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  RECEIVABLES TEORI A 1.   What determines whether receivables are current or noncurrent assets? 2.   What is the effect of the write-off of uncollectible accounts (using the allowance method) on ( a ) net income and ( b ) net accounts receivable? 3.   What is the primary difference between accounts receivable and notes receivable? 4.   Describe how (and when) the direct write-offmethod accounts for uncollectible accounts. What are thedisadvantages of this method?   Answer: 1.   The factor which determine whether receivables said as current or non-current assets is the term of that receivables. When a receivable has more than 1 year or 1 accounting period term, that receivable counted as non-current assets, and otherwise. 2.   a. The effect of the write off uncollectible accounts on net income is the reduction of net income.  b. The effect of the write off uncollectible accounts on net accounts receivable is the reduction of net accounts receivable. 3.   4. The direct write-off method is used when receivable are determined uncollectible. The First disadvantages is no matching, second receivable not stated at cash reliazable value, third not acceptable for financial reporting.   SOAL 1A Wholesale WarehouseStores sold $950,000 in merchandise during 2011. Of this amount, $400,000 was on credit with terms2/10, n/30 (75 percent of these amounts were paid within the discount period), $500,000 was paidwith credit cards (there was a 3 percent credit card discount), and the rest was paid in cash. OnDecember 31, 2011, the Accounts Receivable  balance was $80,000. The beginning balance in the Allowance for Doubtful Accounts was $9,000 and $6,000 of bad debts was written off during the year. Required: 1. Compute net sales for 2011, assuming that sales and credit card discounts are treated ascontra-revenues. 2. Assume that Wholesale uses the percentage of sales method for estimating bad debt expense and that it estimates that 2 percent of credit sales will produce bad debts. Record bad debt expense for 2011. 3. Assume instead that Wholesale uses the aging of accounts receivable method and that it estimatesthat $10,000 worth of current accounts is uncollectible. Record bad debt expense for 2011.  Given: Sales = $950,000 Accounts Receivables = $400,000 The difference Accounts Receivable Notes Receivable Collectible Probability Low, due to the age of receivable High Liquidity Liquid More Liquid   Sales Discount = 400,000 x 75/100 x 2/100 = $6,000 Accounts Receivable  –   Credit Card = $500,000 Credit Card Expense = 3/100 x 500,000 = $15,000 Cash = $50,000 Answer: 1.    Net sales = Sales  –   Sales Discount  –   Credit Card Expense = 950,000  –   6,000  –   15000 = 929,000 2.   Bad Debt Expense 15,000 Allowance for Doubtful Account 15,000 (2% x 900,000 = 18,000-3000) 3.   Bad debt Expense 7,000 Allowance for Doubtful Account 7,000 SOAL 2A Deby Shoes sold $950,000 in merchandise on credit during 2009. During the same year,DS determined that a $500 account balance owed by a deceased customer (R. Cuter) was uncollectible. Required: 1. Prepare the journal entry to record the write- off of R. Cuter’s account receivable.  2. Assume that DS uses the aging of accounts receivable method and has collected the information presented in the aging schedule that follows. As of December 31, 2009, the Allowance for Doubtful Accounts had an unadjusted credit balance of $3,000. Compute the desired balance foruncollectible accounts and prepare a journal entry to record the bad debt expense.  Number of days unpaid Total 0-30 31-60 61-90 >90 Total receivables $171,000 $50,000 $80,000 $40,000 $1,000 X Esimated bad debt % X 1% X 5% X 15% X 50% =Estimated uncollectible 3. Assume DS reported net accounts receivable of $160,000 on December 31, 2009, and $167,586 on December 31, 2008. Calculate the receivables turnover ratio for 2009. 4. If the receivables turnover ratio was 6.4 in 2008, what was the number of days to collect in 2008? Given your calculations in requirement 3, were SDS collections in 2009 faster or slower thancollections in 2008?  5. Assume that DS uses the percentage of credit sales method (rather than the aging of accountsreceivable method) for estimating bad debt expense. If DS estimates that 1 percent of creditsales will become bad debts, prepare the journal entry to record those effects. Answer: 1.   Allowance for doubt account 500 Accounts Receivable 500 2.   Age Interval Balance Estimated Uncollectible Accounts Percent Amount 1-30 pastdue 50,000 1% 500 31-60 pastdue 80,000 5% 4,000 61-90 pastdue 40,000 15% 6,000 >90 pastdue 1,000 50% 500 11,000 ‘  Bad debt expense 8,000 Allowance for Doubtful Accounts 8,000 (*11,000-3,000) 2009 2008  Net Sales 950,000 - Accounts Receivable 160,000 167,586 Average Accounts Receivable 163,793* - Accounts Receivable turnover 5,8** * (160,000+167,586) / 2) ** ( 950,000 : 163,793 ) 4.    –   5.   Bad debt expense 9,500 Allowance for doubtful Account 9,500 (1% x 950,000) SOAL 3A  On March 1 of a recent year, Rocky Mountain Chocolate Factory, Inc. (RMCF) reported that thecompany had issued $120,000 of notes receivable at an annual interest rate of 10 percent. As a publiccompany, RMCF prepares financial statements every quarter: on May 31, August 31, November 30, andFebruary 28. Assume the notes were created on March 1, 2009, when RMCF lent money to another company and RMCF receives interest payments semiannually on July 31 and January 31. Required: 1. Calculate the amount of interest that RMCF earned each month after issuing the notes on March 1. 2. Calculate the amount of the interest payments that RMCF will receive on July 31, 2009, andJanuary 31, 2010. 3. Prepare a timeline showing the amount of interest earned and received during each period. 4. Prepare journal entries to record the note’s issuance, the interest earne d, and the interestpayments received on each given date. Answer: 1.   120,000 x 10% x 1/12 = $1,000 2.   July 31 = 120,000 x 10% x 5/12 = $5,000 January 31 = 120,000 x 10% x 6/12 = $6,000 3. Time May 31 July 31 August 31 November 30 January 31 February 28 Total and Explanation 3,000 (Interest earned) 2,000 (interest earned) ; 5,000 (interest received) 1,000 (Interest earned) 3,000 (Interest earned) 2,000 (interest earned); 6,000 (Interest received) 1,000 (interest earned) 4. Date Description Post Ref. Debit Credit March 1 Notes Receivable 120,000 Accounts Receivable 120,000 May 31 Interest receivable 3,000 Interest Revenue 3,000 July 31 Cash 5,000

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Jul 23, 2017
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