5 compute the maturity date of and interest on notes

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  • ACC 291
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Survey of Accounting
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Chapter 3 / Exercise E3-10
Survey of Accounting
Warren
Expert Verified
5 Compute the maturity date of and interest on notes receivable. For a note stated in months, the maturity date is found by counting the months from the date of issue. For a note stated in days, the number of days is counted, omit- ting the issue date and counting the due date. The formula for computing interest is:Face value Interest rate Time. 6 Explain how companies recognize notes receivable. 7 Describe how companies value notes receivable. As with accounts receivable, companies report notes receivable at their cash (net) realizable value.The notes receivable al- The computation and estimations involved in valuing notes receivable at cash realizable value, and in recording the proper amount of bad debts expense and related al- lowance are similar to those for accounts receivable. 8 9 Explain the statement presentation and analysis of receivables. SUMMARY OF STUDY OBJECTIVES The Navigator JWCL165_c08_356-395.qxd 7/31/09 3:20 PM Page 378
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Survey of Accounting
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Chapter 3 / Exercise E3-10
Survey of Accounting
Warren
Expert Verified
Self-Study Questions 379 Accounts receivable Amounts owed by customers on ac- count. (p. 358). Accounts receivable turnover ratio A measure of the liq- uidity of accounts receivable; computed by dividing net credit sales by average net accounts receivable. (p. 374). Aging the accounts receivable The analysis of cus- tomer balances by the length of time they have been unpaid. (p. 364). Allowance for Doubtful Accounts An account that shows the estimated amount of claims on customers that the company expects will become uncollectible in the future. (p. 362).

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