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Exam 7: Accounting for Receivables

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Question 51

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The percent of revenue method for estimating uncollectible accounts expense is considered superior to the percent of receivables method because it is more conservative.

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B) False

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Question 52

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Old Dominion Antiques Shop reported the following income statement and balance sheet for 2016: a)Determine the inventory turnover and the average number of days to sell its inventory. b)Determine the accounts receivable turnover and the average number of days it takes to collect accounts receivable. c)Determine the estimated number of days in the operating cycle.Round the number of days answers to one decimal place.

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a)Inventory turnover = $234,400/62,400 =...

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Question 53

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For a company that uses the allowance method,the write-off of an uncollectible account receivable is an asset use transaction.

What type of account is Allowance for Doubtful Accounts,and what is its normal balance?

Pena Company experienced the following events during 2016: 1.Recognized $17,000 of service revenue on account 2.Wrote off as uncollectible an account receivable,$70. 3.Prepared adjusting entry to recognize uncollectible accounts expense.Pena expected that 2% of service revenue would not be collected Required: Show how each of these events would affect the financial statements model,below.Include dollar amounts of increases and decreases.When an account is not affected by a particular event,indicate with NA.

Barton Corporation uses the percent of receivables method of accounting for uncollectible accounts.As of December 31,2016,prior to estimating uncollectible accounts expense,Barton's balance of accounts receivable was $68,900,the balance of allowance for doubtful accounts was $2,500,and total sales for 2016 were $875,000.On December 31,Barton aged its receivables and determined the following: Indicate whether each of the following statements is true or false. _____ a)Barton will report Net Realizable Value of Accounts Receivable equal to $63,170 on its December 31,2016 balance sheet. _____ b)Barton will report Uncollectible Accounts Expense of $5,730 on its 2016 income statement. _____ c)The December 31 adjusting entry related to uncollectible accounts will increase liabilities and decrease equity by $3,230. _____ d)The method Barton uses to account for uncollectible accounts is known as the balance sheet approach. _____ e)Write-offs of uncollectible accounts in 2017 will reduce Barton's net realizable value of receivables.

If a company uses the percent of receivables method to estimate uncollectible accounts,the company will first determine the required ending balance in Allowance for Doubtful Accounts,and Uncollectible Accounts Expense will be the difference between that amount and the current balance in the allowance.

Geary,Inc.had the following sales during 2016: Geary also had the following beginning and ending balances in the receivables accounts: Geary,who uses the allowance method of accounting for uncollectible accounts,estimated that 3% of the credit sales will go uncollected.The credit card company charges Geary a 4% service charge. Required: a)Prepare Geary's year-end adjusting journal entry for uncollectible accounts expense. b)Prepare the entry to record the credit card sales. c)What is Geary's cash flow from customers for the year?

Buttercup Florist uses the allowance method to account for uncollectible accounts.Unable to collect a $150 account from a customer,Buttercup determined it was uncollectible.How would the write-off of this account affect the company's financial statements?

If Kettler Company loans $24,000 to Beam Company on March 1,2016,and the one-year note carries an interest rate of 7%,how much interest revenue will Kettler recognize in 2016? How much in 2017?

On June 14,2016,Sure-Fit Shoe Store sold $12,000 of merchandise that cost $8,000 and accepted credit cards as payment.Sure-Fit electronically transmitted the credit card forms to the credit card company which charges a 3% fee to handle such transactions.On June 18,2016,Sure-Fit received the proceeds from the credit card company. a)Prepare the journal entry to record the sale of the merchandise on 6/14/16. b)Prepare the journal entry to record the credit card proceeds on 6/18/16.

Use the following to answer questions The Miller Company earned $190,000 of revenue on account during 2016.There was no beginning balance in the accounts receivable and allowance accounts.During 2016 Miller collected $136,000 of cash from its receivables accounts.The company estimates that it will be unable to collect 3% of its sales on account. 37.The amount of uncollectible accounts expense recognized on the 2016 income statement was A.$5,700. B.$1,320. C.$4,080. D.$54,000. Answer: A Learning Objective: 07-01 Topic Area: Uncollectible accounts ― Percent of revenue method AACSB: Knowledge Application AICPA: FN Measurement AICPA: BB Critical Thinking Blooms: Apply Level of Difficulty: 2 Medium Feedback: $190,000 revenue on account x 3% = $5,700 -The net realizable value of Miller's receivables at the end of 2016 was

When a customer's account,previously written off as uncollectible,is reinstated,the net realizable value of Accounts Receivable increases.

Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Enter only one letter for each element.You do not need to enter amounts. -On September 1,2016,Ruiz Company loaned $10,000 to Alpha Company.Show the effect of the December 31,2016 adjusting entry to accrue interest on Ruiz's financial statements.

Discuss briefly the costs of making sales on account.

Allegheny Company ended 2015 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $23,000 and $900,respectively.During 2016,Allegheny wrote off $1,500 of Uncollectible Accounts.After aging its receivables,Allegheny estimates that the ending Allowance for Doubtful Accounts balance should be $1,600.What will Allegheny report as Uncollectible Accounts Expense on its 2016 income statement?

Tuckahoe Corporation accepted credit cards for $38,000 of services performed in March 2016.The credit card company charged a 3 ½% service fee and paid Tuckahoe as soon as it received the credit card receipts. Required: a)Prepare the general journal entry to record performance of the services. b)Prepare the general journal entry for collection of the receivable from the credit card company.

The practice of reporting the net realizable value of receivables in the financial statements is commonly called:

Willis Company had $200,000 in credit sales for 2016,and it estimated that 2% of the credit sales would not be collected.The balance in Accounts Receivable at the end of the year was $38,000.Willis had never used the allowance method to account for its receivables till 2016.The net realizable value of its accounts receivable at the end of the year was $34,000.

Vincent Company accepted a 12-month,7% promissory note from a customer,Graves Company,on September 1,2016,in exchange for $24,000 of services that Vincent performed.Prepare general journal entries for the following: a)acceptance of the note on September 1,2016 b)accrual of interest on December 31,2016 c)collection of principal and interest on August 31,2017