Accouting chapter 6
Terms
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- In recording credit card sales, when do you debit A/R and when do you debit Cash?
- If cash is immediately received when credit card sales receipts are deposited, the company debits Cash at the time of sale. If the company does not receive payment until after it busmits receipts to the credit card company, it debits A/R at the time of sale. (Cash is later debited when payment is received from the credit card company.)
- A company accumulates sales receipts and remits them to the credit card company for payment. When are the credit card expenses recorded? When are these expenses incurred?
- Credit card expenses are usually recorded and incurred at the same time of their related sales, not when cash is received from the credit card company
- Why must bad debts expense be estimated is such an estimate is possible?
- If possible, bad debts expense must be matched with the sales that gave rise to the A/R. This requires that companies estimate future bad debts at the end of each period before they learn which accounts are uncollectible.
- What term describes the balance sheet valuation of A/R less the Allowance for Doubtful Accounts?
- Realizable value (also called net realizable value)
- Why is estimated bad debts expense credited to a contra account (Allowance for Doubtful Accounts) rather than to the A/R account?
- The estimated amount of bad debts expense cannot be credited to the A/R account because the specific customer accounts that will prove uncollectible cannot yet be identified and removed from the acounts receivable subsidiary ledger. Moreoever, if only the A/R account is credited, its balance would not equal the sum of its subsidiary account balances.
- SnoBoard Company's year-end balance in its Allowance for Doubtful Accounts is a credit of $440. By aging A/R, it estimates that $6,142 is uncollectible. Prepare SnoBoard's year-end adjusting entry for bad debts.
- (see page 300)
- Record entries for these transactions assuming the allowance method is used: -Jan 10 The $300 account of customer Cool Jam is determined uncollectible. -April 12 Cool Jam unexpectedly pays in full the account deemed uncollectible on Jan 10
- (see page 300)
- Irwin purchases $7,000 of merchandise from Stamford on December 16,2007. Stamford's accounting period ends on December 31, and it does not make reversing entries. Prepare entries for Stamford on December 16,2007, and December 31, 2007.
- (see page 300)
- Prepare an entry for March 16,2008 if Irwin dishonors the note
- (see page 300)