ACCT 2010 May 19

ACCT 2010 May 19 - 5/19/08 CHAPTER 7 INVESTMENTS &...

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5/19/08 CHAPTER 7 Gross Accounts Receivable – Allowance = Net AR Investment in a CD Year-end adjusting entry: Db. Interest Receivable 1,500 Cr. Interest Revenue 1,500 FORMULA: Interest (I) = Principal (P) × Rate (R) × Time (T) $1,500 = $100,000 × 6% × 90/360 Accounting for Common-Stock Investments Fair Value Method Equity Method Consolidated Financial Statements 0%-----------------------20%-----------------------50%-------------------------------------------100% No significant Significant Control influence influence ACCOUNTS RECEIVABLE What is an account receivable? An Asset A receivable arising from the sale of goods or services with a verbal promise to pay How to companies keep track of all those receivables? A subsidiary ledger Accounts Receivable Valuation: 1. Direct Write-off Method J/E: Dr. Bad Debts Expense XXX Cr. Accounts Receivable—Dexter XXX 1
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5/19/08 2. % of Net Credit Sales Method (Estimated Bad Debt Expense) % of Net Sales x Net Sales = Bad Debt Expense J/E: Dr. Bad Debt Exp $ XX Cr. Allowance for Doubtful accounts $XX (to record bad debt expense) Example: Assume prior years’ net credit sales and bad debt expense is as follows:
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This note was uploaded on 06/05/2008 for the course ACCT ACCT 2010 taught by Professor Olvera during the Spring '08 term at North Texas.

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ACCT 2010 May 19 - 5/19/08 CHAPTER 7 INVESTMENTS &...

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