Quiz 4 Receivables

The net amount expected to be received in cash from receivables is termed the

• cash realizable value.

• cash-good value.

• gross cash value.

• cash-equivalent value.

Janway sells softball equipment. On November 14, they shipped $1,000 worth of softball

uniforms to Chris Middle School, terms 2/10, n/30. On November 21, they received an

order from Douglas High School for $600 worth of custom printed bats to be produced in

December. On November 30, Chris Middle School returned $100 of defective

merchandise. Janway has received no payments from either school as of month end.

What amount will be recognized as net accounts receivable on the Balance Sheet as of

November 30?

• $1,600

• $1,500

• $1,000

• $900

When the allowance method is used to account for uncollectible accounts, Bad Debts

Expense is debited when

• a sale is made.

• an account becomes bad and is written off.

• management estimates the amount of uncollectibles.

• a customer's account becomes past-due.

When an account becomes uncollectible and must be written off,

• Allowance for Doubtful Accounts should be credited

• Accounts Receivable should be credited.

• Bad Debts Expense should be credited.

• Sales should be debited.

Long Company uses the percentage of sales method for recording bad debts expense.

For the year, cash sales are $500,000 and credit sales are $2,000,000. Management

estimates that 1% is the sales percentage to use. What adjusting entry will Long Company

make to record the bad debts expense?

• Bad Debts Expense ....................................................... 25,000

  Allowance for Doubtful Accounts ................................... 25,000

• Bad Debts Expense ....................................................... 20,000

  Allowance for Doubtful Accounts ................................... 20,000

• Bad Debts Expense ....................................................... 20,000

  Accounts Receivable ..................................................... 20,000

• Bad Debts Expense ....................................................... 25,000

  Accounts Receivable ..................................................... 25,000

An aging of a company's accounts receivable indicates that $4,000 are estimated to be

uncollectible. If Allowance for Doubtful Accounts has a $1,200 credit balance, the

adjustment to record bad debts for the period will require a

• debit to Bad Debts Expense for $4,000

• debit to Allowance for Doubtful Accounts for $2,800.

• debit to Bad Debts Expense for $2,800.

• credit to Allowance for Doubtful Accounts for $4,000.

12/31/07

Accounts receivable $525,000

Allowance (45,000)

Cash realizable value $480,000

During 2008, sales on account were $145,000 and collections on account were $86,000. Also

during 2008, the company wrote off $8,000 in uncollectible accounts. An analysis of outstanding

receivable accounts at year end indicated that bad debts should be estimated at $54,000.

The change in the cash realizable value from the balance at 12/31/07 to 12/31/08 was a

• $50,000 increase.

• $59,000 increase.

• $42,000 increase.

• $51,000 increase.

12/31/07

Accounts receivable $525,000

Allowance (45,000)

Cash realizable value $480,000

During 2008, sales on account were $145,000 and collections on account were $86,000. Also

during 2008, the company wrote off $8,000 in uncollectible accounts. An analysis of outstanding

receivable accounts at year end indicated that bad debts should be estimated at $54,000.

Bad debts expense for 2008 is:

• $17,000.

• $9,000.

• $54,000

• $1,000.

If a company sells its accounts receivables to a factor,

• the seller pays a commission to the factor.

• the factor pays a commission to the seller.

• there is a gain on the sale of the receivables.

• the seller defers recognition of sales revenue until the account is collected.

Bad Debts Expense is reported on the income statement as

• part of cost of goods sold.

• reducing gross profit.

• an operating expense.

• a contra-revenue account.