WRD_ch09 - 9 Receivables Learning Objective 1 3-1 Describe...

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Unformatted text preview: 9 Receivables Learning Objective 1 3-1 Describe the nature of the adjusting process. 9-2 Insert Chapter Objectives Receivables 1 Describe the common classes of receivables. 2 Describe the accounting for uncollectible receivables. 3 Describe the direct write-off method of accounting for uncollectible receivables. After studying this chapter, you should be able to: 9-2 Receivables (continued) 5 Compare the direct write-off and allowance methods of accounting for uncollectible accounts. 6 Describe the accounting for notes receivable. 7 Describe the reporting of receivables on the balance sheet. 4 Describe the allowance method of accounting for uncollectible receivables. 9-3 9-4 Describe the common classes of receivables. 1 9-4 9-5 The term receivables includes all money claims against other entities, including people, business firms, and other organizations. 1 9-6 Accounts receivable are normally expected to be collected within a relatively short period, such as 30 or 60 days. 1 9-7 Notes receivable are amounts that customers owe for which a formal, written instrument of credit has been issued. 1 9-8 Other receivables expected to be collected within one year are classified as current assets. If collection is expected beyond one year, these receivables are classified as noncurrent assets and reported under the caption Investments . 1 9-9 Describe the accounting for uncollectible receivables. 2 9-9 9-10 Companies often sell their receivables to other companies. This transaction is called factoring the receivables, and the buyer of the receivables is called a factor . 2 Factoring 9-11 Regardless of how careful a company is in granting credit, some credit sales will be uncollectible. The operating expense account is called bad debt expense , uncollectible accounts expense , or doubtful accounts expense . 2 9-12 The direct write off method records bad debt expense only when an account is judged to be worthless. The allowance method records bad debt expense by estimating uncollectible accounts at the end of the accounting period. 2 9-13 Describe the direct write- off method of accounting for uncollectible receivables. 3 9-13 9-14 On May 10, a $4,200 accounts receivable from D. L. Ross has been determined to be uncollectible. 3 9-15 The amount written off is later collected on November 21. 3 Reinstatement Entry Receipt of Cash Entry 9-16 Example Exercise 9-1 3 Direct Write-off Method Journalize the following transactions using the direct write-off method of accounting for uncollectible receivables. July 9 Received $1,200 from Jay Burke and wrote off the remainder owed of $3,900 as uncollectible. Oct. 11 Reinstated the account of Jay Burke and received $3,900 cash in full payment....
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This note was uploaded on 08/11/2010 for the course ACCT 1A taught by Professor Seyedin during the Spring '10 term at Foothill College.

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WRD_ch09 - 9 Receivables Learning Objective 1 3-1 Describe...

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