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Exam 7: Accounting for Receivables

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Question 81

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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 Furs Company uses the allowance method. On June 20, Furs wrote off an uncollectible account in the amount of $2,000. On September 1, the company collected the receivable that it had previously written off. How would reinstating the receivable (not the collection)affect the financial statements?

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This is an asset exchange transaction....

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Question 82

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On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Loudoun uses the allowance method. On February 15, Year 2, one of Loudoun's customers failed to pay his $1,050 account and the account was written off. On April 4, Year 2, this customer paid Loudoun the $1,050. Which of the following correctly states the effect of Loudoun Company writing off the customer's account?

A) Option A
B) Option B
C) Option C
D) Option D

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

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Question 83

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If a company estimates uncollectible accounts based on a percentage of receivables, the resulting estimate will be presented on the balance sheet as the ending balance in Allowance for Doubtful Accounts.

Green Acres Lawn Care provided $600,000 of services to customers during Year 1. All customers paid for the services with credit cards. The company submitted the credit card receipts to the credit card company immediately, and the credit card company paid cash in the amount of face value less a 4 percent service charge.Required:Record the (1)credit card sales and (2)collection of the receivables in the horizontal statements model, below. Show dollar amounts of increases and decreases. For cash flows, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). Use NA to indicate that an element is not affected by an event.

Chadwick Company's sales for Year 1 were $8,700,000. The ending balance of accounts receivable was $801,000 at the end of the year. During Year 1, Chadwick collected $8,400,000 on its accounts receivable. The accounts receivable turnover ratio for the year was 10.5.

On October 1, Year 1, Blake Company loaned $18,000 to Jimenez for 8 months at 6% interest.Required:How will Blake report the note and interest on its Year 1 income statement, balance sheet, and statement of cash flows?How will Blake report the note and interest on its Year 2 income statement and statement of cash flows?

Why would cash sales companies, such as Wendy's, Domino's, and Krispy Kreme have accounts receivables on their financial statements?

With the direct write-off method, writing off an account receivable is an asset use transaction.

What are some of the costs a business incurs in making credit sales to customers?

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 net realizable value of receivables shown on the Year 3 balance sheet is

The net realizable value of receivables is not shown on the balance sheet of a company using the

The year-end adjustment to accrue interest on a note receivable is an asset source transaction.

The following information is available for Phoenix Corporation, which uses the allowance method. Phoenix expects 3% of sales on account to be uncollectible. Sales on account: $490,000Collections on account: $440,000 Required: a)Compute the amount of uncollectible accounts expense for Year 1.

Ron Company experienced an accounting event that had the following effects on its financial statements. Which of the following events could have caused these effects?

What is meant by the net realizable value of accounts receivable?

Rosewood Company made a loan of $16,000 to one of the company's employees on April 1, Year 1. The one-year note carried a 6% rate of interest. What is the amount of interest revenue that Rosewood would report in Year 1 and Year 2, respectively?

The following information is available from Avalon, Incorporated for the current year: During the year, the average number of days to sell inventory was 76.1 days.Required:Calculate the following.Accounts receivable turnover ratioAverage number of days to collect accounts receivableLength of operating cycleNet cash flow from sales

When a company accepts a credit card payment for a sale, the amount of sales revenue to be recorded is reduced by the amount of the credit card company's fee.

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 Cole Company uses the direct write-off method. The company wrote off an uncollectible account in the amount of $4,000. The write-off is immaterial in amount.

Explain the computation of the length of the operating cycle. assuming use of the allowance method. a)The Allowance for Doubtful Accounts is a contra asset account.b)The net realizable value of receivables is the difference between the ending balance of accounts receivable and the ending balance in the allowance for doubtful accounts.c)The recognition of uncollectible accounts expense at the end of an accounting period does not affect the net realizable value of accounts receivable.d)The write-off of an uncollectible account reduces the net realizable value of accounts receivable.e)The write-off of an uncollectible account does not affect the amount of stockholders' equity.