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Exam 5: Revenue and Receivables

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Question 41

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Match each statement to the item listed below. -measure the return the company is earning on sales

A) bad debt expense
B) net sales revenue
C) nontrade receivables
D) percentage of credit sales
E) profitability ratios
F) trade receivables

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Question 42

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You are the credit manager at a large retail department store.What steps should you take before deciding to write off a customer's account?

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After giving customers a grace period,yo...

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Question 43

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Match each statement to the item listed below. -arise from transactions not involving inventory (e.g.,interest receivable)

Match each statement to the item listed below. -a way to estimate bad debt expense

This company sells its merchandise only on credit. The following data are available at December 31, Year 1. $\begin{array}{lr}\text { Sales } & \$ 411,000 \\\text { Sales returns and allowances } & 12,000 \\\text { Accounts receivable at January 1, Year 1 } & 89,000 \\\text { Allowance for doubtful accounts at January 1, Year 1 } & 4,100 \\\text { Cash collections during Year 1 } & 385,100 \\\text { Accounts written off as uncollected during Year 1 } & 3,600\end{array}$ -Refer to Abundant Returns.Determine the balance of accounts receivable at December 31,Year 1.

This company sells merchandise only on credit. For the year ended December 31, Year 1, the following data are available: $\begin{array}{lr}\text { Sales } & \$ 1,200,000 \\\text { Sales returns and allowances } & 50,000 \\\text { Accounts receivable — January 1, Year 1 } & 225,000 \\\text { Allowance for doubtful accounts —January 1, Year 1 } & 15,000 \\\text { Collections during Year 1 } & 1,050,000 \\\text { Accounts written off as uncollected during Year 1 } & 10,000\end{array}$ -Refer to Aardvark Resale.Assume that the company estimates bad debts at 2% of net credit sales. A) What amount will the company record as bad debts expense for Year 1? B) How much is the net realizable value of accounts receivable reported an the compary's balance sheet at December 31 Year 1 ?

A(n)____________________ categorizes the various accounts receivable amounts by the length of time outstanding.

This company sells its merchandise only on credit. The following data are available at December 31, Year 1. $\begin{array}{lr}\text { Sales } & \$ 411,000 \\\text { Sales returns and allowances } & 12,000 \\\text { Accounts receivable at January 1, Year 1 } & 89,000 \\\text { Allowance for doubtful accounts at January 1, Year 1 } & 4,100 \\\text { Cash collections during Year 1 } & 385,100 \\\text { Accounts written off as uncollected during Year 1 } & 3,600\end{array}$ -Refer to Abundant Returns.The firm estimates that bad debts could be 2% of net sales. A) What amount will the company recognize as bad debts expense for the year? B) Assume that the company has a balance of accounts receivable of $\$ 108,900$ , and on allowance for doubtful accounts of $\$ 820$ . What will be the net realizable value once the adjustment from (Part $A$ ) is made?

Action Signs recorded credit sales of $10,000 on the gross method.Terms are 2/20,n/30.How would the entry to this sale be recorded?

What is the effect of an unacceptably long collection period for accounts receivable?

The terms "realized" and "realizable" mean that the selling price is fixed and determinable and collectability is reasonably assured.

A&B Foods Data for the year ended December 31, Year 1, are presented below. $\begin{array}{lr}\text { Sales (100\% on credit) } & \$ 2,100,000 \\\text { Sales returns } & 150,000 \\\text { Accounts receivable (December 31, Year 1) } & 420,000 \\\text { Allowance for doubtful accounts } & \\\quad \text { (before adjustment at December 31, Year 1) } & 25,000 \\\text { Estimated amount of uncollected accounts based on an aging analysis } & 75,000\end{array}$ -Refer to the figure A&B Foods.If the company uses 4% of net credit sales to estimate its bad debts,what will be the balance in the allowance for doubtful accounts after the adjustment for bad debts?

The amount of interest paid is a function of three variables: the amount borrowed,the interest rate,and the length of the loan period.

Advanced Technology reported the following on its balance sheet at December 31,Year 1: Accounts recevable, less allowance far doubteul accounts of $\$ 20,500$ $\quad$ $\quad$$\$ 580,200$ A) What is the net realizable value of the company's accounts receivable? B) What is the balance of the accounts receivable account? C) Are you able to determine whether the company uses the allowance method or the direct write off method for bad debts? Why or why not?

What should a company do to improve its accounts receivable turnover rate?

Alco Roofing Company's beginning accounts receivable were $200,000.Ending accounts receivable were $270,000.During the period,credit sales totalled $570,000.How much cash was collected from customers?

Which of the following is an accurate description of the allowance for doubtful accounts?

All Star Auto All Star Auto has an accounts receivable balance after posting net collections from customers of $180,000. The customers took advantage of sales discounts of $15,000. Management aged the accounts receivable and estimate for uncollected account percentages as follows: $\begin{array}{ll}\$ 90,000 & \text { Current at } 2 \% \\\$ 50,000 & 1-30 \text { days past due at } 5 \% \\\$ 30,000 & 31-60 \text { days past due at } 10 \% \\\$ 10,000 & 60+\text { days past due at } 25 \%\end{array}$ -Refer to the figure All Star Auto.What is the net realizable value of the accounts receivable?

The following comparative financial statements for the years ended December 31,Year 2 and Year 1 are provided for Air Plus Company: $\begin{array} { l r r } \text { Balance Sheet: } & \text { Year 2 } & \text { Year 1 } \\\quad \text { Cash and cash equivalents } & \$ 87,000 & \$ 71,600 \\\text { Accounts receivables, less allowance for doubtful } & & \\\quad \text { accounts of \$90 (Year 2) and \$82 (Year 1) } & 3,800 & 2,500 \\\text { Notes receivable } & 15,000 & 20,000 \\& & \\\text { Income Statement: } \\ \quad \text { Net sales for the year } & \$ 9,700 & \$ 8,800 \\\text { Net income for the year } & 920 & 1,050\end{array}$ Answer these questions concerning the company's receivables: A) What is the gross amount of accounts receivable at December 31, Year 2? Why is this amount different from the amount of receivables shown in the Year 2 column of the balance sheet? B) What is the net realizable value of accounts receivable at December 31, Year 2? What does this amount represent? C) How should accounts receivable be classified on a classified balance sheet? Why?

Which of the following would occur if a company factored $2,500,000 of receivables with a 2% fee?