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Questions and Answers
What is the total amount of cash and notes receivable collected in the journal entry?
What is the total amount of cash and notes receivable collected in the journal entry?
What is the interest revenue earned from the notes receivable?
What is the interest revenue earned from the notes receivable?
What does the receivables turnover ratio measure?
What does the receivables turnover ratio measure?
What is the formula for calculating the receivables turnover ratio?
What is the formula for calculating the receivables turnover ratio?
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What does the average collection period measure?
What does the average collection period measure?
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What is the purpose of estimating uncollectible accounts?
What is the purpose of estimating uncollectible accounts?
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What is the primary reason companies are required to estimate future uncollectible accounts?
What is the primary reason companies are required to estimate future uncollectible accounts?
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What is the result of recording an estimate of uncollectible accounts?
What is the result of recording an estimate of uncollectible accounts?
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What is the basis of the estimate of bad debts in the percentage-of-receivables method?
What is the basis of the estimate of bad debts in the percentage-of-receivables method?
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What is another name for the percentage-of-receivables method?
What is another name for the percentage-of-receivables method?
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What is the purpose of estimating uncollectible accounts?
What is the purpose of estimating uncollectible accounts?
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Which of the following methods is used to estimate uncollectible accounts?
Which of the following methods is used to estimate uncollectible accounts?
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What is the effect of estimating uncollectible accounts on the financial statements?
What is the effect of estimating uncollectible accounts on the financial statements?
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What is the primary goal of estimating uncollectible accounts?
What is the primary goal of estimating uncollectible accounts?
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What is a characteristic of the aging method?
What is a characteristic of the aging method?
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Based on the illustration, what is the estimated percentage of uncollectible accounts for receivables that are 61-120 days past due?
Based on the illustration, what is the estimated percentage of uncollectible accounts for receivables that are 61-120 days past due?
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What is the total amount of estimated uncollectible accounts for Kimzey's accounts receivable?
What is the total amount of estimated uncollectible accounts for Kimzey's accounts receivable?
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The percentage-of-receivables method is also known as the:
The percentage-of-receivables method is also known as the:
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What is the basis for estimating uncollectible accounts using the aging method?
What is the basis for estimating uncollectible accounts using the aging method?
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What is the advantage of the aging method over the percentage-of-receivables method?
What is the advantage of the aging method over the percentage-of-receivables method?
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According to the illustration, what is the total amount of Kimzey's accounts receivable?
According to the illustration, what is the total amount of Kimzey's accounts receivable?
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What is the percentage of uncollectible accounts for receivables that are not yet due?
What is the percentage of uncollectible accounts for receivables that are not yet due?
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What is the estimated amount of uncollectible accounts for receivables that are more than 120 days past due?
What is the estimated amount of uncollectible accounts for receivables that are more than 120 days past due?
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The aging method is used to estimate:
The aging method is used to estimate:
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Study Notes
Accounts Receivable and Bad Debts
- Companies must estimate future uncollectible accounts and record estimates in the current year.
- Estimated uncollectible accounts reduce assets (accounts receivable) and increase expenses (bad debt expense).
Estimating Uncollectible Accounts
- Two methods can be used: percentage-of-receivables method and aging method.
- Percentage-of-receivables method bases the estimate of bad debts on the balance sheet amount (accounts receivable).
- Aging method considers the age of receivables, with older accounts being more likely uncollectible.
Allowance for Uncollectible Accounts
- The allowance is estimated based on the balance sheet amount or the age of receivables.
- The estimated amount is then used to reduce assets (accounts receivable) and increase expenses (bad debt expense).
Receivables Analysis
- Receivables Turnover Ratio: the number of times during a year the average accounts receivable balance is collected.
- Average Collection Period: the number of days the average accounts receivable balance is outstanding.
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Description
Learn about estimating bad debts in accounting, including the percentage-of-receivables and aging methods. Understand how to record estimates and their impact on assets and expenses.
