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