M3 - M2 - Trade Receivables

Question 1

Valuing accounts receivable requires reductions (4)

Answer 1

1) bad debts, 2) sales returns and 3) allowances, and 4) sales discounts

Question 2

___________ balance is the approximating cash expected to be collected.

Answer 2

net accounts receivable

Question 3

Sales and related receivables can be recorded using either the _______ method or the theoretically preferred ______method.

Answer 3

Gross method or net method

Question 4

What is the JE to record a Receivable of $100 with a 1% discount at Gross method?

Answer 4

DR Receivable - $100 , CR Sales - $100

Question 5

What is the JE to record a Receivable of $100 with a 1% discount at Net Method

Answer 5

DR Receivable - $99, CR $99

Question 6

The ____ method records a sale without regards to the available discount, if payment is received with the discount period, a sales discount account is debited for the amount

Answer 6

Gross Method

Question 7

Accounts receivable is presented on the balance sheet at the ____________.

Answer 7

net realizable value

Question 8

Estimating uncollectible accounts receivables includes the following methods (2)

Answer 8

Direct Write-off Method and Allowance method

Question 9

________ method: used for tax; it is not GAAP.

Answer 9

Direct Write-off Method

Question 10

In the _________ approach (percent of ending A/R and aging method), the ending balance in the allowance account must equal an amount determined by an analysis of the A/R schedule.

Answer 10

balance sheet approach

Question 11

In the allowance method, writing off an account receivable involves debiting the ______ and crediting ___________.

Answer 11

allowance, accounts receivable

Question 12

When collecting an account previously written off, restore the _______ and the _______ and then record the collection in the normal way.

Answer 12

account receivable and allowance and DR Cash, CR AR

Question 13

Factoring receivables can be done either (2)

Answer 13

with or without recourse.

Question 14

_________ means the transferor retains the risk of uncollectibility.

Answer 14

With recourse

Question 15

Factoring _______ is a sale of the receivable and the assignee assumes the risk of loss.

Answer 15

without recourse

Question 16

_______ is a oral promise to pay debts and are generally classified as current asset

Answer 16

Accounts Receivable

Question 17

______ is an account receivable from purchases of the company’s goods and services

Answer 17

Trade Receivables

Question 18

_______ accounts receivable are from person other than customers such as advances from employees, tax refunds

Answer 18

Non-Trade Receivables

Question 19

What is the Base formula for Accounts Receivable

Answer 19

Beginning Balance + Credit Sales - Cash Collected, AR Concert to NR, and AR written off as bad Debis = Ending Balance

Question 20

_________ are quoted in percentage, sales revenues and AR are recorded net of _________. and these are applied sequentially

Answer 20

Trade Discounts

Question 21

What is the JE to record the direct write-off method

Answer 21

DR Bad Debt Expense , CR Accounts Receivable

Question 22

There are two ways to record the allowance method

Answer 22

Percentage of Accounts Receivable, Aging of Receivable method

Question 23

________ notes receivable involves transferring the note to a third party, usually for cash.

Answer 23

Discounting

Question 24

Discounting notes receivable involves transferring the note to a third party, usually for cash. This transfer can be ___________

Answer 24

with or without recourse.

Question 25

If Discounting notes receivables is done with recourse a ______ is created for the transferor

Answer 25

Contingent Liability

Question 26

Discounting Notes Receivable - Determining the proceeds to be received requires deducting __________ from the maturity value of the note.

Answer 26

deducting the banker's discount (interest) from the maturity value of the note.

Question 27

How is the discount calculated

Answer 27

The discount is calculated using maturity value, discount rate, and time left to maturity.

Question 28

______ is the process whereby the company uses existing accounts receivables as collateral for a loan

Answer 28

Pledging

Question 29

In pledging, the company retains the title to the receivables but pledges that will use the proceeds to pay the loan. How is it treated

Answer 29

Pledging requires only note disclosures

Question 30

How do you record a Factoring without recourse (If sale is final)

Answer 30

DR cash, DR Due from Factor, Loss on sale of Receivable XXXX. CR Receivable

Question 31

The asset account ______ reflects the proceeds retained by the factor

Answer 31

Due to Factor

Question 32

What are the two options for with resource for Factoring of Accounts Receivables

Answer 32

A) A Sale or B) Borrowing (with AR as collateral)

Question 33

In order to be considered a sale, the transfer must meet what conditions

Answer 33

1) Transfer obligation for uncollectible can be estimated. 2) The transfers surrenders control of future benefits. 3) The transferor cannot be required to repurchase the receivables, but may be required to replace them with other similar receivables. (treated as a lone if any of them are not)

Question 34

In a ______ account receivable are transferred to a different entity, such as a trust or subsidiary. The entity then sells securities that are Collateralized by the A/R invested receive cash as the accounts receivables are paid.

Answer 34

Securitization

Question 35

__________ refers to the sale of a note to a third party, usually a bank or other financial institution.

Answer 35

Discounting

Question 36

The ___________ is the amount of potential loss the entity would suffer if all parties to the financial instruments failed completely to perform and the amounts due proved to be of no value to the entity.

Answer 36

total risk of accounting loss

Question 37

A __________ is defined as the level used by the entity in developing and documenting a systematic method for determining the allowance for credit losses

Answer 37

portfolio segment

Question 38

What is the JE for recording a Contentigency liability when selling a Notes receivable to the bank with recourse

Answer 38

Dr Notes Receivable | CR Notes Receivable Discounted