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Exam 7: Accounting for Receivables

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Question 71

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Vailes Services Company loaned $6,000 on August 1,2016 to an individual who issued Vailes a promissory note with 6% interest.The issuer of the note repaid the principal and interest on July 30,2017.How did the August 2016 event affect Vailes's statement of cash flows? How did the July 2017 event affect it?

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Vailes would show a $6,000 outflow for i...

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Question 72

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In the first year of operations,2016,Ralph's Repair Service recognized $480,000 of service revenue on account.The ending accounts receivable balance was $88,000.Ralph estimates that 2% of sales on account will not be collected.During the year,Ralph wrote off a $200 receivable that was determined to be uncollectible.Assume there were no other transactions affecting accounts receivable. Required: a)What amount of cash was collected in 2016? b)What amount of uncollectible accounts expense was recognized in 2016? c)What will be Ralph's net realizable value of receivables on the December 31,2016 balance sheet?

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a)$391,800 cash coll...

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Question 73

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Indicate whether each of the following statements is true or false. _____ a)Most companies expect to receive the full face value of their receivables. _____ b)The estimated amount of uncollectible accounts is called the net realizable value. _____ c)The direct write-off method of accounting for uncollectible accounts does not require the computation of the net realizable value of accounts receivable. _____ d)The practice of reporting the net realizable value of receivables is the result of using the allowance method of accounting for uncollectible accounts. _____ e)The materiality principle requires the computation of net realizable value for a company's liabilities.

The year-end adjusting entry to accrue interest on a note receivable is an asset source transaction.

Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.Enter only one letter for each element.You do not need to enter amounts. -Garrison Co.uses the allowance method to account for uncollectible accounts.Show how the adjusting entry to recognize uncollectible accounts expense would affect the elements of Garrison's financial statements.

The longer an account receivable has been outstanding,the less likely it is to be collected.

Rosewood Company made a loan of $16,000 to one of the company's employees on April 1,2016.The one-year note carried a 6% rate of interest.The amount of interest revenue that Rosewood would report in 2016 and 2017,respectively would be: 2016 2017

Glebe Company accepted a credit card account receivable in exchange for $1,100 of services provided to a customer.The credit card company charges a 5% service charge.The collection of cash from the credit card company when it settles the account receivable balance will act to:

Which of the following businesses would most likely have the longest operating cycle?

Which of the following general journal entries would be used to recognize $7,500 of uncollectible accounts expense under the direct write-off method?

Kona Espresso Machine Company makes many of its sales on account.For 2016,its beginning balance in Accounts Receivable was $190,000.Sales on account for the year were $904,000,and the amount of cash collected from its accounts receivable was $829,900.During the year,uncollectible accounts of $10,100 were written off.What was the ending balance in Accounts Receivable?

The average number of days to collect accounts receivable is computed by dividing:

On January 1,2016,the Accounts Receivable balance was $37,000 and the balance in the Allowance for Doubtful Accounts was $2,800.On January 15,2016 an $800 uncollectible account was written-off.The net realizable value of accounts receivable immediately after the write-off is:

How is the number of days to collect accounts receivable computed? What information does this ratio provide?

Use the following to answer questions On January 1,2016 Grande Company had a $16,000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account.During 2016,Grande provided $104,000 of service on account.The company collected $97,000 cash from accounts receivable.Uncollectible accounts are estimated to be 2% of sales on account. -The amount of uncollectible accounts expense recognized on the 2016 income statement is:

The primary reason for a business to allow customers to purchase goods or services on account is to:

Flagler Corporation uses the direct write-off method of accounting for uncollectible accounts.On February 2,2016,after making numerous efforts to collect $9,600 from a customer,the company wrote off the account.On April 1,2016,the customer paid $8,000 to Flagler.Make the appropriate entries to 1)write off the account;2)reestablish the account receivable;and 3)to record the collection.

The accounting records of the Harris and Schubert Companies contained the following account balances: Select the true statement from the following options:

The following information is available from Avalon,Inc.for the year 2016. Required: Calculate the following,rounding your answers to one decimal place: a)Avalon's inventory turnover for 2016. b)The average number of days to sell inventory for the year. c)The accounts receivable turnover. d)The average number of days to collect accounts receivable. e)Avalon's operating cycle. f)Avalon's cash flow from sales.

A company that uses the allowance method to account for uncollectible accounts