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Exam 9: Receivables

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Question 21

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A primary difference between the direct write-off and allowance method is whether or not bad debts is based on a percentage of sales.

A) True
B) False

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Question 22

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

A) True
B) False

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Question 23

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When the allowance method for accounting for uncollectible receivables is used, net income is reduced when a specific receivable is written off.

A company uses the allowance method to account for uncollectible accounts receivables. When the firm writes off a specific customer's account receivable

Two methods of accounting for uncollectible accounts are the

Discount Mart utilizes the allowance method of accounting for uncollectible receivables. On December 12th the company receives a $550 check from Chad Thomas in settlement of Thomas' $1,100 outstanding accounts receivable. Due to Thomas' failing health he is closing his company and is expecting to make no further payments to Discount Mart. Journalize this declaration.

On June 30th (the end of the period) Brown Company has a credit balance of $2,275 in Allowance for Doubtful Accounts. An evaluation of accounts receivable indicates that the proper balance should be $30,025. Journalize the appropriate adjusting entry.

Allowance for Doubtful Accounts has a credit balance of $500 at the end of the year (before adjustment) , and bad debt expense is estimated at 3% of net credit sales. If net credit sales are $300,000, the amount of the adjusting entry to record the estimated uncollectible accounts receivables is

In computing the maturity date of a note, the date the note is issued is included but the due date is omitted.

The direct write-off method of accounting for uncollectible accounts

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

Journalize the following transactions (Assume a 360-day year when calculating interest.):

Allowance for Doubtful Accounts has a credit balance of $800 at the end of the year (before adjustment) , and an analysis of accounts in the customer ledger indicates the estimated amount of uncollectible accounts should be $16,000. Based on the estimate above, which of the following adjusting entries should be made?

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 the net realizable value of accounts receivable after adjustment. (Hint: Determine the amount of the adjusting entry for bad debt expense and the adjusted balance Allowance of Doubtful Accounts.)

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

The balance in the Allowance for Doubtful Accounts account at the end of the year includes the total of all accounts written-off since the beginning year.

When a company uses the allowance method of accounting for uncollectible receivables, which entry would not be found in the general journal?

Match each of the following terms associated with the best description of that term.

The Lowery Co. uses the direct write-off method of accounting for uncollectible accounts receivable. Lowery has a customer whose accounts receivable balance has been determined to likely be uncollectible. The entry to write off this account would be which of the following?:

At the end of the current year, Accounts Receivable has a balance of $750,000; Allowance for Doubtful Accounts has a debit balance of $6,200; and net sales for the year total $3,500,000. Bad debt expense is estimated at 1/2 of 1% of net sales. 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.