AFM101 Lecture Notes - Lecture 6: Bank Reconciliation, Book Value, Income Statement

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coralchinchilla474

8 Dec 2016

School

University of Waterloo

Department

Accounting & Financial Management

Course

AFM101

Professor

Donna Psutka

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AFM101 Full Course Notes

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* the revenue principle requires that revenues be recorded when earned: sales discount: 2/10, n/30 (record: how the entries change, sale return and allowance (a separate account) Most businesses record an estimate of the bad debt expense: allowance for doubtful accounts. Two methods: statement of financial position/aging of trade receivables method. Focus is on determining the desired balance in the allowance for doubtful accounts on the statement of financial position. Desired balance in allowance account - (+) allowance account credit (debit) balance = Tuesday, april 1, 2014: income statement/percentage of credit sales. Focus is on determining the amount to record on the income statement as bad debt. Net credit loss rate x %bad debt loss rate = bad debt expense. 6. internal control of cash: bank reconciliations, purchase approval, cheque. Trade receivables: are open accounts owed to the business by trade customers. Notes receivable: are written promises that require another party to pay the business under specific conditions (amount, time, interest)

Related Questions

The following selected amounts are reported on the year-endunadjusted trial balance report for a company that uses the percentof sales method to determine its bad debts expense. Accountsreceivable $ 430,000 Debit Allowance for Doubtful Accounts 1,400Debit Net Sales 2,250,000 Credit All sales are made on credit.Based on past experience, the company estimates 1.0% of creditsales to be uncollectible. What adjusting entry should the companymake at the end of the current year to record its estimated baddebts expense? Multiple Choice Debit Bad Debts Expense $5,700;credit Allowance for Doubtful Accounts $5,700. Debit Bad DebtsExpense $22,500; credit Allowance for Doubtful Accounts $22,500.Debit Bad Debts Expense $23,900; credit Allowance for DoubtfulAccounts $23,900. Debit Bad Debts Expense $4,300; credit Allowancefor Doubtful Accounts $4,300. Debit Bad Debts Expense $21,100;credit Allowance for Doubtful Accounts $21,100.

21 In 2007, Corey Company had service revenue of $1.0 million dollars, half of which represented an accounts receivable and half was paid in cash. At year end its A/R totaled $120,000 and its allowance for doubtful accounts had a $1,500 credit balance. Record the necessary journal entry 12/31/07 if: Big Bucks estimates 1.5% of credit sales are uncollectible. a. No entry required. b. Dr. Bad Debts $1,500 Cr Allowance for doubtful accounts $1,500.00 c. Dr. Bad Debts $300 Cr Allowance for doubtful accounts $300.00 d. Dr. Bad Debts $15,000 Cr Allowance for doubtful accounts $15,000.00 e. None of the above. The correct answer is 'c'.

Flyer Company has provided the following information prior to any year-end bad debt adjustment: Cash sales, $151,000 Credit sales, $451,000 Selling and administrative expenses, $111,000 Sales returns and allowances, $31,000 Gross profit, $491,000 Accounts receivable, $120,000 Sales discounts, $15,000 Allowance for doubtful accounts credit balance, $1,300 Flyer prepares an aging of accounts receivable and the result shows that 4% of accounts receivable is estimated to be uncollectible. What is the balance in the allowance for doubtful accounts after bad debt expense is recorded?

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AFM101 Lecture Notes - Lecture 6: Bank Reconciliation, Book Value, Income Statement

AFM101 Full Course Notes

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