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Exam 7: Accounting for Receivables

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Question 91

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On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $62,600 and $1,100, respectively. During Year 2, Kincaid reported $148,000 of credit sales, wrote off $1,150 of receivables as uncollectible, and collected cash from receivables amounting to $154,500. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales.What is the net realizable value of receivables that will be reported on Kincaid's Year 2 balance sheet?

A) $53,470
B) $53,520
C) $56,100
D) $54,950

E) None of the above
F) A) and B)

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Question 92

Multiple Choice

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At the beginning of Year 3 Omega Company had a $60,000 balance in its accounts receivable account and a $3,000 balance in allowance for doubtful accounts. During Year 3, Omega experienced the following events.(1) Omega earned $200,000 of revenue on account(2) Collected $210,000 cash from accounts receivable(3) Wrote-off $2,000 of accounts receivable as uncollectible Omega estimates uncollectible accounts to be 4% of receivables. Based on this information, the December 31, Year 3 balance in the accounts receivable account is

A) $50,000.
B) $46,000.
C) $48,000.
D) $47,000.

E) A) and D)
F) B) and C)

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Question 93

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Blain Company has $20,000 of accounts receivable that are current, $10,000 that are between 0 and 30 days past due, $6,000 that are between 30 and 60 days past due, and $1,600 that are more than 60 days past due. Blain estimates that 2% of the receivables that are current will be uncollectible, 5% of those between 0 and 30 days past due will be uncollectible, 10% of those between 30 and 60 days past due will be uncollectible, and 50% of those more than 60 days past due will be uncollectible. Just prior to recognizing uncollectible accounts expense, Blain's allowance for doubtful accounts has a $200 positive balance. Assuming Blain uses the aging method to estimate uncollectible accounts expense, the amount of uncollectible expense will be

How is the accounts receivable turnover computed? What information does this ratio provide?

On January 1, Year 2 Grande Company had a $16,000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During Year 2, Grande provided $104,000 of service on account. The company collected $97,000 cash from accounts receivable. Uncollectible accounts are estimated to be 2% of sales on account.What is the amount of uncollectible accounts expense recognized on the Year 2 income statement?

Indicate whether each of the following statements is true or false.a)Other things being equal, an operating cycle of 49 days is more desirable than an operating cycle of 120 days.b)The operating cycle is longer for a winery than a fast-food restaurant.c)The length of an operating cycle is not relevant to the profitability of a business.d)The length of an operating cycle equals the average days to collect accounts receivable.e)The length of an operating cycle is computed by adding the sum of the average days in inventory and the average number of days to collect accounts receivable.

The collection of an account receivable is an asset source transaction.

Which of the following correctly describes the effect of the collection of cash from the credit card company on the financial statements of Yankee Corporation?

Which of the following is a true statement about a company that uses the allowance method?

How is a company's operating cycle determined?

Hancock Medical Supply Company, earned $160,000 of revenue on account during Year 1, its first year of operation. During Year 1, Hancock collected $128,000 of cash from its receivables accounts. The company did not write-off any uncollectible accounts. It estimates that it will be unable to collect 1% of revenue on account. What is the net realizable value of receivables that will be reported on the balance sheet at December 31, Year 1?

Under what condition is the direct write-off method acceptable under GAAP?

Perez Company began the current year with a balance of $148,000 in accounts receivable and $8,600 in allowance for doubtful accounts. During the year, it provided $656,000 in services to customers on account and collected $580,000 in cash from its accounts receivable. Perez wrote off $6,500 of uncollectible accounts during the year. At the end of the year, the company prepared an aging schedule and adjusted its accounts based on the estimate that $12,600 of receivables would not be collected.Required:Compute the uncollectible accounts expenseDetermine the net realizable value of accounts receivable at the end of the current year.

Under the direct write-off method, uncollectible accounts expense is recognized