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Exam 7: Accounting for Receivables

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Question 1

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

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Aging of accounts receivable is the proc...

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Question 2

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Glebe Company accepted a credit card as payment for $1,100 of services provided to a customer. The credit card company charges a 5% fee for handling the transaction. What effect will the collection of cash from the credit card company have on the elements of the financial statements?

A) Increase assets by $1,045
B) Decrease assets and stockholders' equity by $55
C) Increase assets by $1,100
D) None of these answer choices are correct

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

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Question 3

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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 is the amount of uncollectible accounts expense that will be reported on the Year 2 income statement?

During its first year of operation, 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 during the year? b)What amount of uncollectible accounts expense was recognized during the year?

When a company receives payment from a customer whose account was previously written off, the account is reinstated and the net realizable value of Accounts Receivable increases.

When a company receives payment from a customer whose account was previously written off, the customer's account should be reinstated.

Many businesses find it more efficient to offer credit directly to customers rather than to accept third-party credit cards.

Rhodes Company reports the following information for the Year 1 fiscal year: Determine the average number of days it takes Rhodes to collect its accounts receivable. (Round intermediate calculations to 2 decimal places.)

Li Company has the following account balances: Determine the net realizable value of Li's accounts receivable.

What type of account is the Allowance for Doubtful Accounts?

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 March 1, Year 2, King Co. collected a note receivable and related interest from Havilland Co. The note had been issued one year earlier. Indicate the effects of this event on King's financial statements.

On November 1, Year 1 Shelter Company loaned $4,000 cash to Cove Company. The one-year note carried a 5% rate of interest. Which of the following shows how the loan will affect Shelter's financial statements on November 1, Year 1?

On June 1, Year 2, Carolina Company collected a $24,000 note receivable that had been issued on June 1, Year 1. The note carried a 6% interest rate. On June 1, Year 2, the company will recognize interest revenue in the amount of $1,440.

What is the term used to describe the amount of accounts receivable that is actually expected to be collected?

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 December 31, Year 3 unadjusted (current) balance in allowance for doubtful accounts account (balance before expense recognition) is

The longer an account receivable has been outstanding, the less likely it is to be collected.

The total amount of uncollectible accounts expense recognized over the life of a business will be the smallest under the

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's recording the reestablishment of the receivable on April 4, Year 2?

The direct write-off method does a better job of matching revenues and expenses than does the allowance method.

Most companies report receivables on their balance sheets at the net realizable value.