Determine the total estimated uncollectibles

What type of receivable is evidenced by a formal instrument and normally requires the payment of interest?

A trade receivable

A note receivable

Past-due accounts receivables

An account receivable

When is a receivable recorded by a service organization?

When the customer pays

When the related expenses are incurred

When the bill is sent to the customer

When service is provided on account

At what value are accounts receivable reported on the balance sheet?

Present value

Cash (net) realizable value

Fair market value

Maturity value

Short-term notes receivable are reported at their cash (net) realizable value.

True

False

Which one of these statements about promissory notes is incorrect?

The party making the promise to pay is called the maker.

A promissory note is not a negotiable instrument.

A promissory note is more liquid than an account receivable.

The party to whom payment is to be made is called the payee.

Which of the following should be classified as an “other” receivable?

Interest receivable

Notes receivable

Accounts receivable

Trade receivables

What type of receivables result from sales transactions?

Long-term receivables

Non-trade receivables

Other receivables

Trade receivables

Which one of the following is not a method used by companies to accelerate cash receipts?

Writing off receivables

Offering discounts for early payment

Accepting national credit cards for customer purchases

Selling receivables to a factor

Which of the following accounts is debited when a company factors its accounts receivable?

Loss on Sale of Accounts Receivable

Service Charge Expense

Accounts Receivable

Interest Expense

Which of the following is the value at which loans and receivables should be reported under IFRS?

Amortized cost

Maturity value

Net of bad debt expense

Cash realizable value

Exercise 8-5

Shamrock, Inc. has accounts receivable of $96,800 at March 31, 2017. Credit terms are 2/10, n/30. At March 31, 2017, there is a $2,018 credit balance in Allowance for Doubtful Accounts prior to adjustment. The company uses the percentage-of-receivables basis for estimating uncollectible accounts. The company’s estimates of bad debts are as shown below.

Balance, March 31

Estimated Percentage Uncollectible

Age of Accounts

2017

2016

Current

$67,300

$78,800

2

%

1–30 days past due

12,000

8,350

5

31–90 days past due

10,500

2,600

32

Over 90 days past due

7,000

1,050

47

$96,800

$90,800

Determine the total estimated uncollectibles.

The total estimated uncollectibles

$

SHOW LIST OF ACCOUNTS

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Prepare the adjusting entry at March 31, 2017, to record bad debt expense. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

SHOW LIST OF ACCOUNTS

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Problem 8-1A

Teal Mountain Inc. uses the allowance method of accounting for bad debts. The company produced the following aging of the accounts receivable at year-end.

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Calculate the total estimated bad debts on the below information.

Number of Days Outstanding

Total

0–30

31–60

61–90

91–120

Over 120

Accounts Receivable

$478,000

$325,000

$85,000

$39,000

$16,000

$13,000

% uncollectible

1%

4%

5%

8%

11%

Estimated bad debts

$

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$

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$

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$

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$

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$

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SHOW LIST OF ACCOUNTS

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Prepare the year-end adjusting journal entry to record the bad debts using the aged uncollectible accounts receivable determined in above. Assume the unadjusted balance in Allowance for Doubtful Accounts is a $4,000 debit. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

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SHOW LIST OF ACCOUNTS

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Of the above accounts, $5,000 is determined to be specifically uncollectible. Prepare the journal entry to write off the uncollectible account. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

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SHOW LIST OF ACCOUNTS

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The company collects $5,000 subsequently on a specific account that had previously been determined to be uncollectible in part (c). Prepare the journal entry(ies) necessary to (1) restore the account and (2) record the cash collection. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No.

Account Titles and Explanation

Debit

Credit

1.

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2.

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SHOW LIST OF ACCOUNTS

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Problem 8-6A

On January 1, 2017, Bonita Industries had Accounts Receivable of $53,100 and Allowance for Doubtful Accounts of $3,600. Bonita Industries prepares financial statements annually. During the year, the following selected transactions occurred.

Jan. 5

Sold $4,500 of merchandise to Rian Company, terms n/30.

Feb. 2

Accepted a $4,500, 4-month, 8% promissory note from Rian Company for balance due.

12

Sold $11,520 of merchandise to Cato Company and accepted Cato’s $11,520, 2-month, 10% note for the balance due.

26

Sold $11,600 of merchandise to Malcolm Co., terms n/10.

Apr. 5

Accepted a $11,600, 3-month, 8% note from Malcolm Co. for balance due.

12

Collected Cato Company note in full.

June 2

Collected Rian Company note in full.

15

Sold $2,100 of merchandise to Gerri Inc. and accepted a $2,100, 6-month, 11% note for the amount due.