F3M2 Flashcards
Accounts receivable are ___ promises to pay debts are are generally classified as ___ assets
oral promises
current assets
How can accounts receivable be nontrade receivables
If it does not come from a customer
Sales discount speed method can either be recorded
gross or net
Speed discount is gross when
we do NOT expect them to take discount, without regard to the discount
Speed discount is net when
we DO expect them to take the discount
Trade discounts are reported ___ and applied___
net and sequentially , do not add them together
accounts receivable should be reporting on the balance sheet at
NRV gross - allowance for doubtful accounts
Only the ___ method of recognizing uncollectibles is acceptible by GAAP
allowance method
Why do we not use the direct write off method
does not match revenues and expenses
A/R becomes overstated
never has allowance, only writes off as it becomes uncollectible
Allowance for doubtful accounts account type
contra asset
what is the model for allowance for doubtful account
CECL
current expected credit loss
CECL accounts for
current, historical, and future conditions
Write off entry
Dr. Bad debt expense
Cr. A/R
Bad Debt Expense charge
provision made each period and adjustment made at year end
Direct Write off subsequent collection of A/R
Dr. Cash
Cr. Uncollectible accounts recovered
Increase cash and increase a/r
Allowance method subsequent collection of A/R
Dr. A/R
Cr. Revenue
Dr. Cash
Cr. A/R
Pledging
A/R as collateral.
Footnote disclosure only required
since it is only collateral instead of sold, there is no journal entry
Factoring of A/R
without recourse is a sale
with recourse could be a sale or pledge
NEED CASH NOW
Factoring without recourse
true sale that decreases a/r
sale is final
whoever bought assumes the risk of loss
Factoring with recourse
either sale (a/r would go down) or pledge (if collateral)
Due from factor A/R sale
security for the buyer to collect receivables
In order for the factor with recourse to be a sale
- the uncollectable can be reasonably estimated
- transfere surrenders control
- cannot be required to repurchase receivables, but may have to replace
Securitization
a/r transferred to another entity
Note Receiveable
written promises to pay either current or long term asset
Face Value
Principle
Maturity Value
Principle plus interest
Face - Unearned interest
present value
Discounting notes receivable
get cash now endorses the note (with or without recourse) to a third party and receives a sum of cash
NR with recourse
Dr. Cash
Cr. NR discount
OR remove from BS and record contingent liability
NR without resource
risk of loss on the buyer
Dr. Cash
Dr. Loss on sale
Cr. NR
What type of account is note receivable discount
contra-asset
