Questions and Answers
What do receivables represent?
Includes all money claims against other entities.
Using the direct write-off method, what is the journal entry when an account receivable is determined to be uncollectible?
Debit to Bad Debt Expense.
What would the journal entry to reinstate the receivable include after an uncollectible account is later collected?
Credit to Bad Debt Expense.
Under the allowance method for uncollectible accounts, what is included in the journal entry to record the estimate of uncollectible accounts?
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What does the journal entry to write off an account receivable include under the allowance method?
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What is the interest on a $5,400, 3%, 45-day note?
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What does the journal entry to record the adjusting entry for accrued interest on a note receivable include?
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What do generally accepted accounting principles (GAAP) require for companies with a large amount of receivables?
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The __________ records bad debt expense only when an account is determined to be worthless.
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How is accounts receivable classified on the balance sheet?
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Where are noncurrent receivables reported on the balance sheet?
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The allowance for doubtful accounts is reported as a(n) __________ on the balance sheet.
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All receivables that are expected to be realized in cash within a year are reported in the __________ section of the balance sheet.
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How is the accounts receivable turnover computed?
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Which account is used only with the allowance methods of accounting for uncollectible accounts receivable?
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Study Notes
Receivables Overview
- Receivables represent all money claims against other entities; classified as accounts receivable, notes receivable, or other receivables.
- Accounts receivable is a current asset on the balance sheet.
Direct Write-off Method
- When an account is uncollectible, such as a $2,000 account from J.P. Moore, the entry includes a debit to Bad Debt Expense.
- If previously written-off accounts are collected, the reinstatement includes a credit to Bad Debt Expense.
Allowance Method
- Under the allowance method, to record estimated uncollectible accounts, a credit is made to Allowance for Doubtful Accounts.
- To write off an uncollectible account, the journal entry includes a credit to Accounts Receivable.
Interest on Notes Receivable
- The interest calculation on a $5,400 note at 3% for 45 days totals $20.25.
- Adjusting entries for accrued interest include a credit to Interest Revenue.
Accounting Principles and Definitions
- GAAP mandates using the allowance method for companies with significant receivables.
- The direct write-off method records bad debt expense only when an account is deemed worthless.
Balance Sheet Classifications
- Noncurrent receivables fall under Investments on the balance sheet.
- The allowance for doubtful accounts is reported as a deduction from accounts receivable.
- All receivables expected to be realized in cash within one year are categorized under Current Assets.
Accounts Receivable Turnover
- Accounts receivable turnover is calculated by dividing sales by average accounts receivable.
Exclusive Accounts
- Allowance for Doubtful Accounts is used exclusively with the allowance method of accounting for uncollectible accounts receivable.
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Description
Prepare for your ACCT 101 Exam 3 with this comprehensive study guide featuring flashcards. Each card covers essential concepts such as receivables classification and methods for handling uncollectible accounts. Perfect for reinforcing your understanding of accounting principles.
