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Exam 6: Receivables

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Question 41

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On January 1 of the current year, Slaton, Inc. had the following accounts on its books: During this year, credit sales were $600,000 and collections on account were $580,000. Required: a. Prepare general journal entries for the following transactions that occurred during the year: (1) Wrote off L. Baxter's account, $3,400. (2) Wrote off N. Vale's account, $1,200. (3) N. Vale, who is in bankruptcy, paid $400 in final settlement of the account written off in transaction (2). This amount is not included in the $580,000 collections. (4) On December 31, estimated the year's bad debts expense at 1% of credit sales. b. Determine the balance of Accounts Receivable and the Allowance for Doubtful Accounts at year-end.

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Question 42

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Under the allowance method of estimating bad debts expense, writing off a specific account reduces the firm's net assets.

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B) False

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Question 43

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Rodriguez, Inc. received an $8,000 30-day, 9% note dated December 21. On December 31, Rodriguez made the necessary adjusting entry to accrue interest income on the note. What is the financial statement effect to Rodriguez for the payment of the note on January 20?

Tanaka Company reported total sales for the current year to be $2,500,000, including cash sales of $500,000. Management estimates bad debts to be 5% of credit sales. The Allowance for Doubtful Accounts prior to adjustment has a negative balance of $10,000. The ending balance of the Allowance for Doubtful Accounts after adjustment will be:

A company is holding a $6,000, 90-day, 6% note receivable, dated December 1. The entry to record accrued interest at the end of its fiscal year on December 31 will include:

A retailer that makes credit card sales:

Williams Company's Accounts Receivable Account has a balance of $900,000, and the Allowance for Doubtful Accounts has a negative balance of $2,000 at the end of the year before adjustment. An analysis of their customers' accounts estimates that 2% of year end account receivable will be uncollectible. The adjusting entry for doubtful accounts will include:

The allowance method of accounting for uncollectible accounts recognizes the related expense, even though it is not known which customers' accounts will be uncollectible.

Long Company's Accounts Receivable account has a balance of $322,000 and the Allowance for Doubtful Accounts has a negative balance of $850 at fiscal year-end prior to adjustment. If the estimate based on the percentage of sales approach to estimating uncollectibles is $19,900, the net realizable value of accounts receivable reported on the balance sheet after adjustment is:

The data below is for Randall Corporation If the aging approach is used to estimate bad debts, determine the bad debt expense for the year.

Income statement effects of uncollectible accounts occur at the point of estimation, not when an account is written-off.

At what amount will accounts receivable be reported on the balance sheet if the gross receivable balance is $26,000 and the allowance for doubtful accounts is estimated at 4% of gross receivables?

Accounts receivable has a balance of $1,050,000 and the allowance for doubtful accounts has a balance of $7,400 at fiscal year-end prior to adjustment. If the estimate of uncollectible accounts determined by aging the receivables is $18,500, the amount of bad debt expense is:

Oliver, Inc. estimated uncollectible accounts receivable at December 31, 2019 at $3,372, based on estimates on various ages of receivables and before learning of the bankruptcy of one of its customers. The customer owed $1,340, and the legal department has estimated costs to collect the balance owed by this customer at $2,000. The gross receivables balance on December 31, 2019 after write-offs is $84,300, and the allowance for doubtful accounts balance is $3,620 at December 31, 2018. At December 12, 2019, the company wrote off $1,700 other accounts deemed uncollectible. Required: a. How would the legal department advise Oliver to handle the collection of the $1,340? b. What is the amount of Bad Debt Expense Oliver will report for 2109, assuming that both the $1,700 and $1,340 have been written off. c. What is the effect of the $1,700 write off on gross and net accounts receivable?

Jazz Company lends Sullivan Company $30,000 on August 1, 2019 in exchange of a 9-month, 12% interest note. If Jazz Company accrued interest on its December 31, 2019 year-end, what is the financial statement effect of the collection of the note and interest at its maturity date?

Assume the following unadjusted account balances at the end of the accounting period: Accounts Receivable, $45,000; Allowance for Uncollectible Accounts, $500; and Sales revenue $300,000. If the company ages the accounts and determines that $2,500 of receivables may be uncollectible, the effect of the adjustment on the financial statements would be:

Triandis Company has the following unadjusted account balances on December 31, of the current year. The pre-adjustment balance of Allowance for Doubtful Accounts is a negative $1,600. This company uses the following aging of accounts receivable to estimate its bad debts. The Net Realizable Value of Accounts Receivable reported on the year-end Balance Sheet will be:

Define accounts receivable turnover and the average collection period. What insights do these ratios offer an analysis of a company's accounts receivable?

Forrester Inc. provided the following aging of its receivables at December 31. During the year, $6,256 of receivables were written off. The balance at the beginning of the year in the allowance account was $6,000. Required: a. How much will Forrester report as bad debt expense for the year? Round your calculations to the nearest dollar. b. How much is the net realizable value of Forrester's receivables at year end?

A $15,000, 120-day, 9% note is dated April 30. The maturity date and maturity value of the note are, respectively: