Accounting hw 5
FOB
"Free on board" used in quoting shipping terms
percent-of-sales method
Calculates uncollectible account expense as a percentage of net sales. Also called the income statement approach
Accounts Receivable.....................................$26,000 Allowance for collectible account 12/31/14..$1,500 Credit sales during 2014.............................$94,000 Cash sales during 2014.............................. $28,000 Collection from customers on account........$100,000 Uncollectible-accounts are determined by the percent of sales method to be 3% of credit sales. How much is uncollectible-account expense for 2014? a.) $4,320 b.) $3,240 c.) $1,500 d.) $2,820
D.) (94,000x.03)=$2,820
sales discounts
Percentage reduction of sales price by a seller as incentive for early payment before the due date. Usually written as x/10, n/30 meaning that they have X% discount if paid within 10 days, total amount due in 30 days
days' sales in receivables
Ratio of average net accounts receivables to one day's sales. Indicates how many days ' sales remain in accounts receivables awaiting collection. Also called the collection period.
acid test ratio/quick check ratio
Ratio of the sum of cash plus short-term investments plus net current receivables to total current liabilities. Tells whether the entity can pay all of its liabilities if they come due immediately.
available-for-sale-securities
Securities that are not classified as held-to-maturity or trading securities
maturity value
The sum of principle and interest on the note
direct write-off method
a method of accounting for bad debts in which the company waits until a customer's account receivable proves uncollectible and then the debits uncollectible-account expense and credits the customers account receivable
allowance method
a method of recording collection losses based on estimates of how much money the business will not collect from its customers
aging of receivables
a way to estimate bad debts by analyzing individual accounts receivable according to the length of time they have been receivable from the customer
interest
the borrowers cost of renting money from a lender. Revenue for the lender, expense for the borrower
maturity date
the date on which the debtor must pay the note
term
the length of time from inception to to maturity
debtor
the party that owes money
FOB Shipping point
title passes on the date the goods are shipped from the seller
Accounts Receivable.....................................$26,000 Allowance for collectible account 12/31/14..$1,500 Credit sales during 2014.............................$94,000 Cash sales during 2014.............................. $28,000 Collection from customers on account........$100,000 Uncollectible-account expense for 2014 is $2,820. What is the adjusted balance in the allowance account at year-end for 2014. a.) $1,320 b.) $2,820 c.) $4,320 d.) $1,500
c.) (1,500+2,820) = $4,320
Accounts Receivable.....................................$26,000 Allowance for collectible account 12/31/14..$1,500 Credit sales during 2014.............................$94,000 Cash sales during 2014.............................. $28,000 Collection from customers on account........$100,000 Using the aging of receivables method, the net realizable value of accounts receivables on the December 31, 2014 balance sheet would be a.) $22,220 b.) $28,280 c.) $23,720 d.) $26,000
c.) (26,000 - 2,280) = $23,720
What is the maturity value of a $40,000, 5%, six-month note? a.) $42,000 b.) $39,000 c.) $41,000 d.) $40,000
c.) 40,000 + (40,000 x .05 x (6/12)) = $41,000
sales return and allowances
merchandise returned for credit or refunds for services provided
held-to-maturity securities
securities in which the investor has the intent to hold until the maturity date stated on the face of the security
trading securities
debt or equity investments that are to be sold in the near future with intent of generating profits on the sale
accumulated other comprehensive income
The cumulative amount of items reported as other comprehensive income; a separate category in the stockholder's equity section of the balance sheet
allowance for uncollectible accounts
The estimated amount of collection losses. Another name allowance for doubtful accounts
allowance for doubtful accounts
The estimated amount of collection losses. another name for allowance for uncollectible accounts
Other comprehensive income
Certain types of revenue, expenses, gains, and losses that are allowed to bypass the income statement. These items are reported either in a separate statement or in a combined statement of net income and comprehensive income. At the end of a period, these items are reported as accumulated other comprehensive income, a separate category of stockholders equity
accounts receivable turnover
Net sales divided by average net accounts receivable
shipping terms
Terms provided by the seller of merchandise that dictate the date on which title transfers to the buyer
T-BAR-T Tennis academy held investments in trading securities with a fair value of $90,000 at Dec, 31, 2014. These investments cost $76,000 on January 1, 2014. What is the appropriate amount to report for these investments on the Dec 31,2014 balance sheet? a.) $90,000 b.) $76,000 c.) $14,000 gain d.) cannot be determined from given data
a.) $90,000
Accounts Receivable.....................................$26,000 Allowance for collectible account 12/31/14..$1,500 Credit sales during 2014.............................$94,000 Cash sales during 2014.............................. $28,000 Collection from customers on account........$100,000 Using the aging of receivables method the, the balance of the allowance account after the adjusting entry at year end 2014 would be a.) $2,820 b.) $1,500 c.) $780 d.) $3,780
a.) (780 + 1500) = $2,280
If the adjusting entry to accrue interest on a note receivable is omitted, then a.) assets, net income, and stockholders equity are understated b.) liabilities are understated, net income is overstated, and stockholders equity is overstated c.) assets, net income, and stockholders equity are overstated d.) assets are overstated, net income is understated, and stockholders equity is understated
a.) assets, net income, and stockholders equity are understated
principal
amount borrowed from a debtor and lent by a creditor
bad-debt expense
another name for uncollectible account expense
doubtful account expense
another name for uncollectible-account expense
T-BAR-T Tennis academy held investments in trading securities with a fair value of $90,000 at Dec, 31, 2014. These investments cost $76,000 on January 1, 2014. What should appear on the income statement for the year ended Dec 31, 2013, for the trading securities? a.) $90,000 b.) $14,000 unrealized gain c.) $76,000 d.) cannot be determined from the given data
b.) $14,000 unrealized gain
Accounts Receivable.....................................$26,000 Allowance for collectible account 12/31/14..$1,500 Credit sales during 2014.............................$94,000 Cash sales during 2014.............................. $28,000 Collection from customers on account........$100,000 If uncollectible are determined by the aging of receivables method to be $2,280 the uncollectible account expense for 2014 would be a.) $2,280 b.) $780 c.) $2,280 d.) $1,500
b.) (2,280 - 1500) = $780
Accounts receivable has a debit balance of $3,600 and the allowance for uncollectible accounts has a credit balance of $200. A $70 account receivable is written off. What is the amount of net receivables (net realizable value) after the write off. a.) $3,300 b.) $3,400 c.) $3,530 d.) $3,470
b.) (3600 - 70) - (200 - 70) = $3,400
uncollectible-account expense
cost to the seller of extending credit. Arises from the failure to collect from credit customers, also called doubtful account expense or bad-debt expense
Stripes LTD. received a four-month, 7% , $15,000 note receivable on March 1. The adjusting entry on March 31 will include a.) a debit to interest receivable for $1,050 b.) a debit to interest receivable for $350 c.) a debit to cash for $1,050 d.) a credit to interest revenue for $87.50
d.) (15,000 x .07 x (4/12) x (1/4)) = $87.50 credit to interest revenue
Angelina Corporation began 2014 with accounts receivable of $450,000. Sales for the year totaled $1,820,000. Angelina ended the year with accounts receivable of $525,000. Angelina's bad debt-losses are minimal. How much cash did Angelina collect from customers in 2014? a.) $1,895,000 b.) $845,000 c.) $1,820,000 d.) $1,745,000
d.) (450,000+1,820,000-525,000) = $1,745,000
unrealized gain/loss
gains or losses that occur on investments through fluctuations in market values, rather than through sales
FOB destination
goods passes to the buyer when the goods are delivered and the buyer assumes control
receivables
monetary claims against a business or an individual, acquired mainly by selling goods or services and by lending money