Accounts Receivable and Bad Debts Expense

On June 1, $800 of goods are sold with credit terms of 1/10, n/30. On June 3 the customer returned $100 of the goods. How much should the seller expect to receive if the buyer pays on June 8?

$693 $800 - $100 = $700 - (1% x $700)

On June 1, $800 of goods are sold with credit terms of 1/10, n/30. How much should the seller expect to receive if the buyer pays on June 8?

$792 $800 - (1% x $800)

With credit terms of 2/10, n/30, the annual interest rate for paying in 10 days instead of 30 days is closest to

36%

The days' sales in accounts receivable is calculated by dividing __________ days by the receivables turnover ratio during the year.

360 or 365

Sorting a company's accounts receivable into classifications such as current, 1-30 days past due, and 31-60 days past due is known as the __________ of accounts receivables.

Aging

Which method of reporting losses on accounts receivable is to be used for financial reporting?

Allowance

On which financial statement would you expect to find Allowance for Doubtful Accounts?

Balance Sheet

When the Allowance for Doubtful Accounts appears on a company's financial statements, its balance will be a __________ balance.

Credit

The seller is responsible for the costs of shipping its goods to the buyer when the terms of the sale are FOB

Destination

When the terms of a sale are FOB __________, ownership of goods will transfer to the customer at the customer's dock.

Destination

Which method of reporting losses on accounts receivable is required in the U.S. for income tax purposes?

Direct Write-Off

When a sale is made with the credit terms of 2/10, net 30, the "10" refers to the __________ period.

Discount

In some industries, companies often sell their accounts receivable to a firm known as a __________.

Factor

After several years of operations, a company's Bad Debts Expense for a given year is likely to be the same as its balance in Allowance for Doubtful Accounts.

False

A company's accounts receivable minus its allowance for doubtful accounts equals the net __________ value of the accounts receivable.

Realizable

The receivable turnover ratio is computed by dividing the net credit __________ for the year by the average amount of accounts receivable during the year.

Sales

The buyer is responsible for the costs of shipping when goods are sold with the terms FOB

Shipping Point

The seller of goods that is offering credit terms of net 30 days will likely be one of its customer's __________ creditors until it receives payment.

Unsecured