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ACC 100 Lecture Notes - Lecture 8: Securitization, Promissory Note, Accounts Receivable

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orangeminnow913
27 Feb 2017
School
Ryerson University
Department
Accounting
Course
ACC 100
Professor
N.a

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Document Summary

Accounts receivable: amount owed by customer on account. Trade receivable: a/r and n/r result from sales transaction. Interest revenue: if customers do not pay in full within the period it is due, extra financing charges are to be made. Net realizable value: amount owed will be collected. Net realizable value: accounts receivable allowance for. Calculating estimating allowance: income statement approach: allowance for doubtful accounts is ignored, percentage of sales approach: calculates bad debt expense as percentage of net credit sales, balance sheet approach: do not ignore allowance for doubtful. Accounts: percentage of receivable approach (aging schedule): uses past experience to estimates percentage of receivables that will become uncollectible accounts. Allowance method: estimation of uncollectible accounts at the end of the accounting period: record estimated uncollectible. Allowance of doubtful accounts 800: record the write-offs of uncollectible amount. Accounts receivable 800: recovery of uncollectible account (if they can pay again)

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Related Questions


The following information was taken from the records of AlphabetSoup at the end of 2012:

Cash sales $1,000,000
Credit sales 500,000
Sales discounts 5,000
Accounts Receivable 250,000
Allowance for Doubtful Accounts(before adjustment) (25,000)
Estimated uncollected accounts 2,475
Cost of goods sold $975,000

Determine the following:

A) Gross sales

B) Net sales

C) Gross Profit

Assuming the company uses the income statement approach toestimating uncollectibles:

D) Bad debt estimate percentage

F) Ending balance in Allowance for Doubtful Accounts afteradjustment

G) Net realizable value of receivables after adjustment for baddebts

Assuming the company uses the balance sheet approach toestimating uncollectibles:

H) Gross receivables

The following items were taken from the annual report of AndrewCorp. Please read the question carefully.

2001 Credit Sales $7,000
2001 Bad Debt write-offs 150
12/31/01 Accounts Receivable 7,000
12/31/01 Allowance for Doubtful accounts 2,000
2001 Cash Collections from customers 2,000

Andrew uses the percentage of sales method to estimate bad debts.Andrew’s estimated bad debt percentage for 2001 was 5%.

a. What is the net realizable value of Andrews’s accountsreceivable at 12/31/01? 2 points







b. What was the amount of bad debt expense for 2001? 2 points








c. What was the 12/31/00 Accounts Receivable balance? 2points








d. What was the 12/31/00 Allowance for Doubtful accounts balance? 2points
Jan. 19. Reinstated the account of Arlene Gurley, which had been written off in the preceding year as uncollectible. Journalize the receipt of $2,120 cash in full payment of Arlene’s account.
Apr. 3. Wrote off the $12,150 balance owed by Premier GS Co., which is bankrupt.
July 16. Received 30% of the $21,800 balance owed by Hayden Co., a bankrupt business, and wrote off the remainder as uncollectible.
Nov. 23. Reinstated the account of Harry Carr, which had been written off two years earlier as uncollectible. Recorded the receipt of $3,455 cash in full payment.
Dec. 31. Wrote off the following accounts as uncollectible (compound entry): Cavey Co., $9,135 ; Fogle Co., $2,715 ; Lake Furniture, $ 6,975 ; Melinda Shryer, $1,970.
Dec. 31. Based on an analysis of the $1,074,100 of accounts receivable, it was estimated that $46,700 will be uncollectible. Journalize the adjusting entry.

Required:

1. Record the January 1 credit balance of $44,500 in a T account presented below in requirement 2b for Allowance for Doubtful Accounts.

2. a. Journalize the transactions. If an amount box does not require an entry, leave it blank. Note: For the December 31 adjusting entry, assume the $1,074,100 balance in accounts receivable reflects the adjustments made during the year.

Jan. 19-reinstate Accounts Receivable-Arlene Gurley
Allowance for Doubtful Accounts
Jan. 19-collection Cash
Accounts Receivable-Arlene Gurley
Apr. 3 Allowance for Doubtful Accounts
Accounts Receivable-Premier GS Co.
July 16 Cash
Allowance for Doubtful Accounts
Accounts Receivable-Hayden Co.
Nov. 23-reinstate Accounts Receivable-Harry Carr
Allowance for Doubtful Accounts
Nov. 23-collection Cash
Accounts Receivable-Harry Carr
Dec. 31-write-off Allowance for Doubtful Accounts
Accounts Receivable-Cavey Co.
Accounts Receivable-Fogle Co.
Accounts Receivable-Lake Furniture
Accounts Payable-Melinda Shryer
Dec. 31-adjusting Bad Debt Expense
Allowance for Doubtful Accounts

Feedback

Set up T accounts.
Recall that under the allowance method, the entry to write off an account debits Allowance for Doubtful Accounts and credits Accounts Receivable.
In such cases where an account receivable that has been written off is later collected, the account is reinstated by an entry that reverses the write-off entry. Then record the receipt of cash as payment for the account.
The amount of bad debt expense is affected by the balance in the allowance account.

Learning Objective 4.

2. b. Post each entry that affects the following T accounts and determine the new balances:

Allowance for Doubtful Accounts
Apr. 3 Jan. 1 Balance
July 16 Jan. 19
Dec. 31 Nov. 23
Dec. 31 Unadjusted Balance
Dec. 31 Adjusting Entry
Dec. 31 Adjusted Balance
Bad Debt Expense

Feedback

Set up T accounts.
Recall that under the allowance method, the entry to write off an account debits Allowance for Doubtful Accounts and credits Accounts Receivable.
In such cases where an account receivable that has been written off is later collected, the account is reinstated by an entry that reverses the write-off entry. Then record the receipt of cash as payment for the account.
The amount of bad debt expense is affected by the balance in the allowance account.

Learning Objective 4.

3. Determine the expected net realizable value of the accounts receivable as of December 31 (after all of the adjustments and the adjusting entry).
$

4. Assuming that instead of basing the provision for uncollectible accounts on an analysis of receivables, the adjusting entry on December 31 had been based on an estimated expense of ½ of 1% of the sales of $6,630,000 for the year, determine the following:

a. Bad debt expense for the year.
$

b. Balance in the allowance account after the adjustment of December 31.
$

c. Expected net realizable value of the accounts receivable as of December 31 (after all of the adjustments and the adjusting entry).
$

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