ACCT 001 Lecture Notes - Lecture 21: Accounts Receivable, Accounts Payable

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skywildebeest596

10 Jul 2020

School

College of The Sequoias

Department

Accounting (ACCT)

Course

ACCT 001

Professor

Cooper

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Document Summary

Not considered for the resulting balance for the balance: aging of accounts receivable: estimation that the longer the wait for the ar to be received, the less likely it will ever be received. Recognizing that receivables become less collectible as the debt gets older. It is a listing and summation of accounts receivable by their ages. Ar is an uncollected sale, therefore we need to ask how well the business collects its receivables, the better collection means better management of receivables. A business may have a lot of bad debt: when business sales is decreasing, sell to less credit worthy customers in order to increase sales, however this increases bad debts. Ratio of receivables turnover during that period. Compares a company"s credit sales during a period to its average receivables balance. Divide the receivables ratio into 365 days to express how long it takes a company to. Accounts receivable = credit sales / average accounts receivable.

Related Questions

Raintree Cosmetic Company sells its products to customers on a credit basis. An adjusting entry for bad debt expense is recorded only at December 31, the companyâs fiscal year-end. The 2017 balance sheet disclosed the following: Current assets: Receivables, net of allowance for uncollectible accounts of $48,000 $ 522,000 During 2018, credit sales were $1,840,000, cash collections from customers $1,920,000, and $57,000 in accounts receivable were written off. In addition, $4,800 was collected from a customer whose account was written off in 2017. An aging of accounts receivable at December 31, 2018, reveals the following: Percentage of Year-End Percent Age Group Receivables in Group Uncollectible 0â60 days 70 % 5 % 61â90 days 20 15 91â120 days 5 20 Over 120 days 5 40 Required: 1. Prepare summary journal entries to account for the 2018 write-offs and the collection of the receivable previously written off. 2. Prepare the year-end adjusting entry for bad debts according to each of the following situations: Bad debt expense is estimated to be 4% of credit sales for the year. Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable. Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is determined by an aging of accounts receivable. 3. For situations (a)â(c) in requirement 2 above, what would be the net amount of accounts receivable reported in the 2018 balance sheet?

pinkantelope545

Adham Sdn. Bhd. accounts for its uncollectible accounts usingthe allowance method. The company reported the following accountbalances at 31 December 2017.

	RM
Accounts receivable	250,000
Less: Allowance for doubtful accounts	12,500

During the year 2017, the company had the following transactionsrelated to receivables.

	RM
1.Credit sales	600,000
3.Collections of accounts receivable	680,000
4.Write-offs of accounts receivable	10,800
5.Recovery of bad debts previously written off	3,000

Required:

a) Journalise transactions 1 - 5 above.

b) Post the entries to the two accounts: Accounts receivable andAllowance for doubtful account.

c) Record the bad debt expense for 2017 (in T-account) undereach of the following independent assumptions:

i. The company estimates its bad debt expense based on 5% ofoutstanding account receivable balance.

ii. The company bad debt estimate is 1% of its credit sales.

d) What is the net realisable value of Accounts Receivable at 31December 2017 under assumption (i) above.

carminesalmon51

12. Raintree Cosmetic Company sells its products to customers ona credit basis. An adjusting entry for bad debt expense is recordedonly at December 31, the companyâs fiscal year-end. The 2015balance sheet disclosed the following:


Current assets:
Receivables, net of allowance for uncollectibleaccounts of $39,000 $477,000

During 2016, credit sales were $1,795,000,cash collections from customers $1,875,000, and $44,000 in accountsreceivable were written off. In addition, $3,900 was collected froma customer whose account was written off in 2015. An aging ofaccounts receivable at December 31, 2016, reveals thefollowing:

	Percentage of Year-End		Percent
Age Group	Receivables in Group		Uncollectible
0â60 days	70	%	5%
61â90 days	20		15
91â120 days	5		20
Over 120 days	5		40

Required:

2.	Prepare the year-endadjusting entry for bad debts according to each of the followingsituations:

a.	Bad debt expense isestimated to be 4% of credit sales for the year.
b.	Bad debt expense is estimated by computing net realizable valueof the receivables. The allowance for uncollectible accounts isestimated to be 10% of the year-end balance in accountsreceivable.
c.	Bad debt expense is estimated by computing net realizable valueof the receivables. The allowance for uncollectible accounts isdetermined by an aging of accounts receivable.
	(If no entry is required for a transaction/event, select"No journal entry required" in the first accountfield.)

3.	For situations (a)â(c) in requirement 2 above, what would be thenet amount of accounts receivable reported in the 2016 balancesheet?

sapphiredeer171

ACCT 001 Lecture Notes - Lecture 21: Accounts Receivable, Accounts Payable

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