Section 10 - Receivables

Question 1

What value should A/R be reported at?

Answer 1

NRV

Gross amount of A/R less estimates of amount that won’t be collected.

Question 2

What are the three methods of calculating bad debt expense?

Answer 2

1) Direct write-off method
2) Income Statement Approach - % of credit sales method
3) Balance Sheet Approach - % of receivable method

Question 3

Is the Direct Write-off Method for bad debt allowed under GAAP?

Answer 3

NO, this method is only for tax purposes because it is not MATCHING and not CONSERVATIVE

GAAP two methods are the valuation approach which are:

1) Income Statement Approach - % of credit sales method
2) Balance Sheet Approach - % of receivable method

Question 4

Under the I/S approach - % of credit sales method, what principle is emphasize?

Answer 4

Matching principle - record expense at point of sale

Question 5

Under the B/S approach - % of receivable method, what principle is emphasize?

Answer 5

Asset valuation - age all the outstanding A/Rs

Question 6

What are the J/Es to record bad debt expense, write-off A/R and recover A/R?

Answer 6

To record bad debt expense
Bad Debt Expense
Allowance for uncollectible accounts**

*** Contra account on the B/S

To write off A/R
Allowance
A/R

To recover A/R (someone paid A/R that was written down) - 2 J/Es
A/R
Allowance

Cash
A/R

Question 7

Is pledging and assigning receivable as collateral borrowing or selling?

Answer 7

Borrowing

Question 8

Transaction costs attributable to acquisition of receivable is allowed under IFRS or GAAP?

Answer 8

IFRS

Question 9

IFRS uses which word for “allowance method”?

Answer 9

PROVISION for…

Question 10

What is the JE for non-interest bearing note receivables?

Answer 10

N/R
Discount on N/R
Asset/Equipment
Gain on sale