SIMS 6 - (5GradableItems 1 Allowance. 2 DirectWriteoff. 3...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Uncollectible Accounts   (5 Gradable Items)  1. Allowance.  This method has the tax advantage of anticipating deductions.  2. Direct Write-off.  This approach debits bad debt expense and credits accounts receivable at the  time the uncollectibility of a specific account is established.  3. Allowance.  This method attempts both to match bad debt expense with the related revenue and to  determine the net realizable value of the accounts receivable.  4. Allowance.  Based on an estimate of uncollectible accounts for a period, bad debt expense is  debited and an allowance account is credited using the allowance method.  5. Allowance.  A contra-asset account (the allowance) is created and deducted from accounts  receivable on the balance sheet when the allowance method is used.  Research   (1 Gradable Item)  Answer: FASB ASC: 310-20-35-5  35-5  Fees deferred in accordance with paragraph 310-20-25-15 shall be recognized on a straight-line basis  over the period the fee entitles the cardholder to use the card. This accounting shall also apply to other  similar card arrangements that involve an extension of credit by the card issuer.  Notes Receivable -- Discounting   (4 Gradable Items)  The annual rate on the note is 6%, but its term is 180 days. Accordingly, the gain or loss on discounting the note is calculated using the following seven steps:  1.   Total interest receivable:  $50,000  ×  6%  ×  (180 days  ÷  360 days) = 
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
  $1,500  2.  Maturity amount:  $50,000 + $1,500 = $51,500  3.  Accrued interest receivable:  $50,000  ×  6%  ×  (90  ÷  360) = $750*  4.  Bank’s discount:  $51,500  ×  8%  ×  (90  ÷  360) = $1,030*  5.  Cash proceeds:  $51,500 - $1,030 = $50,470  6.  Carrying amount of the  note:    $50,000 + $750 = $50,750  7.  Gain or (loss): 
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern