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Exam 7: Cash and Receivables

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Question 21

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Which of the following does not change the balance in accounts receivable?

A) Returns on credit sales.
B) Collections from customers.
C) Bad debts expense adjusting entry.
D) Write-offs.

E) All of the above
F) None of the above

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Question 22

Multiple Choice

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Collection of accounts receivable that previously have been written off results in an increase in cash and an increase in:

A) Accounts receivable.
B) Allowance for uncollectible accounts.
C) Bad debts expense.
D) Retained earnings.

E) None of the above
F) B) and D)

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Question 23

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On March 12, 2013, Admiral Electronics sold 20 fax machines to Cool Stuff Co. for $10,000, subject to terms 2/10, n30. Admiral uses the gross method of accounting for sales discounts. Required: 1. Prepare the journal entry to record the sale. 2. Prepare the journal entry to record receipt of the payment, assuming the correct amount was received on March 20, 2013. 3. Prepare the journal entry to record receipt of the payment, assuming the correct amount was received on April 5, 2013.

What is the correct entry for Flores on November 10?

Discounts on notes receivable are recognized as interest earned over the term of the related note.

On July 18, 2013, Philly Furniture Factory sold 20 reclining rockers to Dave's Discount Furniture for $8,000, subject to terms 2/10, n30. Philly uses the net method of accounting for sales discounts. Required: 1. Prepare the journal entry to record the sale. 2. Prepare the journal entry to record receipt of the payment, assuming the correct amount was received on July 26, 2013. 3. Prepare the journal entry to record receipt of the payment assuming the correct amount was received on August 15, 2013.

Ireland Corporation obtained a $40,000 note receivable from a customer on June 30, 2013. The note, along with interest at 6%, is due on June 30, 2014. On September 30, 2013, Ireland discounted the note at Cloverdale bank. The bank's discount rate is 10%. What amount of cash did Ireland receive from Cloverdale Bank?

Huckabee's 2013 receivables turnover (rounded) is:

The transferor is considered to have surrendered control over its receivables if:

For each posted entry in the allowance account during 2010, prepare the journal entry.

The net method of accounting for cash discounts requires adjusting entries for discounts taken.

San Mateo Company had the following account balances at December 31, 2013, before recording bad debt expense for the year: San Mateo is considering the following approaches for estimating bad debts for 2013: • Based on 3% of credit sales • Based on 6% of year-end accounts receivable What amount should San Mateo charge to bad debt expense at the end of 2013 under each method?

How could a company with receivables like HP be able to manage earnings in applying generally accepted accounting principles?

Important elements of an internal control system for cash disbursements include each of the following except:

As of December 31, 2013, Amy Jo's Appliances had unadjusted account balances in accounts receivable of $311,000 and $970 in the allowance for uncollectible accounts, following 2013 write-offs of $6,450 in bad debts. An analysis of Amy Jo's December 31, 2013, accounts receivable suggests that the allowance for uncollectible accounts should be 2% of accounts receivable. Bad debt expense for 2013 should be:

Briefly compare and contrast the two approaches to estimating bad debt expense. In your answer, indicate which approach, if either, is superior.

The income statement approach to estimating bad debts requires an adjusting entry at the end of the period to reduce receivables to net realizable value.

Rahal's 2013 bad debt expense is:

Brewer Inc. is owed $200,000 by Carol Co. under a 10% note with two years remaining to maturity. Due to financial difficulties Carol Co. did not pay the prior year's interest. Brewer agrees to settle the receivable (and accrued interest) in exchange for a cash payment of $150,000. The journal entry that Brewer would make to record this transaction would include a loss on troubled debt restructuring of:

Briefly explain the accounting treatment for sales returns.