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Exam 7: Accounting for Receivables

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Question 41

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Domino Company ages its accounts receivable to estimate uncollectible accounts expense. Domino began Year 2 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $47,850 and $3,800, respectively. During Year 2, the company wrote off $2,820 in uncollectible accounts. In preparation for the company's estimate of uncollectible accounts expense for Year 2, Domino prepared the following aging schedule: What amount will be reported as uncollectible accounts expense on the Year 2 income statement?

A) $5,116
B) $6,096
C) $2,296
D) $2,820

E) B) and C)
F) C) and D)

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Question 42

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Chico Company began Year 2 with balances in accounts receivable and allowance for doubtful accounts of $44,300 and $1,675, respectively. The company reported credit sales of $490,250 during the year and wrote off $1,400 of uncollectible accounts. Chico Company prepared the following aging schedule on December 31, Year 2: Required:Compute the amount of cash collected from accounts receivable.Compute the uncollectible accounts expense.Determine the net realizable value of accounts receivable.

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a)$487,200b)$2,700c)$42,975a)Ending acco...

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Question 43

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On October 1, Year 1 Hernandez Company loaned $60,000 cash to Acosta Company. The two-year note carried a 6% rate of interest. Which of the following shows the effect of Year 2 interest expense on Hernandez's financial statements?

Indicate how each event affects the financial statements. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter dollar amounts. Increase = I Decrease = D Not Affected = NA On November 1, Year 1, Gable Company accepted a credit card as payment for $1,500 of services rendered to one of its customers. The credit card company charges a 3% fee for handling the transaction. Show the effect of this transaction on Gable's financial statements.

On January 1, Year 2 Grande Company had a $18,000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During Year 2, Grande provided $72,000 of service on account. The company collected $68,500 cash from accounts receivable. Uncollectible accounts are estimated to be 2% of sales on account.What is the amount of cash flow from operating activities that would appear on the Year 2 statement of cash flows?

Indicate whether each of the following statements is true or false. a)A benefit of making credit card sales is that there is no cost to the merchant.b)A benefit of accepting credit cards is that increased sales may be generated.c)Recording a credit card sale increases total assets and increases total liabilities.d)Recording the collection of cash from the credit card company increases cash and increases revenue.e)The income statement is not affected at the time the cash receipt is recorded.

The accounting records of the Harris and Schubert Companies contained the following account balances: Which of the following statements is true?

At the beginning of Year 3 Omega Company had a $60,000 balance in its accounts receivable account and a $3,000 balance in allowance for doubtful accounts. During Year 3, Omega experienced the following events.(1) Omega earned $200,000 of revenue on account(2) Collected $210,000 cash from accounts receivable(3) Wrote-off $2,000 of accounts receivable as uncollectibleOmega estimates uncollectible accounts to be 4% of receivables. Based on this information, the amount of uncollectible accounts expense shown on the Year 3 income statement is

On December 31, Year 3, Alpha Company had an ending balance of $400,000 in its accounts receivable account and an unadjusted (current) balance in its allowance for doubtful accounts account of $600. Alpha estimates uncollectible accounts expense to be 1% of receivables. Based on this information, the amount of uncollectible accounts expense shown on the Year 3 income statement is

On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $71,800 and $3,100, respectively. During Year 2, Kincaid reported $194,000 of credit sales, wrote off $1,800 of receivables as uncollectible, and collected cash from receivables amounting to $234,500. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales.Which of the following describes the effects of writing off the uncollectible accounts?

The adjustment to recognize uncollectible accounts expense is an asset use transaction.

The net effect of the entries to recognize the write-off under the allowance method is to:

Alberta Company accepts a credit card as payment for $450 of services provided for the customer. The credit card company charges a 4% fee for handling the transaction. Select the answer that shows how the entry to record the sale would affect Alberta's financial statements.

Which of the following shows how recognizing uncollectible accounts expense under the direct write-off method would affect the financial statements?

Indicate how each event affects the financial statements. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter dollar amounts. Increase = I Decrease = D Not Affected = NA On December 31, Year 1, Sparkes Company estimated it had $12,000 of uncollectible accounts related to credit sales it made during the year. Sparkes, which uses the allowance method, made the necessary adjustment to record this estimate.

DeKalb Company made a loan of $10,000 to one of the company's employees on May 1, Year 1. The one-year note carried a 6% rate of interest. The amount of interest revenue that DeKalb would report in Year 1 and Year 2, respectively would be

The Yankee Corporation has recently begun to accept credit cards. On July 7, Year 1, Yankee made a credit card sale of $600. Assume that the credit card fee is recorded on the date of sale and that the credit card company charges a fee of 3% for handling a credit card transaction. Which of the following correctly shows the effects of the sale on July 7?

The Miller Company earned $117,000 of revenue on account during Year 1. There was no beginning balance in the accounts receivable and allowance accounts. During Year 1, Miller collected $79,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 3% of its sales on account.What is the net realizable value of Miller's receivables at the end of Year 1?

How would accountants estimate the amount of a company's uncollectible accounts expense?

On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $31,000 and $500, respectively. During Year 2, Kincaid reported $72,500 of credit sales, wrote off $550 of receivables as uncollectible, and collected cash from receivables amounting to $74,550. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales. What effect will recognizing the uncollectible accounts expense for Year 2 have on the elements of the financial statements?