Chapter 5
Amen debited accounts receivable and credited allowance for doubtful accounts. Amen should also debit _______ and credit ______
cash accounts receivable
allowance for uncollectible accounts
contra-asset estimate of the total uncollectible AR $ they don't think they will get
which of the following are classified as receivables?
Interest due from loans to customers loans by a company to other entities
A claim to receive cash in the future is a
Receivable
the account sales return and allowances account is a ___________ account and requires a _______ entry to increase the amount
Contra-revenue Debit
Which of the following items are classified as receivables
Tax refund claim amounts owed by customers Amounts loaned and expected to be repaid
What is a note?
a formal lending/credit agreement based on a written debt instrument, usually interest bearing
A trade discount is
a percentage reduction from list price
sales discount
a reduction in the sales price granted to customer for paying promptly
sales allowances
a reduction in the sales price granted to customer to satisfy a complaint the customer has about the product/service
sales returns
a return of product by customer who is not satisfied with it
An ______ is the legal right to receive cash from a credit sale and represents an asset of the company
accounts receivable
A company that expects that some of its customers will not pay the agree upon sales price must utilize the
allowance method
net realizable value
amount expected to be received in cash from an asset
compared to other methods of estimating uncollectible accounts, the aging of accounts receivable method tends to
be more accurate
sales allowance, sales discount
contra-revenue
Accounts receivable should be classified as a
current asset
Bad debt expense
current years cost of estimated future uncollectible AR
Willie earns a bonus each year if the company's net income is at least 100000. They use the allowance method for uncollectible accounts. What could willie do to make sure he gets a bonus
decrease estimate of uncollectible accounts will increase net income
Note receivable
formal credit arrangement between borrower and lender
notes receivables
generally longer-term than accounts receivables and include interest received
On Nov 1, Roddick provides services on account for 10000 and accepts a six-month, 9% note from the customer
notes rec 10000 service rev 10000 -Dec 31 interest rec 150 interest rev 150 -May 1 cash 10450 notes rec 10000 interest rev 300 interest rec 150
Two entries are required when a previous written off account is paid. These two entries include
record the collection on the account receivable reinstate the account receivable
When merchandise is returned for a refund or for credit to be applied to other purchases, the situation is called a
sales return
net revenue
sales revenue minus sales allowance/ discount/return
Direct write off method
timing Bad debt expense is recorded when accounts actually become uncollectible; no estimate time is recorded Bad debt expense XXX accounts receivables XXX not allowed by US GAAP
allowance for uncollectible accounts
total estimated future uncollectible AR
Roddick normally provides services for 600. on Nov 1, they decide to charge only 500 to a long time customer. services provided on account with terms 2/10; n/30
Accounts Rec 500 Service revenue 500 -Nov 3, roddick recognizes defective services and grants 100 allowance sales allowance 100 accounts rec 100 -Nov 9 roddick receives the full amount of cash owed cash 392 sales disc 8 accounts rec 400
sales return and allowances account is classified as a
Contra revenue account
The allowance method is required consistent under
GAAP
The approach the considers the age of various accounts receivables to estimate uncollectible accounts is referred to as the ________ method of accounts receivables
aging
Accounts receivable
amounts owed to a company by customers for products or services provided in the normal course of business
accounts receivable
amounts owed to a company by customers for products or services provided in the normal course of business
When a business sells goods to a customer, and the customer promises to pay later, this is referred to as
credit sales
Account receivable
informal credit agreement with trade customers