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Exam 7: Accounting for Receivables

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Question 21

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Houff Company uses the allowance method to account for uncollectible accounts.An account that had been previously written-off as uncollectible was recovered.How would the recovery affect the company's accounting equation?

A) Increase assets and increase equity.
B) Increase assets and decrease liabilities.
C) Reduce liabilities and increase equity.
D) Have no effect on assets,liabilities or equity.

E) B) and D)
F) All of the above

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Question 22

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

A) Consider new circumstances that are anticipated to be experienced in the future.
B) Compute as a percentage of credit sales.
C) Consult with trade association and business associates.
D) All of these answer choices are correct.

E) None of the above
F) A) and C)

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Question 23

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The adjusting entry to recognize uncollectible accounts expense does not affect the net realizable value of receivables.

The face value of Accounts Receivable plus the balance in the Allowance for Doubtful Accounts is equal to the net realizable value of the receivables.

Rhodes Company reports the following information for the 2016 fiscal year: Determine the average number of days it takes Rhodes to collect its accounts receivable.(Round intermediate calculations to 2 decimal places. )

Which of the following is not an advantage of accepting credit cards from retail customers?

Use the following to answer questions On January 1,2016 Grande Company had a $16,000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account.During 2016,Grande provided $104,000 of service on account.The company collected $97,000 cash from accounts receivable.Uncollectible accounts are estimated to be 2% of sales on account. -Based on this information,the amount of cash flow from operating activities that would appear on the 2016 statement of cash flows is:

Use the following to answer questions On January 1,2016,Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $31,000 and $500,respectively.During the year Kincaid reported $72,500 of credit sales.Kincaid wrote off $550 of receivables as uncollectible in 2016.Cash collections of receivables amounted to $74,550.Kincaid estimates that it will be unable to collect one percent (1%) of credit sales. -The net realizable value of receivables appearing on Kincaid's 2016 balance sheet will amount to:

Blake Company loaned Jiminez Corporation $18,000 on October 1,2016.The 8-month note carried a 6% rate of interest. Required: a)How will Blake report the note and interest on its 2016 income statement,balance sheet,and statement of cash flows? b)How will Blake report the note and interest on its 2017 income statement and statement of cash flows?

In the first year of operations,2016,John's Repair Service recognized $220,000 of service revenue on account.The ending accounts receivable balance was $15,100.Jake estimates that 3% of sales on account will not be collected;no accounts receivable had been written off by year end.Assume there were no other transactions affecting accounts receivable. a)What amount of cash was collected in 2016? b)What amount of uncollectible accounts expense was recognized in 2016?

What is aging of accounts receivable,and how is it used to account for uncollectible accounts?

The direct write-off method of accounting for uncollectible accounts overstates assets on the balance sheet.

When is it acceptable to use the direct write-off method of accounting for uncollectible accounts?

Use the following to answer questions On January 1,2016,Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $31,000 and $500,respectively.During the year Kincaid reported $72,500 of credit sales.Kincaid wrote off $550 of receivables as uncollectible in 2016.Cash collections of receivables amounted to $74,550.Kincaid estimates that it will be unable to collect one percent (1%) of credit sales. -Kincaid's entry to recognize the write-off of the uncollectible accounts will

When a credit card sale is recorded,what is the effect on the accounting equation?

Use the following to answer questions On December 31,2015,the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible.Loudoun uses the allowance method of accounting for uncollectible accounts.In February 2016,one of Loudoun's customers failed to pay his $1,050 account and the account was written off.On April 4,2016,this customer paid Loudoun the $1,050. -Which of the following answers correctly states the effect of the December 31,2015 adjusting entry for uncollectible accounts on the financial statements of the Loudoun Corporation?

Perez Company began 2016 with a balance of $148,000 in accounts receivable and $8,600 in allowance for doubtful accounts.During the year,it provided $656,000 in services to customers on account and collected $580,000 in cash from its accounts receivable.Perez wrote off $6,500 of uncollectible accounts during 2016.At the end of the year,the company prepared an aging schedule and adjusted its accounts based on the estimate that $12,600 of receivables would not be collected. Required: a)Prepare the journal entries to record all the transactions related to accounts receivable,including the estimate of uncollectible accounts expense. b)What was the net realizable value of Pence's accounts receivable at the end of 2016?

Accounts receivable turnover is computed by dividing:

Vancouver Company began 2016 with balances in accounts receivable and allowance for doubtful accounts of $92,800 and $9,280,respectively.The company reported credit sales of $875,550 during the year,collected $870,200,and wrote off $6,800 of uncollectible accounts.Vancouver estimates that 10% of its accounts receivable balance will be uncollectible. Required: a)What will Vancouver report as its allowance for doubtful accounts on December 31,2016? b)Prepare the adjusting journal entry for December 31,2016 to recognize uncollectible accounts expense. c)Calculate Vancouver's net realizable value of accounts receivable on December 31,2016.

Chadwick Company's sales for 2016 were $8,700,000.Its accounts receivable were $801,000 at the end of the year.During 2016,Chadwick collected $8,400,000 on its accounts receivable.The accounts receivable turnover ratio for the year was 10.5.