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Exam 7: Accounting for Receivables

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Question 1

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The allowance method of accounting for bad debts requires an estimate of bad debt expense at the end of each accounting period.The two common methods to determine the estimate amount are the percent of sales method and the percent of receivables method.Explain the basic differences between the two methods.

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The percent of sales method emphasizes t...

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Question 2

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Sellers allow customers to use bank (or third-party) credit cards for all of the following reasons except:

A) To be able to charge more due to fees and interest.
B) To avoid the risk of customers not paying.
C) To speed up receipt of cash from the credit sale.
D) To increase total sales.
E) To avoid having to decide who gets credit and how much.

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Match each of the appropriate definitions with correct term.

The period of a note is the time from the note's (contract)date to its maturity date.

Giorgio Italian Market bought $4,000 worth of merchandise from Food Suppliers and signed a 90-day,6% promissory note for the $4,000.Food Supplier's journal entry to record the collection on the maturity date is: (Use 360 days a year.)

A credit sale of $5,275 to a customer would result in which of the following?

When using the allowance method of accounting for uncollectible accounts,the entry to write off Jeannie's uncollectible account is a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable-Jeannie.

The direct write-off method of accounting for bad debts records the loss from an uncollectible account receivable when it is determined to be uncollectible.

Converting receivables to cash before they are due is usually done by either (1)________ or (2)________.

Woods Co.uses a perpetual inventory system,and accepts the World Express bank credit card from its customers.World Express charges a 3.5% service fee and all credit card receipts deposited are credited to the company account on the day of deposit.On February 28,Woods sold $24,000 worth of merchandise to customers (that had cost $14,400)using the World Express charge card.Prepare the journal entries to record February 28 sales.

Mercks uses the perpetual inventory system,and accepts the Discovery bank credit card for credit card sales.Discovery charges Mercks a 3% fee,and all credit card receipts deposited are credited to the company account on the day of deposit.Prepare journal entries to record the following transaction.

On July 9,Mifflin Company receives an $8,500,90-day,8% note from customer Payton Summers as payment on account. -What entry should be made on the maturity date assuming the maker pays in full,and no adjusting entries have been made related to the note? (Use 360 days a year.)

Each December 31,Kimura Company ages its accounts receivable to determine the amount of its adjustment for bad debts.At the end of the current year,management estimated that $16,900 of the accounts receivable balances would be uncollectible.The Allowance for Doubtful Accounts account had a debit balance of $1,200 before any year-end adjustment for bad debts.Prepare the adjusting journal entry that Kimura Company should make on December 31,of the current year.

On September 30,Waldon Co.has $540,250 of accounts receivable.Waldon uses the allowance method of accounting for bad debts and has an existing credit balance in the allowance for doubtful accounts of $13,750. 1.Prepare journal entries to record the following selected October transactions.The company uses the perpetual inventory system. a.Sold $305,000 of merchandise (that cost $178,500)to customers on credit. b.Received $395,100 cash in payment of accounts receivable. c.Wrote off $15,700 of uncollectible accounts receivable. d.In adjusting the accounts on October 31,its fiscal year-end,the company estimated that 4.0% of accounts receivable will be uncollectible. 2.Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its October 31 balance sheet.

The Links Company uses the percent of sales method of accounting for uncollectible accounts receivable.During the current year,the following transactions occurred: 1.Prepare the general journal entries to record these transactions. 2.If the balance of the allowance for uncollectible accounts was a $4,000 credit on January 1 of the current year,determine the balance of the allowance for uncollectible accounts at December 31 of the current year.Assume that the transactions above are the only transactions affecting the allowance for uncollectible accounts during the year.

A company has $80,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts.Experience suggests that 6% of outstanding receivables are uncollectible.The current credit balance (before adjustments)in the allowance for doubtful accounts is $1,200.The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for $4,800.

On December 31 of the current year,the unadjusted trial balance of a company using the percent of receivables method to estimate bad debt included the following: Accounts Receivable,debit balance of $95,250; Allowance for Doubtful Accounts,credit balance of $921.What amount should be debited to Bad Debts Expense,assuming 6% of outstanding accounts receivable at the end of the current year are estimated to be uncollectible?

Jordan Co.uses the allowance method of accounting for uncollectible accounts.Jordan Co.accepted a $5,000,12%,90-day note dated May 16,from Beckam Co.in exchange for its past-due account receivable.Make the necessary general journal entries for Jordan Co.on May 16 and the August 14 maturity date,assuming that the: a.Note is held until maturity and collected in full at that time. b.Note is dishonored; the amount of the note and its interest are written off as uncollectible.

When a note receivable is dishonored,it reverts to an account receivable.

Prepare general journal entries for the following transactions for the current year: