LearnSmart Chapter 5. Receivables and Sales
Because some of the amounts reported in financial statements are based on estimates, some of the information may be
inaccurate
An aging schedule classifies accounts receivable based on
length of time outstanding.
When merchandise is returned for a refund or for credit to be applied to other purchases, the situation is called a(n) _____ _____.
sales return
Glasser Corp. provided $20,000 of services on account. The account that should be credited is ______ _____.
service revenue
Since accounting numbers, such as the Allowance for UA balance, are based on estimates, financial statements are:
susceptible to management manipulation
Flounder Corp. sold $12,000 of goods on account. The entry to record this transaction would include a debit to
accounts receivable
When an account previously written off is collected in full, which entry is required to ensure the accounting for the complete payment history of the customer?
An entry to reinstate the AR and an entry to record payment.
Trade receivable is another term for ______ receivable.
accounts
1. Accounts Receivable 2. Notes Receivable
1. Informal credit agreement with trade customers. 2. Formal credit arrangement between borrower and lender.
Which of the following are classified as receivables?
1. Interest due from loans to customers. 2. Loans by a company to other entities.
AR has a $2,300 balance, and the Allowance for doubtful accounts has a $200 credit balance. An $80 AR is written off. Net Receivables (NRV) after the write-off equals:
$2100
Which of the following items are classified as receivables?
1. Amounts owed by customers. 2. Tax refund claims. 3.Amounts loaned and expected to be repaid.
A company makes a sale on terms 2/10, n/30. What does this mean?
1. The customer may take a 2% discount off the price if paid within 10 days. 2. If the discount is not taken in 10 days, the net amount is due in 30 days.
A trade discount is a reduction from the list price, which is used to:
1. change prices without publishing a new catalog 2. give quantity discounts to customers 3. disguise real prices from competitors
Two entries are required when a previously written off account is paid. These two entries include:
1. reinstate the AR 2. record the collection on the AR
Payment for credit sales are typically due in _____ to ____ days.
30;60
Sales return Sales Allowance
A customer returns merchandise purchased during the month and receives a refund of the full sales price. A customer receives a partial refund of the sales price after the customer discovers a flaw in the merchandise. The customer keeps the merchandise.
A trade discount is
a percentage reduction from list price.
With the allowance method, bad debt expense is recorded
at the end of the period when bad debts are estimated.
A customer account that is not expected to be collected is referred to as a(n) ____ debt.
bad
The expense associated with the estimate of the amount of accounts receivable that may not be collected during the year is referred to as ____ ____ expense.
bad debt
Compared to other methods of estimating uncollectible accounts, the aging accounts receivables method tends to
be more accurate.
A cash discount representing a reduction in the amount to be paid by a credit customer if the customer pay within a specified period of time is also referred to as a _____ period.
cash
The sales discount account is classified as a
contra revenue account.
Allowance for Uncollectible Accounts has a credit balance because it is a(n) _____ account.
contra-asset
An account receivable is normally classified as a
current asset
At the end of the year, companies must record estimated contra revenue for estimated sales returns and allowances and sales discounts pertaining to
current year sales only.
Company A learned that Company B, one of its customers with an outstanding accounts receivable balance, filed for bankruptcy. Assuming that the company utilizes the allowance method, Company A should record a(n):
decrease in Accounts Receivable
A sales allowance _____ the amount owed by the customer for merchandise that is _____ by the customer.
decreases;retained
The Accounts Receivable account is reduced when the seller:
determines that a specific customer account will not be collectible
The write-off of a specific AR ____ total assets reported on the balance sheet.
does not affect
At the beginning of the year, Gerta Company's allowance account has a credit balance of $10,000. This may indicate that the
estimate of uncollectible accounts was too high
At the beginning of the year, Blocker Company's allowance account has a debit balance of $10,000. This may indicate that the
estimate of uncollectible accounts was too low.
When the allowance method is used, the write-off of an uncollectible account:
has no effect on net income
The allowance for UA has a debit balance at the end of the year prior to recording bad debt expense. This means that write offs of accounts were _____ than the estimated BDE for the previous year.
higher
The unadjusted balance of the Allowance for UA is equal to the estimate of UA at the end of last year _____ actual write-offs during the ______ year.
less; current
At the end of the year, Kunze Corp. estimates that $1600 worth of merchandise sold during the current year will still be returned by customers during the subsequent year. Kunze Corp. must
record the estimated returns at the end of the year.
The purpose of recording an allowance for uncollectible accounts is to
report accounts receivable at net realizable value.
The process of estimating an allowance for UA, writing off BDs in the following periods, and then re-estimating the allowance at the end of the period occurs:
throughout the company's life