accounting 5.2
On September 1, Year 1, Dallas Corporation accepts a $30,000 six-month, 12 percent promissory note from one of its clients. The year-end adjustment to accrue interest revenue on December 31, Year 1 will include a _____.
$1,200 credit to Interest Revenue
Account(s) with a normal credit balance include: (Select all that apply.) (2)
allowance for uncollectible accounts, sales revenue
when using an aged method for estimating uncollectible accounts...
older accounts are considered less likely to be collected
sales allowances
reduction in revenue because of some deficiency (flaw) in the company's product
sales returns
reduction in revenue because the customer brings back products to company after the original purchase
Under the allowance method, companies are required to estimate future uncollectible accounts and record those estimates in the current year. Estimated uncollectible accounts do what to assets and do what to net income:
decrease total assets and decrease net income.
On January 1, Year 1, Alpha Corporation accepts a $10,000 three-month, nine percent promissory note from one of its customers. How much interest will be collected at the maturity date of the note?
$225
During its first year of operations, Ellison, Inc. bills customers $18,000 for the services it provided. At the end of the year, $6,000 remains due from customers. The company's credit manager estimates that 10% of the total year-end accounts receivable will not be collected. The company's estimate of uncollectible accounts is:
$600
On Oct. 1, 2018, Dots Inc, lends $100,000 to another company and accepts a 12-month, 3% note. What is the amount of interest revenue stripes will report in its 2018 income statement?
$750 (100,000 x 0.03 x 3/12)
Net credit sales for Turner Company are $200,000 for the year and the average accounts receivable balance is $20,000. What is the company's average collection period? (Use 365 days in a year.)
36.5 days
Net credit sales for Winner Company are $100,000 for the year. The Accounts Receivable account had a balance of $15,000 at the beginning of the year and $25,000 at the end of the year. What is the company's receivables turnover ratio?
5.0 (($100,000 ÷ [($15,000 + $25,000)/2] = $100,000 ÷ $20,000 = 5.))
T/F: A company's decision to offer discounts for early payment has the potential to increase sales volume, but comes at the cost of slower cash collection.
False
T/F: Company A and Company B operate in the same industry and region. Compared to Company B, Company A has a low receivables turnover ratio and a correspondingly high average collection period. From this information, we can conclude that Company A is managing its receivables better than Company B.
False
On March 1, Terrell & Associates provides legal services to Whole Grain Bakery regarding some recent food poisoning complaints. Legal services total $9,800. In payment for the services, Whole Grain Bakery signs a 10% note requiring the payment of the face amount and interest to Terrell & Associates on September 1. Required: For Terrell & Associates, record the acceptance of the note receivable on March 1 and the cash collection on September 1. (2 ENTRIES)
March 1: debit notes receivable $9,800, credit service revenue $9,800 Sept 1 : debit Cash $10,290, credit NR $9,800, credit Interest revenue $490
Delta Company performed $20,000 of services on account and recorded the amount due as a typical account receivable. Over time, it became apparent that the customer would not be able to pay quickly, so Delta required the customer to sign a six-month, 11 percent promissory note on February 1, Year 2. The company then reclassified the existing account receivable as a note receivable. Which of the following will result from this action?
No impact on the accounting equation
The percentage increase in receivables for Petro Corporation is greater than the percentage increase in sales. Which of the following conclusions can be drawn from this information?
The average collection period will increase
T/F: The allowance method is required by GAAP for financial reporting purposes.
True
T/F: The allowance method requires managers to estimate future uncollectible accounts and to record that estimate in the current year.
True
contra-rev
accounts w balances opposite of revenue
During its first year of operations, Kimbrough Corporation sold $14 million worth of goods on account. At the end of the year, $5 million remains due from customers. If the company estimates that 20% of the total year-end accounts receivable will not be collected, it will record a:
credit to Allowance for Uncollectible Accounts for $1 million
On September 1, Year 1, a company collects a $5,000 six-month, five percent promissory note. The entry to record the collection at maturity date will include a:
credit to Interest Revenue for $125
Physicians' Hospital has the following balances on December 31, 2021, before any adjustment: Accounts Receivable = $47,000; Allowance for Uncollectible Accounts = $1,100 (credit). On December 31, 2021, Physicians' estimates uncollectible accounts to be 15% of accounts receivable. Required: 1. Record the adjusting entry for uncollectible accounts on December 31, 2021.
debit bad debt expense $5,950, credit allowance for uncollectible accounts $5,950
On September 1, Year 1, Sigma Corporation accepts a $100,000 six-month, nine percent promissory note from one of its clients. The transaction recorded by the company on March 1, Year 2, the maturity date, will involve _____. (3)
debit to Cash for $104,500 credit to Interest Receivable for $3,000 credit to Notes Receivable for $100,000
On January 1, Year 1, Boyd Corporation accepts a $10,000 three-month, nine percent promissory note from one of its customers. To record acceptance of the note, the company will record a:
debit to Notes Receivable for $10,000
trade discounts
reduction in revenue because the product is sold below the listed price
Sales discounts
reduction in revenue when the customer pays w/in a specified time period
net realizable value
the difference between total AR and the estimate of future uncollectible accounts (bad debts) ((the amt I will get))
allowance method
the procedure required for financial reporting purposes to account for uncollectible accounts
Net Revenues
total revenues, less contra revenues