Accounting Chapter 9

A claim against the customer created by selling merchandise or services on credit

The relationship between net sales and accounts receivable, computed by dividing the net sales by the average net accounts receivable; measures how frequently during the year the accounts receivable are being converted to cash

The process of analyzing the accounts receivable and classifying them according to various age groupings, with the due date being the base point for determining age

The contra asset account for accounts receivable

The method of accounting for uncollectible accounts that provides an expense for uncollectible receivables in advance of their write-off

The operating expense incurred because of the failure to collect receivables

The method of accounting for uncollectible accounts that recognizes the expense only when accounts are judged to be worthless

A note the maker fails to pay on the due date

The amount that is due at the maturity or due date of a note

The estimated selling price of an item of inventory less any direct costs of disposal, such as sales commissions

A customers written promise to pay an amount and possibly interest at an agreed upon rate

The relationship between sales and accounts receivable, computed by dividing the net accounts receivable at the end of the year by the average daily sales

All money claims against all other entities, including people, business firms, and other organizations

d. trade receivables.

d. current assets.

d. current assets.

b. There is no general rule as to when an account becomes uncollectible. Deciding when an account is uncollectible is not hard and fast. It generally takes multiple factors to confirm that an account is uncollectible.

d. for federal income tax purposes.

c. at the end of each accounting period. The direct write-off method does not accrue bad debt expense in the period the sale is made. It records it at the point of default.

a. Accounts Receivable The correct entry includes a debit to bad debt expense and a credit to the specific customer's accounts receivable account.

c. Direct write-off method

a. the expense of a bad debt is not matched to the period that generated the uncollectible sale amount.

c. total assets will be unchanged. Under the allowance method, when a specific account is written off, the allowance account is debited and the accounts receivable account is credited.

c. debit Allowance for Doubtful Accounts; credit Accounts Receivable.

d. $12,000.

a. The expense is recognized when the account is written off rather than in the period of sale. The direct write-off method does not use an allowance account and is typically used by small companies with few receivables. When an account is deemed uncollectible, it is directly expensed at that point.

c. The result is based on either (1) a percentage of sales or (2) an analysis of receivables. When using the allowance method, the expense is estimated in the period of the sale by using either the percentage of sales method or an analysis of receivables and is recorded in an allowance (contra asset) account. Primary users of the allowance method are large companies and companies with a large amount of receivables.

c. is the same as it would be under the allowance method. The journal entry to record the receipt of cash after the account has been reinstated is the same under both the direct write-off and allowance methods. Cash: debit of 3,650 Accounts Receivable - Connor Young: credit of 3,650

a. the face value of the note plus the interest due to the maturity date.

debit Notes Receivable; credit Accounts Receivable

d. $10,200. The maturity value of a note is the face amount plus interest. This is calculated as $10,000 + [$10,000 × 12% x (60/360)] = $10,200.

c. current assets; balance sheet; liquidity

a. current assets All receivables that are expected to be realized within a year are reported in the current assets section of the balance sheet.

c. either on the face of the financial statements or in the financial statement notes.

d. 6.91 $4,250,000 / [($600,000 + $630,000) / 2] = 6.91

b. None of these choices are correct. a. accounts receivable ending balance. c. accounts receivable beginning balance. d. average daily sales. The denominator in the number of days' sales in receivables calculation is average daily sales.

c. 48.7 $82,500/365 = 226.0; $11,000/226.0 = 48.7, which is the number of days' sales in receivables for Year 2.

c. monthly cash expenses.

d. trade receivables.

a. factoring

d. estimates must be made when recording bad debt expense and it is not possible to know which specific accounts will not be collected.

The direct write-off method is used by all of the following businesses except

b. total assets will decrease.

a. accounts receivable turnover and the number of days' sales in receivables.

d. subtracted from Accounts Receivable

c. $10,300.

c. a debit to Bad Debt Expense for $3,250 under the direct method rather than a debit to Allowance for Doubtful Accounts for $3,250 under the allowance method.

a. Debit Bad Debt Expense, $14,500; credit Allowance for Doubtful Accounts, $14,500. Expenses increase with debits. In addition, $500 represents the credit balance in the Allowance for Doubtful Accounts at the end of the year (before adjustment), and an analysis of accounts in the customer ledger indicates doubtful accounts of $15,000.

a. those that have receivables as a large part of their current assets. the direct write-off method is used by businesses that sell most of their goods and services for cash or MasterCard or Visa.

d. a credit to Allowance for Doubtful Accounts of $10,000.

b. a credit to Allowance for Doubtful Accounts of $3,650.

a. average accounts receivable by average daily sales. Number of Days' Sales in Receivables = Average Accounts Receivable / Average Daily Sales

$100.

d. is an estimate of the length of time the receivables have been outstanding.