ACCTG 201 Study Guide - Final Guide: Inventory Turnover, Cash Flow, Operating Cash Flow
Document Summary
Ex: inventory quantity purchase cost market value. Aging method to estimate uncollectible accounts: more accurate than applying a single percentage to all accounts receivable. Recognizes that the longer accounts are past due, the less likely they are to be collected. Less than 30 days past due ,600 15% Greater than 30 days past due ,600 40% Subtract the balance in these accounts from total revenues to find net income. Trade discount: not contra revenue account- it"s a reduction in listed price. The direct write off method reduces accounts receivable and records bad debt expense at the time the account receivable proves uncollectible. If a company fails to report its future for bad debt at the end of the current year:net income is overstated. Calculate interest on note receivable as face value of note x the stated annual rate x fraction of year (disregarding how many months the note extends.
