Escolar Documentos
Profissional Documentos
Cultura Documentos
$80,000
Estimated
%
Uncollectibl
1%
$25,000
5%
Estimated
Uncollectible
Amount $800
$1,250
due
31-60 days past
$7,000
10%
$700
due
61-90 days past
$1,500
20%
$300
$750
40%
$300
$114,250
$3,350**
** The total Estimated Uncollectible Accounts represents the required balance in the
Allowance for Doubtful Accounts on the balance sheet date.
RECORDING ESTIMATED UNCOLLECTIBLES
At the end of the accounting period, an _Adjusting__ entry is made to record the
estimated uncollectible amount.
The purpose of the adjusting entry is twofold:
1. Needed to bring the Allowance for Doubtful Accounts account to the
_____Correct_ ending balance. The ending balance is determined using either
$55,000
114,250
(3,350)
110,900
cash
(net)
realizabl
e value
80,000
12,500
$258,40
0
$60,000
Estimated
%
Uncollecti
1%
$31,000
5%
Estimated
Uncollectible
Amount 600
1,550
due
31-60 days past
$9,000
10%
900
$2,500
20%
500
$950
40%
380
due
Over 90 days
past due
Totals
$103,450
3,930
350
350
1,325-350+x= 3930
2,955
2,955
Accounts
Debit
6/1
Notes Receivable
15,000
Credit
Cash
15,000
Notes Receivable
1,000
Accounts receivable
1,000
Accounts
Debit
Notes Receivable
2,000
Accounts Receivable
10/1
Cash
Credit
2,000
2,060
Notes Receivable
Interest Receivable
2,000
60
$2,000*12%*3/12
Accrual of interest revenue
If financial statements are prepared prior to the time payment is received for the
note and interest, an adjusting journal entry is needed to accrue interest revenue.
The adjusting entry is used to record the Interest Revenue earned (but cash has yet
to be received.)
Accounts
Debit
10/1
Notes Receivable
20,000
Cash
Credit
20,000
300
Date
Accounts
12/31
Interest Receivable
$200
Debit
Credit
300
Interest revenue
300
20,000*6%*3/12
3. Mar. 1, 2017 received payment in full for the note and interest.
Date
Accounts
Debit
3/1
Cash
20,500
Interest Receivable
Notes receivable
Interest Revenue
Credit
300
20,000
200
20,000*6%*2/12
LO 4 DESCRIBE THE STATEMENT PRESENTATION OF RECEIVABLES AND THE
PRINCIPLES OF RECEIVABLES MANAGEMENT
Balance Sheet
Companies should identify in the balance sheet or in the notes to the financial
statements each of the major types of receivables. Short-term receivables are
reported in the current assets section of the balance sheet. Balance sheet
presentation of allowance for doubtful accounts shown above.
Income Statement
Hewes ACC 255 notes 8-7
Companies report bad debt expense in the operating expenses section. Interest
revenue is shown under Other Revenues and Gains or Other Revenues and
Expenses in the non-operating section.
MANAGING RECEIVABLES
Managing accounts receivables involves the following steps:
1. Determine to whom to extend credit
2. Establishing a payment period
3. Monitoring collections
4. Evaluating liquidity of receivables tracking the relationship between sales,
accounts receivable, and cash collections is important. If sales increase, then
accounts receivable are also expected to increase, but a disproportionate
increase could signal trouble.
RATIOS USED TO EVALUATE LIQUIDITY OF RECEIVABLES
ACCOUNTS RECEIVABLE TURNOVER measures the number of __Times____, on
receivable is outstanding.
365
Formula
Accounts receivable
turnover
Team Activity
Eddy Corporation had net credit sales during the year of $800,000 and cost of
goods sold of $500,000. The balance is receivables at the beginning of the year
was $100,000 and at the end of the year was $150,000. What was the accounts
receivable turnover and average collection period in days?
Accounts receivable turnover
800,000/((100,000+150,000)/2)=6.4 times
365/6.4=57 days.