chapter 9 receivables

A 60-day, 12% note for $10,000, dated May 1, is received from a customer on account. Assuming a 360-day year, the maturity value of the note is

$10,200.

A 90-day, 12% note for $10,000, dated May 1, is received from a customer on account. Assuming a 360-day year, the maturity value of the note is

$10,300.

On December 1, Bright Company receives a 6% interest-bearing note from Galvalume Company to settle a $20,000 account receivable. The note is due in 3 months. At December 31, Bright should record interest revenue of

$100

A 90-day, 10% note for $9,000, dated April 15, is received from a customer on account. The face value of the note is

$9,000.

inancial statement data for the year ending December 31 for Flagg Co. is as follows: Sales $4,250,000 Accounts receivable: Beginning of year 600,000 End of year 630,000

52.8 days

When comparing the direct write-off and allowance methods, which of the following statements applies to the direct write-off method?

The expense is recognized when the account is written off rather than in the period of sale.

When comparing the direct write-off and allowance methods, which of the following statements applies to the allowance method?

The result is based on either (1) a percentage of sales or (2) an analysis of receivables.

The rule is that an account becomes uncollectible

There is no general rule as to when an account becomes uncollectible.

A note receivable due in 12 months is listed on the balance sheet under the caption

current assets.

Other disclosures related to receivables are reported

either on the face of the financial statements or in the financial statement notes.

The number of days' sales in receivables

is an estimate of the length of time the receivables have been outstanding.

The party making the promise to pay the promissory note is the

maker

Other receivables do not include

trade receivables.

If Accounts Receivable for Crawford Company is equal to $172,000 and the Allowance for Doubtful Accounts is $4,500 at December 31, 2016, what is the amount of net receivables shown on Crawford's balance sheet at December 31, 2016?

$167,500

Allowance for Doubtful Accounts has a credit balance of $500 at the end of the year (before adjustment), and uncollectible accounts expense is estimated at 2% of sales. If sales are $600,000, the amount of the adjusting entry to record the provision for doubtful accounts is

12000

Using the following end-of-year information, calculate the number of days' sales in receivables for Year 2.? Year 2: sales are $82,500; average accounts receivable is $11,000. Year 1: sales are $78,000; average accounts receivable is $10,000. Round to one decimal place.

48.7

Financial statement data for the year ending December 31 for Gore Co. is as follows: Determine accounts receivable turnover for the year.

6.91

Using the following end-of-year information, calculate accounts receivable turnover for Year 2.​ Year 2: sales are $82,500; average accounts receivable is $11,000. Year 1: sales are $78,000; average accounts receivable is $10,000. Round to one decimal place.

7.5

If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is credited when a customer's account is written off as uncollectible?

Accounts Receivable.

Which of the following methods and bases of accounting for uncollectible accounts receivable is inconsistent with the proper application of matching?

Direct write-off method

Allowance for Doubtful Accounts has a credit balance of $500 at the end of the year (before adjustment), and an analysis of accounts in the customer ledger indicates doubtful accounts of $15,000. Which of the following entries records the proper provision for doubtful accounts?

Debit Bad Debt Expense, $14,500; credit Allowance for Doubtful Accounts, $14,500.

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 2% of sales. If sales are $500,000, the adjusting entry for uncollectible accounts would include:

a credit to Allowance for Doubtful Accounts of $10,000.

If Modern Company received $3,650 from Connor Young Company on March 12 for the total amount of an account which had been written off on March 1, the entry to reinstate the account under the allowance method would include:

a credit to Allowance for Doubtful Accounts of $3,650.

If Modern Company received $3,650 from Connor Young Company on March 12 for the total amount of an account which had been written off on March 1, the entry to reinstate the account under the direct write-off method would include:

a credit to Bad Debt Expense of $3,650.

If Ohio Company received $2,250 as partial payment on the $5,500 account of Carson Mueller Company and wrote off the remaining balance as uncollectible, the only difference between recording the entry under the direct write-off method and the allowance method (assuming that an adequate allowance account had been set up) would be:

a debit to Bad Debt Expense for $3,250 under the direct method rather than a debit to Allowance for Doubtful Accounts for $3,250 under the allowance method.

Two financial measures that are especially useful in evaluating efficiency in collecting receivables are the

accounts receivable turnover and the number of days' sales in receivables.

The two methods of accounting for uncollectible receivables are the direct method and the __________ method.

allowance

Under the allowance method of accounting for uncollectible accounts, Bad Debts Expense is debited

at the end of each accounting period.

The number of days' sales in receivables is determined by dividing

average accounts receivable by average daily sales.

Under the direct write-off method

bad debt is recorded when specific customer accounts are determined to be uncollectible.

All receivables that are expected to be realized within a year are reported in the __________ section of the balance sheet.

current assets

An account receivable due in 12 months is listed on the balance sheet under the caption

current assets.

Receivables are _________ on the __________, which are listed in order of ____________.

current assets; balance sheet; liquidity

Flora Co. uses the allowance method of accounting for uncollectible accounts receivable. The entry to write off an account that has been determined to be uncollectible would be as follows:

debit Allowance for Doubtful Accounts; credit Accounts Receivable

Extra Co. uses the direct write-off method of accounting for uncollectible accounts receivable. The entry to write off an account that has been determined to be uncollectible would be as follows:

debit Bad Debt Expense; credit Accounts Receivable.

The journal entry to record a note received from a customer to apply on account is

debit Notes Receivable; credit Accounts Receivable.

Establishing an Allowance for Doubtful Accounts under the allowance method is necessary because

estimates must be made when recording bad debt expense and it is not possible to know which specific accounts will not be collected.

Companies may sell their receivables. This practice is called

factoring

The direct write-off method is required

for federal income tax purposes.

If Modern Company received $3,650 from Connor Young Company on March 12 for the total amount of an account which had been written off on March 1, the entry to record the cash receipt after the account has been reinstated under the direct write-off method

is the same as it would be under the allowance method

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

note receivable.

The direct write-off method records bad debt expense

only when an account is judged to be worthless.

The party to whom the promissory note is payable is the

payee.

Accounts receivable turnover is calculated by dividing

sales by average accounts receivable.

The most common transaction for creating receivables is

selling merchandise or services on credit.

The Allowance for Doubtful Accounts is

subtracted from Accounts Receivable.

In the current asset section of the balance sheet, receivables are usually listed in order

that they can be turned into cash.

A primary weakness of the direct write-off method is that

the expense of a bad debt is not matched to the period that generated the uncollectible sale amount.

The maturity value of a promissory note is

the face value of the note plus the interest due to the maturity date.

the direct write-off method is used by all of the following businesses except

those that have receivables as a large part of their current assets.

Under the allowance method, when a specific account is written off

total assets will be unchanged.

Notes and accounts receivable that result from sales transactions are sometimes called

trade receivables.