Title 3. Testbank Chapter 9 .pdf ✅

Accounting for Receivables 9 - 3 SUMMARY OF STUDY OBJECTIVES BY QUESTION TYPE Study Objective 6 129. MC 131. MC 133. MC 165. BE 189. Ex 130. MC 132. MC 134. MC 167. BE 190. Ex Study Objective 7 135. MC 136. MC Study Objective 8 36. TF 139. MC 168. BE 182. Ex 191. Ex 137. MC 156. MC 169. BE 189. Ex 205. C 138. MC 166. BE 172. Ex 190. Ex 206. C Study Objective 9 29. TF 37. TF 141. MC 143. MC 145. MC 158. MC 192. Ex 30. TF 140. MC 142. MC 144. MC 157. MC 170. BE Note: TF = True-False BE = Brief Exercise C = Completion MC = Multiple Choice Ex = Exercise The chapter also contains one set of ten Matching questions and six Short-Answer Essay questions. CHAPTER STUDY OBJECTIVES 1. Identify the different types of receivables. Receivables are frequently classified as (1) accounts, (2) notes, and (3) other. Accounts receivable are amounts customers owe on account. Notes receivable are claims for which lenders issue formal instruments of credit as proof of debt. Other receivables include nontrade receivables such as interest receivable, loans to company officers, advances to employees, and income taxes refundable. 2. Explain how companies recognize accounts receivable in the accounts. Companies record accounts receivable at invoice price. They are reduced by sales returns and allowances. Cash discounts reduce the amount received on accounts receivable. When interest is charged on a past due receivable, the company adds this interest to the accounts receivable balance and recognizes it as interest revenue. 3. Distinguish between the methods and bases companies use to value accounts receivable. There are two methods of accounting for uncollectible accounts: the allowance method and the direct write-off method. Companies use either the percentage-of-sales or the percentage-of-receivables basis may be used to estimate uncollectible accounts using the allowance method. The percentage of sales basis emphasizes the matching principle. The percentage-of-receivables basis emphasizes the cash realizable value of the accounts receivable. An aging schedule is often used with this basis. 4. Describe the entries to record the disposition of accounts receivable. When a company collects an account receivable, it credits Accounts Receivable. When a company sells (factors) an account receivable, a service charge expense reduces the amount collected. 5. Compute the maturity date of and interest on notes receivable. For a note stated in months, the maturity date is found by counting the months from the date of issue. For a note stated in days, the number of days is counted, omitting the issue date and counting the due date. The formula for computing interest is Face value × Interest rate × Time.