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Exam 5: Accounting for Receivables and Inventory Cost Flow

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Question 1

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An aging of accounts receivable may be used to estimate the amount of accounts receivable that a company is likely not to collect.

A) True
B) False

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Question 2

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On September 30,2012,Falls Company collected the accrued interest revenue on a one-year note receivable dated October 1,2010.Show the effect of the collection of previously-accrued interest on Falls' financial statements.

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Question 3

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Stewart Company sold 180 units @ $320 each on October 31,2012.Cash selling and administrative expenses were $15,000.The following information is also available:

Warnock Company had $400,000 in credit sales for 2012,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 $79,000.Warnock had never used the allowance method to account for its receivables till 2012.The net realizable value of its accounts receivable at the end of the year was $71,000.

Warden Company has the following account balances at the end of 2012:

On September 30,2012,Falls Company collected the principal on a one-year note receivable dated October 1,2011.Show the effect of the collection of the principal on Falls' financial statements.

The Repair Shop provided $618,000 of services to customers during 2012.All customers paid for the services with credit cards.The company submitted the credit card receipts to the credit card company immediately,and the credit card company paid cash in the amount of face value less a 4 percent service charge. Required: Record the credit card sales and collection of the receivables in the horizontal statements model,below.Show dollar amounts of increases and decreases.For cash flows,indicate whether the item is an operating activity (OA),investing activity (IA),or financing activity (FA).Use NA to indicate that an element is not affected by an event.

Mohr Manufacturing,Inc.had the following sales during 2012: Mohr also had the following beginning and ending balances in the receivables accounts: Mohr,which uses the allowance method of accounting for uncollectible accounts,estimated that 3% of the credit sales will go uncollected.The credit card company charges Mohr a 4% service charge. a)What was the amount of uncollectible accounts expense related to credit sales? b)What was the amount of the company's expense for credit card fees during the year? c)What was Mohr's cash flow from customers for the year?

What are some of the costs a business incurs in making credit sales to customers? What is the primary benefit of making credit sales?

The net effect of the entries to recognize the collection of a previously written-off account under the allowance method will

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

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

Barry Company purchased two identical inventory items.The item purchased first cost $7.00 and the item purchased second cost $9.00.Barney sold one of the items for $12.00.Which of the following statements is true?

During November 2012,Hall Company purchased two identical inventory items.The item purchased first cost $12.00,and the item purchased second cost $15.00.Hall sold one of the inventory items for $20.00.Based on this information

The net realizable value of accounts receivable decreases when an account receivable is written off.

Related to this note receivable,what amount of interest income would Siebens report on its 2012 income statement?

What amounts will Siebens report on its 2012 statement of cash flows?

On March 31,2012,Stuart Co.wrote off a $600 account receivable of one of its customers.The $600 sale had been made in 2011.Stuart uses the allowance method to account for uncollectible accounts expense.Show how the write-off of the account would affect Stuart's financial statements.

What is meant by the term "net realizable value" for accounts receivable?

In relation to inventory,differentiate between flow of cost and physical flow of goods.