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Exam 5: Receivables and Sales

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Question 1

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On August 12, a company provides services on account to a customer for $3,000. However, on August 16, the customer is not completely satisfied with the service and the company grants an allowance on the amount owed of $400. On August 20, the customer makes full payment of the balance owed, excluding the allowance. Record the services provided on August 12, the sales allowance on August 16, and the cash collection on August 20.

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Question 2

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Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the best term placing the letter designating the term in the space provided. Terms: -_____ Actual bad debts.

A) Accounts receivable
B) Allowance method
C) No effect
D) Direct write-off method
E) Net realizable value
F) Aging method
G) Bad debt expense
H) Receivables written off
I) Decrease assets and increase expenses
J) Allowance for uncollectible accounts

K) E) and G)
L) B) and J)

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Question 3

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Listed below are five terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the best term by placing the letter designating the term in the space provided. Terms: -_____ When a customer returns a product.

Listed below are five terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the best term by placing the letter designating the term in the space provided. Terms: -_____ Refund because of some deficiency in the company's product or service.

Crimson Inc. recorded credit sales of $750,000, of which $600,000 is not yet due, $100,000 is past due for up to 180 days, and $50,000 is past due for more than 180 days. Under the aging of receivables approach, Crimson Inc. expects it will not collect 1% of the amount not yet due, 10% of the amount past due for up to 180 days, and 20% of the amount past due for more than 180 days. The allowance account had a debit balance of $1,000 before adjustment. After adjusting for bad debt expense, what is the ending balance of the allowance account?

On March 13, a company writes off a customer's account of $3,800. On June 3, the customer unexpectedly pays the $3,800 balance. Using the allowance method, record the write-off on March 13 and the cash collection on June 3.

Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the best term placing the letter designating the term in the space provided. Terms: -_____ The procedure using an adjustment for future uncollectible accounts.

At the beginning of 2012, the balance in Jackson Enterprises' Allowance for Uncollectible Accounts was $31,800. During 2012, the company wrote off $38,000 of accounts receivable. Writing off the individual bad debts would include a:

Beverage International reports net credit sales for the year of $240,000. The company's accounts receivable balance at the beginning of the year equaled $20,000 and the balance at the end of the year equaled $30,000. What is Beverage International's receivables turnover ratio?

A company reports the following amounts at the end of the year: Total sales = $400,000; cash = $35,000; sales discounts = $10,000; accounts receivable = $20,000; sales returns = $15,000; operating expenses = $70,000; sales allowances = $25,000. Compute net sales.

Interest on a note receivable is calculated as the face value of the note times the annual interest rate stated on the note times the fraction of the year the note is outstanding.

The percentage-of-credit-sales method for estimating uncollectible accounts is sometimes described as:

On September 1, 2012, Middleton Corp. lends cash and accepts a $1,000 note receivable that offers 12% interest and is due in six months. How much interest revenue will Middleton Corp report during 2013?

A credit balance in the Allowance for Uncollectible Accounts before adjustment indicates that last year's estimate of uncollectible accounts may have been too high.

At December 31, Gill Co. reported accounts receivable of $238,000 and an allowance for uncollectible accounts of $600 (debit) . An analysis of accounts receivable suggests that the allowance for uncollectible accounts should be 3% of accounts receivable. The amount of the adjustment for uncollectible accounts would be:

Under the direct write-off method, bad debt expense is recorded at the time accounts are known to be uncollectible.

Under the allowance method, the write-off of an actual bad debt is recorded with a debit to the Allowance for Uncollectible Accounts and a credit to Accounts Receivable.

A company expects 5% of its newer accounts receivable to be uncollectible and 20% of its older accounts to be uncollectible. If the company has $40,000 of newer accounts and $5,000 of older accounts, the total estimate of uncollectible accounts is $2,000.

The receivables turnover ratio shows the number of times during a year that the average accounts receivable balance is collected (or "turns over").

On November 10 of the current year, Flores Mills sold carpet to a customer for $8,000 with credit terms 2/10, n/30. How would Flores record the sale on November 10?