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My Own FAR > FAR 10 - Receivables > Flashcards

FAR 10 - Receivables Flashcards

1
Q

What is What is Bad Debt Expense?

A

Entry located on income statement. Shows amount of collectible account in a given period.

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2
Q

What is the matching account for Bad Debt Expense?

A

Allowance for Doubtful Accounts. Contra account to Bad Debt Expense.

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3
Q

Journal Entry for Bad Debt Expense

A

Dr Bad Debt Expense

CR Allowance for Doubtful Accounts

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4
Q

What does the NRV of A/R mean?

A

The amount you expect to collect within the accounting cycle.

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5
Q

Equation for NRV of Accounts Receivable

A

A/R - Bad debts = NRV

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6
Q

Journal entry to write off in Direct Write off method

A

DR Expense

CR A/R

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7
Q

Percentage of credit sales is attached to which financial statement?

A

Income Statement

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8
Q

% credit sales is used above or below the line in the allowance account?

A

Above the line

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9
Q

Which is better matching, income approach or balance sheet approach?

A

Income approach

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10
Q

Which has better asset valuation, credit sales or % of receivables?

A

% of Receivables

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11
Q

Aging of Receivables is which method?

A

Balance sheet, % of Receivables

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12
Q

Total amount of aging of accounts

represents what?

A

Total of doubtful accounts below the line that you are aiming for.

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13
Q

Journal entry to write off receivables

A

DR Allowance for Doubtful Accounts

CR A/R

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14
Q

Journal entry to Recover A/R

A

DR A/R
CR Allowance

DR Cash
CR A/R

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15
Q

What accounts will be listed on the Debit side of A/R?

A

Beginning balance of A/R
Sales
Recoveries
Ending Balance of A/R

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16
Q

What accounts will be listed on credit side of A/R?

A

Collections

Write offs

17
Q

What accounts will be listed on debit side of Allowance for Doubtful Accounts?

A

Write offs

18
Q

What accounts will be listed on credit side of the Allowance for Doubtful Accounts?

A

Beginning balance-Doubtful Accounts
Bad Debt Expense
Recoveries
Ending Balance - Doubtful Accounts

19
Q

What is “pledging” receivables?

A

Where receivables are used as collateral in order to obtain a loan. This must be adequately disclosed in the FOOTNOTES.

20
Q

What is “assigning” receivables?

A

Where I borrow money to produce a product to deliver to a company, and pledge the future receivables as collateral. Banks mandate receivables paid directly to them.

21
Q

What is factoring

A

A way of obtaining money by a company involving a third party called a “factor”.

22
Q

Explains how factoring works.

A

Company A needs money, and sells receivables to Company B, the factor either with or without recourse.

23
Q

What is factoring without recourse?

A

Where a factor purchases receivables from a company, and receives either the gain or loss from the collections.

24
Q

What is factoring with recourse?

A

If the factor is unable to collect the receivable from the debtor, then the company must pay him the amount.

25
Q

How are returns handles within factoring?

A

A factor will usually hold back a certain amount of the factor fee to cover returns until the time limit for returns expires.

26
Q

What three things are required to indicate sale of a receivable as opposed to a borrowing?

A
  1. Asset is out of reach.
  2. Other party has full rights and control of the asset.
  3. The transferor does not maintain control over it.
27
Q

Journal entry for factoring if control is surrendered

A

DR Cash
DR Due from factor(withheld amount)
DR Loss of sale on receivables
CR Accounts Receivable

28
Q

Journal entry for factoring if control is not surrendered

A

DR Cash
DR Interest Expense
CR Note payable

29
Q

Another name for factoring without surrendering

A

Secured borrowing

30
Q

Another name for factoring with surrendering

A

A sale

31
Q

Journal entry for factoring without recourse

A

DR Cash & Amount due frm Factor(Holdback)
DR Loss on Factoring(Fee to Factor)
DR Allowance for Bad debts
CR Accounts receivable

32
Q

Journal entry for factoring with recourse

A

DR Cash and Amount due from Factor(Holdback)
DR Loss on factoring
DR Allowance for bad debts
CR Liability on Transferred receivables
CR Estimated recourse liability

33
Q

Formula for discounting:

A

Face Amount
+ Interest (Interest = Face x Int. rate x Term)
= Maturity
- Discount (Discount = Maturity value x Discount rate x Time remaining
=Proceeds

34
Q

When discounting a not after holding it for 6 months you figure 1.)interest and 2.)discount based upon what?

A
  1. Interest based upon entire amount of bond

2. Discount based on remainder of maturity of bond

35
Q

When a person has a participating interest in a financial instrument, that participating interest is figured as a percentage of carrying value or fair value?

A

Fair value

36
Q

What are servicing assets and servicing liabilities?

A

Charges for servicing and maintaining financial instruments. If less than fair value, it is a servicing liability. If more, it is a servicing asset.

37
Q

What is an IO strip?

A

A financial instrument it is a method of charging for servicing fees through percentage of interest payments received. N in “DENT”

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