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The approach that considers the age of various accounts receivables to estimate uncollectible accounts is referred to as the______method of accounts receivable.
The approach that considers the age of various accounts receivables to estimate uncollectible accounts is referred to as the______method of accounts receivable.
aging
At the beginning of the year, Gerta Company's allowance account has a credit balance of $10,000. What does this indicate?
At the beginning of the year, Gerta Company's allowance account has a credit balance of $10,000. What does this indicate?
estimate of uncollectible accounts was too high.
When is the direct write-off method used?
When is the direct write-off method used?
uncollectible accounts are not anticipated or are immaterial.
What journal entry does Mark record when he debits Bad Debt Expense and credits Accounts Receivable?
What journal entry does Mark record when he debits Bad Debt Expense and credits Accounts Receivable?
How should Raven report a 3-year note receivable from a customer in its financial statements?
How should Raven report a 3-year note receivable from a customer in its financial statements?
What entry is required on Oak Corp's books on March 5 for the $100,000 note from Pine?
What entry is required on Oak Corp's books on March 5 for the $100,000 note from Pine?
Where is a note receivable reported in the balance sheet?
Where is a note receivable reported in the balance sheet?
What is the normal balance of notes receivable?
What is the normal balance of notes receivable?
What comparative advantages do notes receivables possess compared to other receivables? (Select all that apply.)
What comparative advantages do notes receivables possess compared to other receivables? (Select all that apply.)
What is the formula for the receivables turnover ratio?
What is the formula for the receivables turnover ratio?
An ____ is the legal right to receive cash from a credit sale and represents an asset of the company.
An ____ is the legal right to receive cash from a credit sale and represents an asset of the company.
Sales to customers in which the customers pay within 30 to 60 days are referred to as:
Sales to customers in which the customers pay within 30 to 60 days are referred to as:
An account receivable is normally classified as?
An account receivable is normally classified as?
Payment for credit sales are typically due in?
Payment for credit sales are typically due in?
The formula to compute the receivables turnover ratio is net credit sales divided by?
The formula to compute the receivables turnover ratio is net credit sales divided by?
For a typical credit sale, the seller records revenue?
For a typical credit sale, the seller records revenue?
The amount of cash owed to a company by its customers from the sale of goods or services is referred to as?
The amount of cash owed to a company by its customers from the sale of goods or services is referred to as?
Trade receivable is another term for?
Trade receivable is another term for?
When a business provides services to a customer, and the customer promises to pay later, this is referred to as?
When a business provides services to a customer, and the customer promises to pay later, this is referred to as?
Glasser Corp. provided $20,000 of services on account. The account that should be credited is?
Glasser Corp. provided $20,000 of services on account. The account that should be credited is?
Accounts receivable are normally classified?
Accounts receivable are normally classified?
Which of the following are classified as receivables?
Which of the following are classified as receivables?
Net revenues is calculated as total revenues minus which of the following items?
Net revenues is calculated as total revenues minus which of the following items?
The two conditions that must exist for a sale and the related receivable to be recognized are?
The two conditions that must exist for a sale and the related receivable to be recognized are?
A trade discount is a reduction from the list price, which is used to:
A trade discount is a reduction from the list price, which is used to:
Another term sometimes used for accounts receivable is?
Another term sometimes used for accounts receivable is?
The list price in Boyton's catalog indicates that Product A sells for $3,000, with a trade discount of 5%. At what amount should Boyton record the sale and related accounts receivable?
The list price in Boyton's catalog indicates that Product A sells for $3,000, with a trade discount of 5%. At what amount should Boyton record the sale and related accounts receivable?
Flounder Corp. provided $12,000 of services on account. The entry to record this transaction would include a debit to?
Flounder Corp. provided $12,000 of services on account. The entry to record this transaction would include a debit to?
Which of the following items are classified as receivables?
Which of the following items are classified as receivables?
When merchandise is returned for a refund or for credit to be applied to other purchases, the situation is called a(n)?
When merchandise is returned for a refund or for credit to be applied to other purchases, the situation is called a(n)?
Total revenues less discounts, returns, and allowances are referred to as?
Total revenues less discounts, returns, and allowances are referred to as?
A trade discount is?
A trade discount is?
A sales return occurs when?
A sales return occurs when?
A sales allowance is defined as?
A sales allowance is defined as?
A trade discount is recognized by?
A trade discount is recognized by?
A sales allowance ____ the amount owed by the customer for merchandise that is _____ by the customer.
A sales allowance ____ the amount owed by the customer for merchandise that is _____ by the customer.
Warner Corp. sells goods on account for $10,000 on April 2. On April 20, the customer returns $3,000 of the merchandise. What is the entry Warner will make on April 20 when the goods are returned?
Warner Corp. sells goods on account for $10,000 on April 2. On April 20, the customer returns $3,000 of the merchandise. What is the entry Warner will make on April 20 when the goods are returned?
When a customer returns a product for a refund, in which account is the entry recorded?
When a customer returns a product for a refund, in which account is the entry recorded?
The financial statement effects of recording an allowance for estimated sales returns are that?
The financial statement effects of recording an allowance for estimated sales returns are that?
The Sales Returns and Sales Allowances accounts are classified as?
The Sales Returns and Sales Allowances accounts are classified as?
Kilroy Corporation provides services to a customer for $1,000. The customer complained that there was a slight defect in the service. Kilroy granted the customer a $50 credit. Kilroy will record this adjustment to the sales price with a?
Kilroy Corporation provides services to a customer for $1,000. The customer complained that there was a slight defect in the service. Kilroy granted the customer a $50 credit. Kilroy will record this adjustment to the sales price with a?
Adrian Corp. sells goods on account for $100,000 on May 1. The customer paid for the goods on May 10. On May 15, the customer returns $40,000 of the merchandise. The entry Adrian makes on May 15 will include the following?
Adrian Corp. sells goods on account for $100,000 on May 1. The customer paid for the goods on May 10. On May 15, the customer returns $40,000 of the merchandise. The entry Adrian makes on May 15 will include the following?
A cash discount representing a reduction in the amount to be paid by a credit customer if the customer pays within a specified period of time is also referred to as?
A cash discount representing a reduction in the amount to be paid by a credit customer if the customer pays within a specified period of time is also referred to as?
York Inc. records a year-end adjustment for estimated sales returns and allowances. As a result of this entry, York's financial statements will change as follows?
York Inc. records a year-end adjustment for estimated sales returns and allowances. As a result of this entry, York's financial statements will change as follows?
Sales Returns and Sales Allowances are ___________ accounts and require a debit entry to increase the account.
Sales Returns and Sales Allowances are ___________ accounts and require a debit entry to increase the account.
A company makes a sale on terms 2/10, n/30. What does this mean?
A company makes a sale on terms 2/10, n/30. What does this mean?
Abby Fashions sells a suit to a customer for $600 on account. The day after the sale, the customer discovers that the jacket has a small stain on the back. Abby Fashions grants the customer a $60 credit. Abby Fashions will record:
Abby Fashions sells a suit to a customer for $600 on account. The day after the sale, the customer discovers that the jacket has a small stain on the back. Abby Fashions grants the customer a $60 credit. Abby Fashions will record:
Bell provides $500 of services to customers on account with terms 3/10, n/30. The Service Revenue account is credited for $500. If the customer pays within 10 days, Bell will record which of the following?
Bell provides $500 of services to customers on account with terms 3/10, n/30. The Service Revenue account is credited for $500. If the customer pays within 10 days, Bell will record which of the following?
Which of the following is a discount in the amount to be paid if the customer pays within a specified time period?
Which of the following is a discount in the amount to be paid if the customer pays within a specified time period?
The sales discount account is classified as a(n)?
The sales discount account is classified as a(n)?
Claire provides $100 of services to customers on account with terms 2/10, n/30. The Service Revenue account is credited for $100. If the customer pays within 10 days, Claire will record which of the following?
Claire provides $100 of services to customers on account with terms 2/10, n/30. The Service Revenue account is credited for $100. If the customer pays within 10 days, Claire will record which of the following?
Fog Corporation sells $5,000 goods on account. Salaries expense was $3,000. Sales returns were $100, and sales discounts were $300. Net sales were?
Fog Corporation sells $5,000 goods on account. Salaries expense was $3,000. Sales returns were $100, and sales discounts were $300. Net sales were?
Relay Corporation provides services with a normal price of $105,000 and a trade discount of $5,000. Terms are 1/10, n/30 and the customers pay within 10 days. The net service revenue is?
Relay Corporation provides services with a normal price of $105,000 and a trade discount of $5,000. Terms are 1/10, n/30 and the customers pay within 10 days. The net service revenue is?
Kim Corporation sells goods to a customer on account for $1,000, terms 2/10, n/30. When the customer pays on the 20th day, Kim will record which of the following?
Kim Corporation sells goods to a customer on account for $1,000, terms 2/10, n/30. When the customer pays on the 20th day, Kim will record which of the following?
James Corporation sells $1,000 goods on account. Sales returns were $40, and sales allowances were $50. Sales discounts for the period were $30. Net sales are?
James Corporation sells $1,000 goods on account. Sales returns were $40, and sales allowances were $50. Sales discounts for the period were $30. Net sales are?
A company that expects that some of its customers will not pay the agreed-upon sales price must utilize the?
A company that expects that some of its customers will not pay the agreed-upon sales price must utilize the?
Gammy Corporation provides services with a normal price of $800,000 and a trade discount of $100,000. Terms are 2/10, n/30 and the customers pay within 10 days. The net service revenue is?
Gammy Corporation provides services with a normal price of $800,000 and a trade discount of $100,000. Terms are 2/10, n/30 and the customers pay within 10 days. The net service revenue is?
The allowance method estimates?
The allowance method estimates?
True or false: Accounts receivable not expected to be collected should be counted in the assets of the company until they are later written off.
True or false: Accounts receivable not expected to be collected should be counted in the assets of the company until they are later written off.
Accounts receivable are typically classified as current assets because?
Accounts receivable are typically classified as current assets because?
The allowance method is required by?
The allowance method is required by?
The journal entry to record bad debt expense includes?
The journal entry to record bad debt expense includes?
Under the allowance method, companies estimate _____ uncollectible amounts and report those estimates in the _____ year.
Under the allowance method, companies estimate _____ uncollectible amounts and report those estimates in the _____ year.
Recording bad debt expense:
Recording bad debt expense:
Receivables not expected to be collected should not be counted in assets of the company.
Receivables not expected to be collected should not be counted in assets of the company.
The account 'Allowance for Uncollectible Accounts' is classified as?
The account 'Allowance for Uncollectible Accounts' is classified as?
The difference between total accounts receivable and the allowance for uncollectible accounts is referred to as?
The difference between total accounts receivable and the allowance for uncollectible accounts is referred to as?
Tudor Corp. has an ending balance in the accounts receivable account of $20,000. Tudor recorded bad debt expense of $1,000. Tudor has an ending balance in the allowance for uncollectible accounts of $2,000. What is the net accounts receivable balance?
Tudor Corp. has an ending balance in the accounts receivable account of $20,000. Tudor recorded bad debt expense of $1,000. Tudor has an ending balance in the allowance for uncollectible accounts of $2,000. What is the net accounts receivable balance?
To record an estimate for future bad debts at the end of the period, an adjustment would be made with a credit to?
To record an estimate for future bad debts at the end of the period, an adjustment would be made with a credit to?
What are the financial statement effects of recording bad debt expense using the allowance method?
What are the financial statement effects of recording bad debt expense using the allowance method?
The allowance for uncollectible accounts is a contra account to?
The allowance for uncollectible accounts is a contra account to?
The term net accounts receivable refers to?
The term net accounts receivable refers to?
Allowance for Uncollectible Accounts has a credit balance because it is a(n) _____ account.
Allowance for Uncollectible Accounts has a credit balance because it is a(n) _____ account.
Prime Corp. has an ending balance in the accounts receivable account of $100,000. Prime recorded bad debt expense of $3,000. Prime has an ending balance in the allowance for uncollectible accounts of $7,000. What is the net accounts receivable balance?
Prime Corp. has an ending balance in the accounts receivable account of $100,000. Prime recorded bad debt expense of $3,000. Prime has an ending balance in the allowance for uncollectible accounts of $7,000. What is the net accounts receivable balance?
If the allowance for uncollectible accounts is 25% of year-end accounts receivable, this might indicate?
If the allowance for uncollectible accounts is 25% of year-end accounts receivable, this might indicate?
Ophelia Inc. just learned that Patton Inc., one of its customers with an outstanding accounts receivable balance, filed for bankruptcy. Assuming that the company utilizes the allowance method, Ophelia should record a(n):
Ophelia Inc. just learned that Patton Inc., one of its customers with an outstanding accounts receivable balance, filed for bankruptcy. Assuming that the company utilizes the allowance method, Ophelia should record a(n):
Shannon Corp. uses the aging method to account for bad debt expense. Shannon determines that a customer account of $10,000 should be written off as uncollectible. The write-off of the account will include?
Shannon Corp. uses the aging method to account for bad debt expense. Shannon determines that a customer account of $10,000 should be written off as uncollectible. The write-off of the account will include?
The account 'Allowance for Uncollectible Accounts' normally has a?
The account 'Allowance for Uncollectible Accounts' normally has a?
Pixie Inc. writes off a specific accounts receivable. If Pixie is using the allowance method, the write-off will _____ net income.
Pixie Inc. writes off a specific accounts receivable. If Pixie is using the allowance method, the write-off will _____ net income.
The estimated expense for accounts that may not be collected is referred to as?
The estimated expense for accounts that may not be collected is referred to as?
The write-off of a specific accounts receivable ______ total assets reported on the balance sheet.
The write-off of a specific accounts receivable ______ total assets reported on the balance sheet.
A high ratio of allowance for uncollectible accounts to total accounts receivable can indicate?
A high ratio of allowance for uncollectible accounts to total accounts receivable can indicate?
The Accounts Receivable account is reduced when the seller?
The Accounts Receivable account is reduced when the seller?
Gwendolyn uses the allowance method to account for uncollectible receivables. Gwendolyn should record _____ bad debt expense ______.
Gwendolyn uses the allowance method to account for uncollectible receivables. Gwendolyn should record _____ bad debt expense ______.
Joyce Corp. uses the percentage-of-receivables method to account for bad debt expense. Joyce determines that a customer account of $20,000 should be written off as uncollectible. The write-off of the account will include which of the following entries?
Joyce Corp. uses the percentage-of-receivables method to account for bad debt expense. Joyce determines that a customer account of $20,000 should be written off as uncollectible. The write-off of the account will include which of the following entries?
When an account previously written off is collected in full, the entry to reverse the previous write-off would require which of the following?
When an account previously written off is collected in full, the entry to reverse the previous write-off would require which of the following?
When the allowance method is used, the write-off of an uncollectible account?
When the allowance method is used, the write-off of an uncollectible account?
Cobalt Corp. uses the allowance method to account for bad debts. If Cobalt writes off an account for $3,000, what is the effect on the balance sheet?
Cobalt Corp. uses the allowance method to account for bad debts. If Cobalt writes off an account for $3,000, what is the effect on the balance sheet?
When an account previously written off is collected in full, which is required to ensure the accounting for the complete payment history of the customer?
When an account previously written off is collected in full, which is required to ensure the accounting for the complete payment history of the customer?
The percentage-of-receivables approach to measuring bad debt expense is referred to as _____ method.
The percentage-of-receivables approach to measuring bad debt expense is referred to as _____ method.
With the allowance method, bad debt expense is recorded?
With the allowance method, bad debt expense is recorded?
Planters Corp. wrote off a customer's uncollectible account in April. In the following month, Planters collected from the customer in full. The entry to reinstate the account would require a?
Planters Corp. wrote off a customer's uncollectible account in April. In the following month, Planters collected from the customer in full. The entry to reinstate the account would require a?
For accounts receivable, the longer an account is outstanding,
For accounts receivable, the longer an account is outstanding,
Compared to other methods of estimating uncollectible accounts, the aging of accounts receivables method tends to?
Compared to other methods of estimating uncollectible accounts, the aging of accounts receivables method tends to?
Amend Inc. debited Accounts Receivable and credited Allowance for Uncollectible Accounts to reestablish an account previously written off. Amend Inc. should also debit _______ and credit _______.
Amend Inc. debited Accounts Receivable and credited Allowance for Uncollectible Accounts to reestablish an account previously written off. Amend Inc. should also debit _______ and credit _______.
The percentage-of-receivables method of estimating bad debt applies ____ to _____.
The percentage-of-receivables method of estimating bad debt applies ____ to _____.
Bad debt expense is reported on the and is classified as an operating expense.
Bad debt expense is reported on the and is classified as an operating expense.
An ______ balance before adjustment indicates that the estimate of uncollectible accounts at the beginning of the year may have been too high.
An ______ balance before adjustment indicates that the estimate of uncollectible accounts at the beginning of the year may have been too high.
An aging schedule classifies accounts receivable based on?
An aging schedule classifies accounts receivable based on?
At the beginning of the year, Blocker Company's allowance account has a debit balance of $10,000. This may indicate that the?
At the beginning of the year, Blocker Company's allowance account has a debit balance of $10,000. This may indicate that the?
Study Notes
Receivables Turnover Ratio
- Receivables turnover ratio = Net credit sales / Average accounts receivable
- Measures how efficiently a company collects revenue from credit sales.
Accounts Receivable
- Represents a legal right to receive cash from customers and is classified as an asset on the balance sheet.
- Trade receivable is another term for accounts receivable.
- Typically classified as current assets, as they are expected to be converted to cash within one year.
Credit Sales
- Occur when customers pay within 30 to 60 days.
- Represent sales on account.
Revenue Recognition
- Revenue is recorded at the point of delivery when goods or services are provided.
- Conditions for recognizing a sale include the probability of collection and the delivery of goods/services.
Sales Returns and Allowances
- Sales return occurs when a customer returns purchased merchandise for a refund.
- Sales allowance is when a partial refund is issued for a product defect, while the customer retains the merchandise.
- These accounts are classified as contra revenue accounts.
Discounts and Allowances
- Trade discounts reduce the list price for various purposes, such as quantity discounts and price adjustments.
- Cash discounts (sales discounts) decrease the payable amount if early payment is made.
Bad Debt Expense
- Reflects expected uncollectible accounts and is estimated at the end of the period.
- Recorded using the allowance method, which creates a contra asset account for uncollectibles.
Allowance for Uncollectible Accounts
- This account has a credit balance and reduces total accounts receivable reported on the balance sheet.
- The net accounts receivable balance is obtained by subtracting the allowance for uncollectible accounts from total accounts receivable.
Effects of Uncollectible Accounts and Write-offs
- Write-offs do not affect total assets when using the allowance method.
- If a previously written-off account is collected, it requires reinstating accounts receivable and recording payment.
Accounting Methods
- The aging method estimates uncollectibles based on account age; it is often more accurate than other methods.
- Direct write-off method records uncollectibles when they become bad, typically for immaterial amounts.
Notes Receivable
- Notes receivable are recorded as noncurrent assets if they extend beyond one year.
- They offer a higher likelihood of collectibility and often bear interest compared to other receivables.
Financial Statement Impacts
- Recording bad debt expense decreases assets and net income while increasing expenses.
- Allowance adjustments are necessary for proper reporting of expected uncollectibles and maintaining accurate financial statements.
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Test your knowledge of key accounting concepts with these flashcards from ACCT 201. Cover essential terms like receivables turnover ratio and accounts receivable. Perfect for students to reinforce their understanding in a quick and interactive way.
