Question 1

Indicate how each event affects the horizontal financial statements model. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts.Increase = IDecrease = DNot Affected = NAOn September 1, Year 1, Ruiz Company loaned $10,000 to Alpha company. Show the effect of the December 31, Year 1 adjusting entry to accrue interest on Ruiz's financial statements.

Accepted Answer

The adjusting entry to recognize interest on the note receivable will increase assets (interest receivable) and increase revenue (interest revenue), which increases net income and stockholders' equity. It does not affect the statement of cash flows.

Question 2

Indicate how each event affects the horizontal financial statements model. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts.Increase = IDecrease = DNot Affected = NAOn November 1, Year 1, Gable Company accepted a credit card as payment for $1,500 of services rendered to one of its customers. Assume the credit card fee of 3% is recorded on the date of the sale. Show the effect of this transaction on Gable's financial statements.

Accepted Answer

Recording a credit card sale increases assets (accounts receivable), increases revenue, and increases expenses (credit card expense). Because the increase to revenue is greater than the increase to expense, net income and stockholders' equity increase. The statement of cash flows is not affected.

Question 3

How do the percent of revenue method and the percent of receivables method to estimate uncollectible accounts expense differ?

Accepted Answer

The percent of revenue method assigns a percent of the year's net credit sales to the uncollectible accounts expense. This method is more concerned with the income statement presentation. The percent of receivables method uses the process of aging receivables to determine the ending balance in allowance for doubtful accounts. It is more concerned with the balance sheet presentation.

Question 4

Indicate how each event affects the horizontal financial statements model. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts.Increase = IDecrease = DNot Affected = NAOn September 1, Year 1, Diaz Company loaned $10,000 to Ace company. Show the effect of this transaction on Diaz's financial statements.

Accepted Answer

The answer of Indicate how each event affects the horizontal...

Question 5

Vailes Services Company loaned $6,000 on August 1, Year 1, to an individual who issued Vailes a promissory note with 6% interest. The issuer of the note repaid the principal and interest on July 30, Year 2. How did the August 1, Year 1, event affect Vailes's statement of cash flows? How did the July 30, Year 2 event affect it?

Accepted Answer

The answer of Vailes Services Company loaned $6,000 on August...

Question 6

Li Company has the following account balances:
 $\begin{array}{llr}
  \text {  cash} &\$25,000\
 \text { Accounts receivable } &76,000\
 \text { Allowance for doubtful accounts } &5,100\
 \text { Uncollectible accounts expense } &6,200\
 \text {  Credit sales} &115,000\
\end{array}$
 Compute the net realizable value of Li's accounts receivable.

Accepted Answer

The answer of Li Company has the following account balances:
...

Question 7

If Kettler Company loans $24,000 to Beam Company on March 1, Year 1, and the one-year note carries an interest rate of 7%, how much interest revenue will Kettler recognize in Year 1? How much in Year 2?

Accepted Answer

The answer of If Kettler Company loans $24,000 to Beam...

Question 8

What is meant by the net realizable value for accounts receivable?

Accepted Answer

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Question 9

In the first year of operations, John's Repair Service recognized $220,000 of service revenue on account. The ending accounts receivable balance was $15,100. Jake estimates that 3% of sales on account will not be collected; no accounts receivable had been written off by year end. Assume there were no other transactions affecting accounts receivable.
Required:What amount of cash was collected in Year 1?What amount of uncollectible accounts expense was recognized in Year 1?

Accepted Answer

The answer of In the first year of operations, John's...

Question 10

Indicate how each event affects the horizontal financial statements model. Use the following letters to record your answer in the box shown below each element. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts.
Increase = I Decrease = D Not Affected = NA
Stan's Surf Shack purchased 5 surfboards for $200 each. Later it purchased 2 more surfboards for $250 each. Stan's uses the perpetual inventory system. Assume that 6 surfboards were sold during the period for $350 cash each.
Assume that Stan's Surf Shack made the second purchase of surfboards for cash. How would that purchase affect the financial statements?

Accepted Answer

The answer of Indicate how each event affects the horizontal...

Question 11

What is aging of accounts receivable, and how is it used to account for uncollectible accounts?

Accepted Answer

The answer of What is aging of accounts receivable, and...

Question 12

Indicate how each event affects the horizontal financial statements model. Use the following letters to record your answer in the box shown below each element. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts.
Increase = I Decrease = D Not Affected = NA
Stan's Surf Shack purchased 5 surfboards for $200 each. Later it purchased 2 more surfboards for $250 each. Stan's uses the perpetual inventory system. Assume that 6 surfboards were sold during the period for $350 cash each.
Assume that Stan's Surf Shack purchased the first five surfboards on account. How would the purchase transaction affect its financial statements?

Accepted Answer

The answer of Indicate how each event affects the horizontal...

Question 13

When a credit card sale is recorded, what is the effect on the accounting equation?

Accepted Answer

The answer of When a credit card sale is recorded,...

Question 14

Indicate how each event affects the horizontal financial statements model. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts.Increase = IDecrease = DNot Affected = NAGable Company collected a receivable due from a credit card transaction company; the credit card fee had previously been recognized when the sale was recorded. Show the effect of collection of the receivable on Gables financial statements.

Accepted Answer

The answer of Indicate how each event affects the horizontal...

Question 15

Indicate how each event affects the horizontal financial statements model. Use the following letters to record your answer in the box shown below each element. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts.
Increase = I Decrease = D Not Affected = NA
Stan's Surf Shack purchased 5 surfboards for $200 each. Later it purchased 2 more surfboards for $250 each. Stan's uses the perpetual inventory system. Assume that 6 surfboards were sold during the period for $350 cash each.
How would the sale of the six surfboards affect the financial statements if Stan's Surf Shack uses the LIFO inventory cost flow method? Assume the surfboards were sold to customers for more than their original cost.

Accepted Answer

The answer of Indicate how each event affects the horizontal...

Question 16

Indicate how each event affects the horizontal financial statements model. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts.Increase = IDecrease = DNot Affected = NAOn March 1, Year 2, King Company collected a note receivable and related interest from Havilland Company The note had been issued one year earlier. Indicate the effects of this event on the elements of King's financial statements.

Accepted Answer

The answer of Indicate how each event affects the horizontal...

Question 17

What type of transaction (that is, asset source, asset use, asset exchange, or claims exchange) is the write-off of an uncollectible account using the allowance method?

Accepted Answer

The answer of What type of transaction (that is, asset...

Question 18

Indicate how each event affects the horizontal financial statements model. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts.Increase = IDecrease = DNot Affected = NAGarrison Company uses the allowance method to account for uncollectible accounts. Show how the adjusting entry to recognize uncollectible accounts expense would affect the elements of Garrison's financial statements.

Accepted Answer

The answer of Indicate how each event affects the horizontal...

Question 19

After the accounts are adjusted at the end of the year, Accounts Receivable has a balance of $235,000, Uncollectible Accounts Expense has a balance of $17,500, and Allowance for Doubtful Accounts has a balance of $12,500. What is the net realizable value of the accounts receivable?

Accepted Answer

The answer of After the accounts are adjusted at the...

Question 20

What type of account is Allowance for Doubtful Accounts?

Accepted Answer

The answer of What type of account is Allowance for...

Quiz 5: Accounting for Receivables and Inventory Cost Flow

How do the percent of revenue method and the percent of receivables method to estimate uncollectible accounts expense differ?

If Kettler Company loans $24,000 to Beam Company on March 1, Year 1, and the one-year note carries an interest rate of 7%, how much interest revenue will Kettler recognize in Year 1? How much in Year 2?

What is meant by the net realizable value for accounts receivable?

What is aging of accounts receivable, and how is it used to account for uncollectible accounts?

When a credit card sale is recorded, what is the effect on the accounting equation?

What type of transaction (that is, asset source, asset use, asset exchange, or claims exchange) is the write-off of an uncollectible account using the allowance method?

After the accounts are adjusted at the end of the year, Accounts Receivable has a balance of $235,000, Uncollectible Accounts Expense has a balance of $17,500, and Allowance for Doubtful Accounts has a balance of $12,500. What is the net realizable value of the accounts receivable?

What type of account is Allowance for Doubtful Accounts?