Financial Accounting- Chapter 5: Receivables and Sales

contra revenue account

--------------- is an account with a balance that is opposite, or "contra", to that of it related revenue account; sales returns, sales allowance, and sales discounts.

sales return

--------------- is when a customer returns a product.

trade discounts

---------------- are reductions in the listed price of a good or service.

allowance method

---------------- is recording an adjustment at the end of each period for the estimate of future uncollectible accounts.

sales discounts

---------------- reductions in amount owed by customers if payment on account is made within a specified period of time.

credit sales

----------------- transfer goods or services to a customer today while bearing the risk of collecting payment from that customer in the future.

sales allowances

------------------- are reductions in amount owed by customers because of deficiency in products or services.

accounts receivable

--------------------------- represent the amount of cash owed to a company by its customers from the sale of goods or services on account.

$4,400

A company has the following account balances at the end of the year: Credit Sales = $400,000 Accounts receivable = $80,000 Allowance for Uncollectible Accounts = $400 credit The company estimates 1% of credit sales will be uncollectible. At what amount would Allowance for Uncollectible Accounts be reported in the current year's balance sheet? $3,600 $4,400 $800 $4,000

$3,600

A company has the following account balances at the end of the year: Credit Sales = $400,000 Accounts receivable = $80,000 Allowance for Uncollectible Accounts = $400 debit The company estimates future uncollectible accounts to be 4% of accounts receivable. At what amount would Bad Debt Expense be reported in the current year's income statement? $400 $3,200 $2,800 $3,600

accounts receivable

A company will debit -------------------- when recording a credit sale.

assets of the company representing the amount owed by the customers

Accounts receivable are best described as: 1. Assets of the company representing the amount owed by customers. 2. Liabilities of the company that represent the amount owed to suppliers. 3. Amounts that have previously been paid to suppliers. 4. Amounts that have previously been received from customers.

A credit to Allowance for Uncollectible Accounts $4,500

At the end of its first year of operations, a company estimates future uncollectible accounts to be $4,500. The company's year-end adjusting entry would include: 1. a credit to Allowance for Uncollectible Accounts $4,500 2. a debit to Allowance for Uncollectible Accounts for $4,500 3. A credit to Accounts Receivable for $4,500 4. No adjusting entry is necessary.

Bad Debt Expense 2,000 Allowance for Uncollectible Accounts 2,000

At the end of the first year of operations, Mayberry Advertising had accounts receivable of $20,000. Management of the company estimates that 10% of the accounts will not be collected. What adjustment would Mayberry Advertising record to establish Allowance for Uncollectible Accounts? ------------------- -------------------

there is no change in total assets

If a company uses the allowance method of accounting for uncollectible accounts and collects cash on an account receivable previously written off: 1. total assets increase 2. total assets decrease. 3. there is no change in total assets.

net accounts receivable do not change

If a company uses the allowance method of accounting for uncollectible accounts and writes off a specific account: 1. net accounts receivable do not change. 2. net accounts receivable decrease. 3. net accounts receivable increase.

$5,100

On December 31, the Accounts Receivable ending balance is $80,000. Assume that the unadjusted balance of Allowance for Uncollectible Accounts is a credit of $500 and that the company estimates 7% of the accounts receivable will not be collected. The amount of bad debt expense recorded on December 31 will be: $5,000 $5,600 $5,100 $6,100

$11,760

On March 17, Fox Lumber sells materials to Whitney Construction for $12,000, terms 2/10, n/30. Whitney pays for the materials on March 23. What is the amount of net revenues (sales minus sales discounts) as of March 23? $11,760 $12,000 $12,240 $0

900 2,700

On October 1, 2021, Oberley Corporation loans one of its employees $40,000 and accepts a 12-month, 9% note receivable. Calculate the amount of interest revenue Oberley will recognize in 2021 and 2022. 2021 --------- 2022 ----------

Providing services to customers on account.

Which of the following transactions would result in an account receivable? 1. Paying for supplies previously purchased on account. 2. Providing services to customers on account. 3. Receiving a loan from the bank. 4. Purchasing supplies on account.

discount terms

--------------, such as 2/10, n/30, are a shorthand way to communicate the amount of the discount and the time period within which it's available.

invoice

----------- is a source document that identifies the date of sale, the customer, the specific items solde, the dollar amount of the sale, and the payment terms.

allowance for uncollectible accounts

-------------- is a contra asset account representing the amount of accounts receivable not expected to be collected.

direct write-off method

-------------- is recording bad debt expense at the time the account is known to be uncollectible.

bad debt expense

-------------- is the cost of estimated future bad debts that is reported as an expense in the current year's income statement.

net revenues

-------------- is the total revenues less returns, allowances, and discounts.

aging method

-------------- is when the estimated percentage of uncollectible accounts is greater for "old" accounts than for "new" accounts.

notes receivable

--------------- is a formal credit arrangement shown by a written debt instrument.

$4,800

Suppose the balance of the allowance for uncollectible accounts at the end of the current year is $800 (credit) before any adjustment entry. The company estimates future uncollectible accounts to be $5,600. At what amount would bad debt expense be reported in the current year's income statement? $5,600 $6,400 $4,800 $800