Upgrade to remove ads
Only $35.99/year

Chapter 8

Terms in this set (33)

Allowance for Doubtful Accounts
Contra-asset
reduce A/R on Balance Sheet
Bad Debt Exp
Operational Exp
Income Stmt
Receivables
accounts due from individuals and companies are expected to be collected in cash
3 Accounting Issues
Recognizing A/R
Valuing A/R
Disposing A/R
Direct Write-Off
Theoretically undesirable:
No matching
Receivable mot stated at cash realizable value
Not acceptable for financial reporting
Allowance Method
Losses are estimated:
Better matching
Receivable stated at cash realizable value
Required by GAAP
Journal Entries for the Allowance Method
Estimate/Record the Allowance
Write-off a specific A/R
Recovery of a Write-Off
Estimate/Record the Allowance
Bad Debt Exp
Allowance for Doubtful Accts
Write-off a specific A/R
Allow FDA
A/R
Recovery of a Write-lff
A/R
Allow FDA
Cash
A/R
% of Receivables Method
Calc Est of Ending Balance in Allowance FDA
Calc Adj Journal Entries Amount
Record Adjusting JE
Calc Est of Ending Balance in Allowance FDA
% x A/R Bal = End Bal in AFDA
Calc Adj. JE Amount
Estimate
- CR/+DR Bal in AFDA
= Adj JE Amount
Record Adj JE
Bad Debt Exp
Allow FDA
Company Credit Cards
treat same as A/R
Interest Revenue
as time passes
Calc: Bal Due x Interest %
National Credit Cards
visa, mastercard, AMEX
treat the same as cash - service charge
Promissory note
a written promise to pay a specified amount of money on demand or at a definite time
maker
person promising to pay
payee
person receiving money in the future
Calculating Interest
Face Value x Annual Interest % x Time (/12 or /360)
Calculating Maturity Date
Term - (# days in month - date of note)
A receivable that is evidenced by a formal instrument and that normally requires the payment of interest is:
note receivable
Receivables are frequently classified as:
accounts receivable, notes receivable, and other receivables
Kersee Company on June 15 sells merchandise on account to Eng Co. for $1,000, terms 2/10, n/30. On June 20, Eng Co. returns merchandise worth $300 to Kersee Company. On June 24, payment is received from Eng Co. for the balance due. What is the amount of cash received?
$686
Accounts and notes receivable are reported in the current assets section of the balance sheet at:
cash (net) realizable value
Hughes Company has a credit balance of $5,000 in its Allowance for Doubtful Accounts before any adjustments are made at the end of the year. Based on review and aging of its accounts receivable at the end of the year, Hughes estimates that $60,000 of its receivables are uncollectible. The amount of bad debt expense which should be reported for the year is:
$55,000
Hughes Company has a debit balance of $5,000 in its Allowance for Doubtful Accounts before any adjustments are made at the end of the year. Based on review and aging of its accounts receivable at the end of the year, Hughes estimates that $60,000 of its receivables are uncollectible. In this situation, the amount of bad debt expense that should be reported for the year is
$65,000
Net credit sales for the month of $800,000. The accounts receivable balance is $160,000. The allowance is calculated as 7.5% of the receivables balance using the percentage-of-receivables basis. If Allowance for Doubtful Accounts has a credit balance of $5,000 before adjustment, what is the balance after adjustment?
$12,000
In 2022, Patterson Wholesale Company had net credit sales of $750,000. On January 1, 2022, Allowance for Doubtful Accounts had a credit balance of $18,000. During 2022, $30,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables. If the accounts receivable balance was $200,000, what is the required adjustment to Allowance for Doubtful Accounts at December 31, 2022?
$32,000
An analysis and aging of the accounts receivable of Prince Company at December 31 reveals the following data
A/R $800,000
AFDA per books before adj 50,000
Amounts expected to become uncollectible. 65,000
The cash realizable value of the A/R at December 31, after adjustment is
$735,000
Which of the following statements about Visa credit card sales is incorrect?
Two parties are involved
Good Stuff Retailers accepted $50,000 of Citibank Visa credit card charges for merchandise sold on July 1. Citibank charges 4% for its credit card use. The entry to record this transaction by Good Stuff Retailers will include a credit to Sales Revenue of $50,000 and a debit(s) to:
Cash $48,000
Service Charge Exp $2000
Sets with similar terms