ACCT 200 Lecture Notes - Lecture 20: Current Asset, Income Statement, Financial Statement

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ivorysea-lion839

30 Aug 2018

School

University of Arizona

Department

Accounting

Course

ACCT 200

Professor

All

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Document Summary

Net amount due within the first 10 days of the next month. Receivables amounts due from individuals and companies that are expected to be collected in cash. Accounts receivables amounts customers owe on account that result from the sale of goods and services. Notes receivable (interest involved): written promise (formal instrument) for amount to be received. Other receivables non-trade receivables such as interest, loans to officers, advances to employees, and income taxes refundable. Need to 1. recognize ar and 2. value ar. A/r is a current asset that needs to be valued at net realizable value (total ar - estimate of uncollectible) Uncollectible accounts receivable sales on account raise the possibility of accounts not being collected; seller records losses that result from extending credit as bad debt expense (expense on income statement) Two methods for accounting for uncollectible accounts.

Related Questions

Raintree Cosmetic Company sells its products to customers on a credit basis. An adjusting entry for bad debt expense is recorded only at December 31, the companyâs fiscal year-end. The 2017 balance sheet disclosed the following: Current assets: Receivables, net of allowance for uncollectible accounts of $48,000 $ 522,000 During 2018, credit sales were $1,840,000, cash collections from customers $1,920,000, and $57,000 in accounts receivable were written off. In addition, $4,800 was collected from a customer whose account was written off in 2017. An aging of accounts receivable at December 31, 2018, reveals the following: Percentage of Year-End Percent Age Group Receivables in Group Uncollectible 0â60 days 70 % 5 % 61â90 days 20 15 91â120 days 5 20 Over 120 days 5 40 Required: 1. Prepare summary journal entries to account for the 2018 write-offs and the collection of the receivable previously written off. 2. Prepare the year-end adjusting entry for bad debts according to each of the following situations: Bad debt expense is estimated to be 4% of credit sales for the year. Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable. Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is determined by an aging of accounts receivable. 3. For situations (a)â(c) in requirement 2 above, what would be the net amount of accounts receivable reported in the 2018 balance sheet?

pinkantelope545

Select the term that best fits each of the following definitions and descriptions.

a.	Notes receivable
b.	Nontrade receivables
c.	Net realizable value
d.	Direct write-off method
e.	Interest-bearing note
f.	Maturity date
g.	Promissory note
h.	Factoring receivables
i.	Trade discount
j.	Present value
k.	Allowance method
l.	Sales discount
m.	Negotiable note
n.	Non-interest-bearing note
o.	Assignment of receivables
p.	Valuation date

____ 21. Receivables that are evidenced by a formal written promise to pay a certain sum of money at a specified date.

____ 22. The date the principal amount of a note is due to be paid.

____ 23. The sum of future receipts or payments discounted to the present date at an appropriate rate of interest.

____ 24. A method of recognizing the estimated losses from uncollectible accounts as expenses during the period in which the sales occur.

____ 25. A note that is legally transferable by endorsement and delivery.

____ 26. Any receivable arising from transactions that are not directly associated with the normal operating activities of a business.

____ 27. A note written in the form where the face amount includes the interest charges.

____ 28. The borrowing of money with receivables pledged as security on the loan.

____ 29. A note written in the form where the maker promises to pay the face amount plus interest at a specified rate.

____ 30. An unconditional written promise to pay a certain sum of money at a specified time.

ochrecricket36

4Effect of recovering a receivable previously written off LO5-1, 5-2

The accounts receivable balance for Donâs Shoe Repair atDecember 31, 2014, was $87,000. Also on that date, the balance inAllowance for Doubtful Accounts was $3,000. During 2015, $2,300 ofaccounts receivable were written off as uncollectible. In addition,Donâs Shoe Repair unexpectedly collected $130 of receivables thathad been written off in a previous accounting period. Sales onaccount during 2015 were $218,000, and cash collections fromreceivables were $220,000. Uncollectible accounts expense wasestimated to be 1 percent of the sales on account for the period.Also on that date, the balance in Allowance for Doubtful Accountswas $3,000 and the balance in Retained Earnings was $84,000.

Required

Organize the information in accounts under an accountingequation. (Show effect on the accounting equation in theorder provided in the question. Enter any decreases to accountbalances with a minus sign. Select "NA" if there is no effect onthe "Accounts Titles for Retained Earnings".)

HORIZONTAL STATEMENTS MODEL

Cash + Accounts Receivable - Allowance = Liabilities + Equity orRetained Earning = Accounts title for Retained Earning

Bal.

Based on the preceding information, compute (after year-endadjustment):

(1) Balance of Allowance forDoubtful Accounts at December 31, 2015.

(2) Balance of AccountsReceivable at December 31, 2015.

(3) Net realizable value ofAccounts Receivable at December 31, 2015.

ALLOWANCE FROM DOUBTFUL ACCOUNTS ( )
ACCOUNTS RECEIVABLE ( )

NET REALIZED VALUE( )

c.	What amount of uncollectible accounts expense will Donâs ShoeRepair report for 2015? UNCOLLECTIBLE ACCONTS EXPENSE ( )

ACCT 200 Lecture Notes - Lecture 20: Current Asset, Income Statement, Financial Statement

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