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Interest note if wolder presents the note to higley

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Unformatted text preview: that Wolder Co. prepares financial statements as of September 30. The adjusting entry by Wolder is for four months ending Sept. 30. Illustration 8-12 Sept. 1 Interest receivable Interest revenue 300 300 ($10,000 x 9% x 4/12 = $ 300) 8-44 SO 5 Describe the entries to record the disposition of notes receivable. Notes Receivable Notes Receivable Accrual of Interest Illustration: Prepare the entry Wolder’s would make to record the honoring of the Higley note on November 1. Nov. 1 Cash Notes receivable Interest receivable Interest revenue 8-45 10,375 10,000 300 75 SO 5 Describe the entries to record the disposition of notes receivable. Financial Statement Presentation Financial Statement Presentation Illustration 8-13 Balance sheet presentation of receivables 8-46 SO 6 Explain the statement presentation of receivables. Managing Receivables Managing Receivables Managing accounts receivable involves five steps: 1. Determine to whom to extend credit. 2. Establish a payment period. 3. Monitor collections. 4. Evaluate the liquidity of receivables. 5. Accelerate cash receipts from receivables when necessary. 8-47 SO 7 Describe the principles of sound accounts receivable management. Managing Receivables Managing Receivables Extending Credit If the credit policy is too loose, you may sell to customer who will pay either very late or not at all. 8-48 If the credit policy is too tight, you will lose sales. It is important to check references on potential new customers as well as periodically to check the financial health of continuing customers. SO 7 Describe the principles of sound accounts receivable management. Managing Receivables Managing Receivables Establishing a Payment Period 8-49 Companies should determine a required payment period and communicate that policy to their customers. The payment period should be consistent with that of competitors. SO 7 Describe the principles of sound accounts receivable management. Managing Receivables Managing Receivables Monitoring Collections Treasurer should prepare a cash budget. 8-50 Companies should prepare an accounts receivable aging schedule at least monthly. Significant concentrations of credit risk must be discussed in the notes to its financial statements. SO 7 Describe the principles of sound accounts receivable management. Illustration 8-14 Excerpt from note on concentration of credit risk 8-51 Financial Statement Presentation Financial Statement Presentation Evaluating Liquidity of Receivables Illustration 8-15 8-52 SO 8 Identify ratios to analyze a company’s receivables. Financial Statement Presentation Financial Statement Presentation Evaluating Liquidity of Receivables Accounts Receivable Turnover: Assess the liquidity of the receivables. Measure the number of times, on average, a company collects receivables during the period. Average collection period: 8-53 Used to assess effectiveness of credit and collection policies. Collection period should not exceed credit term period. SO 8 Identify ratios to...
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This note was uploaded on 09/27/2013 for the course MGT 11A taught by Professor Armstrong during the Fall '08 term at UC Davis.

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