F3M2

Question 1

Accounts receivable are ___ promises to pay debts are are generally classified as ___ assets

Answer 1

oral promises

current assets

Question 2

How can accounts receivable be nontrade receivables

Answer 2

If it does not come from a customer

Question 3

Sales discount speed method can either be recorded

Answer 3

gross or net

Question 4

Speed discount is gross when

Answer 4

we do NOT expect them to take discount, without regard to the discount

Question 5

Speed discount is net when

Answer 5

we DO expect them to take the discount

Question 6

Trade discounts are reported ___ and applied___

Answer 6

net and sequentially , do not add them together

Question 7

accounts receivable should be reporting on the balance sheet at

Answer 7

NRV gross - allowance for doubtful accounts

Question 8

Only the ___ method of recognizing uncollectibles is acceptible by GAAP

Answer 8

allowance method

Question 9

Why do we not use the direct write off method

Answer 9

does not match revenues and expenses

A/R becomes overstated

never has allowance, only writes off as it becomes uncollectible

Question 10

Allowance for doubtful accounts account type

Answer 10

contra asset

Question 11

what is the model for allowance for doubtful account

Answer 11

CECL

current expected credit loss

Question 12

CECL accounts for

Answer 12

current, historical, and future conditions

Question 13

Write off entry

Answer 13

Dr. Bad debt expense

Cr. A/R

Question 14

Bad Debt Expense charge

Answer 14

provision made each period and adjustment made at year end

Question 15

Direct Write off subsequent collection of A/R

Answer 15

Dr. Cash
Cr. Uncollectible accounts recovered

Increase cash and increase a/r

Question 16

Allowance method subsequent collection of A/R

Answer 16

Dr. A/R
Cr. Revenue

Dr. Cash
Cr. A/R

Question 17

Pledging

Answer 17

A/R as collateral.

Footnote disclosure only required

since it is only collateral instead of sold, there is no journal entry

Question 18

Factoring of A/R

Answer 18

without recourse is a sale

with recourse could be a sale or pledge

NEED CASH NOW

Question 19

Factoring without recourse

Answer 19

true sale that decreases a/r
sale is final
whoever bought assumes the risk of loss

Question 20

Factoring with recourse

Answer 20

either sale (a/r would go down) or pledge (if collateral)

Question 21

Due from factor A/R sale

Answer 21

security for the buyer to collect receivables

Question 22

In order for the factor with recourse to be a sale

Answer 22

1. the uncollectable can be reasonably estimated
2. transfere surrenders control
3. cannot be required to repurchase receivables, but may have to replace

Question 23

Securitization

Answer 23

a/r transferred to another entity

Question 24

Note Receiveable

Answer 24

written promises to pay either current or long term asset

Question 25

Face Value

Answer 25

Principle

Question 26

Maturity Value

Answer 26

Principle plus interest

Question 27

Face - Unearned interest

Answer 27

present value

Question 28

Discounting notes receivable

Answer 28

get cash now endorses the note (with or without recourse) to a third party and receives a sum of cash

Question 29

NR with recourse

Answer 29

Dr. Cash Cr. NR discount OR remove from BS and record contingent liability

Question 30

NR without resource

Answer 30

risk of loss on the buyer Dr. Cash Dr. Loss on sale Cr. NR

Question 31

What type of account is note receivable discount

Answer 31

contra-asset