receivables

Question 1

discount method, gross and net

Answer 1

gross- if discount is taken, considered a reduction of sales.
Net- show at net, if discount not taken, considered interest income

Question 2

bad debt expenses

Answer 2

direct write off , income approach ( % of credit sale), balance sheet approach ( % of receivable)

Question 3

direct write off method

Answer 3

-violate GAAP, not matching , not conservative

Question 4

calculation on interest and discount rate charged by the bank

Answer 4

• (Face+ interest (face*interest rate * time))=maturity value
• maturity value- discount (maturity discount rate time remaining)= proceeds

Question 5

interest on A/R

Answer 5

• in ordinary course of business Face value
• L/T -present value
• future factor equal 1 divided by PV