chapter 5 smartbook

Tudor Corp. has an ending balance in the accounts receivable account of $20,000. Tudor recorded bad debt expense of $1,000. Tudor has an ending balance in the allowance for uncollectible accounts of $2,000. What is the net accounts receivable balance?

$18,000

Prime Corp. has an ending balance in the accounts receivable account of $100,000. Prime recorded bad debt expense of $3,000. Prime has an ending balance in the allowance for uncollectible accounts of $7,000. What is the net accounts receivable balance?

$93,000

Ophelia Inc. just learned that Patton Inc., one of its customers with an outstanding accounts receivable balance, filed for bankruptcy. Assuming that the company utilizes the allowance method, Ophelia should record a decrease in ...

Accounts Receivable

.... are typically classified as current assets because they will be converted to cash within 1 year.

Accounts receivable

When an account previously written off is collected in full, which is required to ensure the accounting for the complete payment history of the customer?

An entry to reinstate the account receivable and an entry to record payment.

Joyce Corp. uses the percentage-of-receivables method to account for bad debt expense. Joyce determines that a customer account of $20,000 should be written off as uncollectible. The write off of the account will include which of the following entries?

Debit to Allowance for Uncollectible Accounts & Credit to Accounts Receivable

What is the formula for the receivables turnover ratio?

Net credit sales divided by average accounts receivable (net).

When a customer returns a product for a refund, in which account is the entry recorded?

Sales return

A(n) .... is the legal right to receive cash from a credit sale and represents an asset of the company.

account receivable

The allowance for uncollectible accounts is a contra account to ...

accounts receivable.

The approach that considers the age of various accounts receivables to estimate uncollectible accounts is referred to as the ... method of accounts receivable.

age

Under the .... companies estimate future uncollectible amounts and report those estimates in the current year.

allowance method

A company that expects that some of its customers will not pay the agreed upon sales price must utilize the ...

allowance method.

Receivables not expected to be collected should not be counted in ... of the company.

assets

Allowance for Uncollectible Accounts has a credit balance because it is a ...

contra-asset account.

The journal entry to record bad debt expense includes credit to ... & debit to ...

credit to allowance for uncollectible accounts & debit to bad debt expense

The income statement approach for estimating bad debts focuses on ...

current year's credit sales

Shannon Corp. uses the aging method to account for bad debt expense. Shannon determines that a customer account of $10,000 should be written off as uncollectible. The write off of the account will include ... (debit or credit what account)

debit Allowance for Uncollectible Accounts.

A sales allowance ... the amount owed by the customer for merchandise that is ... by the customer.

decreases; retained

A trade discount is a reduction from the list price, which is used to (3 things)

disguise real prices from competitors change prices without publishing a new catalog give quantity discounts to customers

True or false: Accounts receivable not expected to be collected should be counted in the assets of the company until they are later written off.

false

Where is a note receivable reported in the balance sheet?

in either current or non-current assets, as appropriate.

The ... approach for estimating bad debts uses a percentage of credit sales

income statement

Using a percentage of each period's net credit sales to estimate bad debt expense is an ... to measuring bad debts

income statement approach

Compared to other methods of estimating uncollectible accounts, the aging of accounts receivables method tends to be ...

more accurate.

The ... and ... provide information about a company's effectiveness in managing receivables

receivables turnover ratio ; the average collection period

Sales to customers in which the customers pay within 30 to 60 days are referred to as

sales on account & credit sales

When merchandise is returned for a refund or for credit to be applied to other purchases, the situation is called a

sales return

To record an estimate for future bad debts at the end of the period, an adjustment would be made with a credit ...

to allowance for uncollectible accounts

A ... is a percentage reduction from list price.

trade discount

An informal credit arrangement with a customer for payment to be received after the sale is classified as an

account receivable.

The cost of estimated accounts receivable that will not be collected is referred to as ...

bad debt expense.

Two entries are required when a previously written off account is collected. These two entries include ... and ...

record the collection on the account receivable ; reinstate the account receivable