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Exam 7: Accounting for Receivables

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Question 71

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The operating cycle is the average time that a company spends acquiring inventory to sell.

A) True
B) False

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Question 72

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Assuming the direct write-off method is used, when is uncollectible accounts expense recognized?

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Under the direct write-off met...

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Question 73

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After the accounts are adjusted at the end of the year, Accounts Receivable has a balance of $225,000, Uncollectible Accounts Expense for the year was $17,500, and Allowance for Doubtful Accounts has a balance of $12,500. What is the net realizable value of the accounts receivable?

The following information is available for Plains Company, which uses the allowance method. Plains estimated that 1% of sales on account will be uncollectible. After several attempts at collection, Plains wrote off an account of $900 that could not be collected. Required:a)Compute the amount of uncollectible accounts expense for Year 1.

On January 1, Year 1, the Accounts Receivable balance was $37,000 and the balance in the Allowance for Doubtful Accounts was $2,800. On January 15, Year 1, an $800 uncollectible account was written-off. What is the net realizable value of accounts receivable immediately after the write-off?

After the accounts are adjusted at the end of the year, Accounts Receivable has a balance of $235,000, Uncollectible Accounts Expense has a balance of $17,500, and Allowance for Doubtful Accounts has a balance of $12,500. What is the net realizable value of the accounts receivable?

Which of the following is not an advantage of accepting credit cards from retail customers?

Making a loan to another party is considered an investing activity on the statement of cash flows.

Indicate whether each of the following statements is true or false. a)Loaning cash to another company is considered a financing activity on the statement of cash flows.b)The major difference between treating the extension of credit to a customer as accounts receivable and treating it as notes receivable is the existence of interest.c)In a promissory note, the payee issues the note to the maker.d)Interest rates are always stated on an annual basis, regardless of the length of the note.e)Accruing interest on a note receivable is considered an asset use transaction.

On August 1, Year 1 Western Company loaned $40,000 cash to Eastern Company. The one-year note carried a 6% rate of interest. The amount of interest revenue on the income statement and the amount of cash flow from operating activities shown on Western's December 31, Year 1 financial statements would be

Zane Enterprises accepts a credit card as payment for $1,000 of services provided to a customer. The credit card company charges a 4% handling charge for its collection services. Based on this information

On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $73,200 and $3,400, respectively. During Year 2, Kincaid reported $201,000 of credit sales, wrote off $1,900 of receivables as uncollectible, and collected cash from receivables amounting to $246,700. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales.What effect will recognizing the uncollectible accounts expense for Year 2 have on the elements of the financial statements?

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

What is the effect of recognizing $7,500 of uncollectible accounts expense under the direct write-off method?

Hancock Medical Supply Company, earned $86,500 of revenue on account during Year 1, its first year of operation. During Year 1, Hancock collected $68,600 of cash from its receivables accounts. The company did not write-off any uncollectible accounts. It estimates that it will be unable to collect 1% of revenue on account. What is the net realizable value of receivables that will be reported on the balance sheet at December 31, Year 1?

Allegheny Company ended Year 1 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $64,000 and $3,150, respectively. During Year 2, Allegheny wrote off $5,700 of Uncollectible Accounts. Using the percent of receivables method, Allegheny estimates that the ending Allowance for Doubtful Accounts balance should be $5,000. What amount will Allegheny report as Uncollectible Accounts Expense on its Year 2 income statement?

Hoff Company uses the allowance method. An account that had been previously written-off as uncollectible was recovered. How do the two parts of the recovery (reinstate receivable and collect the receivable) affect the elements of the financial statements when the two parts are considered together?

Vales Services Company loaned $6,000 on August 1, Year 1 to an individual who issued Vales a promissory note with 6% interest. The issuer of the note repaid the principal and interest on July 30, Year 2. How did the event on August 1, Year 1 affect the statement of cash flows? How did the event on July 30, Year 2 affect the statement of cash flows?

The face value of Accounts Receivable plus the balance in the Allowance for Doubtful Accounts is equal to the net realizable value of the receivables.

Barton Corporation uses the percent of receivables method. As of December 31, Year 1, 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 Year 1 were $875,000. On December 31, Barton aged its receivables and determined the following:. a)Barton will report a net realizable value of accounts receivable equal to $63,170 on its December 31, Year 1 balance sheet.b)Barton will report uncollectible accounts expense of $5,730 on its Year 1 income statement.c)The December 31 adjustment related to uncollectible accounts will increase total liabilities and decrease stockholders' 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 Year 2 will reduce Barton's net realizable value of receivables.