Chapter8notes_11-3 - Chapter 8 Notes Chapter 8 Reporting...

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Chapter 8 Notes Chapter 8 Reporting and Analyzing Receivables o Accounts Receivable – current asset o Notes Receivable – current or long-term based on date Receivables – claims expected to be paid in cash o The Company will receive cash in the future from its customers o The Company sold something on credit or on account to a customer o They expect to receive the cash at a later date Recognize receivable when service or product is sold for credit Valuation of receivables o You need to know the “aging” or allowance or balance sheet method o Provides better matching of revenues and expenses o Receivables are stated at net realizable value on the balance sheet o The amount that you really expect to receive in cash Accounts involved o Accounts Receivable (gross amount) 100,000 o Less Allowance for Doubtful Accts 5,000 (contra asset, CR bal) o Net realizable value 95,000 o Uncollectible accounts are matched to the period in which the sales are made Questions to ask and steps to take 1. What is the estimated amount of uncollectible accounts? $12,000 (use example above) 2. The allowance needs to be $12,000 3. What is the balance in the allowance account now? $5,000 4. What adjusting entry is needed to bring a $5,000 CR balance to a $12,000 CR balance? Allowance for DA 5. DR Bad Debts Expense $7,000 CR Allowance for Doubtful Accounts $7,000 6. What is the new NRV for A/R? $100,000
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This note was uploaded on 01/18/2012 for the course ACCT 207 taught by Professor Hudchinson during the Fall '08 term at University of Delaware.

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Chapter8notes_11-3 - Chapter 8 Notes Chapter 8 Reporting...

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