SU5 - Receivables

Question 1

Two approaches for accounting for credit losses on Accounts Receivable. One is required by GAAP, the other is not accepted by GAAP.

Answer 1

Direct Write-off method (not allowed under GAAP)
Allowance Method (required by GAAP)

Question 2

what is the following called? a transfer of receivables to a third party (a factor) who assumes the responsibility of collection.

Answer 2

Factoring

Question 3

If assets are assigned as collateral on a note payable, then what resulting entries are needed?

Answer 3

Credit to the asset account, and a debit to the “assets assigned” account. (example, Accounts receivable assigned).