Receivables Chapter 9 Receivables Monetary Claims Arise from selling goods and services on credit and lending money Two major types Accounts Receivable Notes Receivable Accounts Receivable Arise from sales or service revenues Should be converted to cash within normal receivable terms
On August 12, 2000, Cayman Company sold $580 of merchandise on credit to Benson Brothers.
On February 1, 2001, Cayman Company determines it cannot collect the $580 from Benson Brothers
The goal of the allowance method is twofold:
Bad debts expense is computed as follows:
Baxter Company has credit sales of $700,000 in 2004. Baxter estimates 0.5% of credit sales are uncollectible.
What is Uncollectible Accounts Expense for 2004?
With the allowance method, when an account is determined to be uncollectible, the debit goes to Allowance for Doubtful Accounts.
Assume that on Feb. 1, Baxter Company deems a $580 account receivable from Benson Brothers to be uncollectible.
Subsequent collections require that the original write-off entry be reversed before the cash collection is recorded. Assume that on June 5, Benson Brothers pays the amount owed.
TechCom has a bank credit card sale of $100 to a customer. The bank charges a processing fee of 4%. The cash is received immediately.
How would TechCom record a $100 non-bank credit card sale with a 2% service charge?
A note is a written promise to pay a specific amount at a specific future date.
If the note is expressed in days, base a year on 360 days.