AC 210 Study Guide - Midterm Guide: Purch Group, Finished Good, Income Statement

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mauvesheep37

21 Nov 2016

School

University of Hartford

Department

Accounting - Barney

Course

AC 210

Professor

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Document Summary

Explain the difference between the account receivables and note receivables. A/r is the promise to collect cash in the future. A/r always has certain amount of risk . N/r is the written promise issued over a certain amount of annual interest rate. Write off method has not: allowance method decreases account receivables through allowance for uncollectible. Accounts while direct write off does not: all of the above, which of the following is false for aging of receivables method, it is one of the two approaches for allowance method. It assigns only one uncollectible account expense rate. It measures the collectability of each account receivables: it provides more accurate allowance amount than percentage of sales method, which of the following shows the write off entry for the receivables according to allowance. The note is issued over a 10% annual interest rate and it is a one year, two times payment note in every six months.

Related Questions

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.

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Q: Answer the questions below with True or False

18. When using the estimate-based on sales method, the entry to record uncollectible accounts expense includes a credit to the Accounts Receivable account.

19. When using the estimate based on analysis of receivables, the amount computer in the analysis is always the required amount that would be recorded in the adjusting entry.

20. The allowance for doubtful accounts is similar to accumulated depreciation in that the account represents the required amount that would be recorded in the adjusting entry.

21. Generally accepted accounting principles do not normally allow the use direct write-off method of accounting for uncollectible accounts.

22. The direct write-off method records uncollectible accounts expense in the yea the specific account receivable is determined to be uncollectible.

23. The equation for computing interest on an interest-bearing note is as follows: interest equals maturity value times rate times time.

24. The due date a 60-day note dated July 10 is September 10

25. The maturity value of a 12%, 60-day note for $5,000 is $5,600.

What are the pros and cons of extendingcredit?

Define net realizable value.

Bad debt expense should be recorded in same periodas the sale to avoid violating the expense recognition (matching)principle. Under the allowance method an estimate of the bad debtsare recorded and later adjusted. Describe the following twosteps of the allowance method and provide the required journalentries.

Adjust for estimated bad debts

Remove (write off) specific customerbalances

Small companies are allowed to use the direct write-offmethod instead of the allowance method. Explain this method and thecons to using it.

What kind of account is allowance for doubtful accounts?Is it permanent or temporary? Which financial statement can it befound on?

Bad debt expense can be estimated using two differentmethods. Describe each of the below methods and provide an examplejournal entry.

Percentage of sales method

Aging of accounts receivable method

Explain how account recoveries are treated. What is thejournal entry?

What is the difference between a note receivable and anaccount receivable?

What is the formula to calculate interest on a notereceivable? Explain each of the three variables.

Provide the following journal entries:

Establish note receivable

Accrue interest earned

Record interest received

Record principal received

What is the receivables turnover ratio formula and whatdoes it tell you?

What is the days to collect formula and what does ittell you?

AC 210 Study Guide - Midterm Guide: Purch Group, Finished Good, Income Statement

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