate a favorable or unfavorable trend.?

What is the type of account and normal balance of Allowance for Doubtful Accounts?

After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance of $340,000 and Allowance for Doubtful Accounts has a balance of $51,000. What is the net realizable value of the accounts receivable?

The two methods of accounting for uncollectible receivables are the allowance method and the

Sunshine Service Center received a 120-day, 6% note for $40,000, dated April 12 from a customer on account.