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Chap007wildtextbook(1)

Recovery of a bad debt 7 28 dr cr feb 8 accounts

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Recovery of a Bad Debt 7-28 DR CR Feb. 8 Accounts Receivable - Martin 300 Allowance for Doubtful Accounts 300 To reinstate account previously written off Feb. 8 Cash 300 Accounts Receivable - Martin 300 To record full payment on account
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% of Sales Emphasis on Matching Sales Bad Debts Exp. Income Statement Focus % of Receivables Emphasis on Realizable Value Accts. Rec. All. for Doubtful Accts. Balance Sheet Focus Aging of Receivables Emphasis on Realizable Value Accts. Rec. All. for Doubtful Accts. Balance Sheet Focus Summary 7-29
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Installment Accounts Receivable Amounts owed by customers from credit sales for which payment is required in periodic amounts over an extended time period. The customer is usually charged interest. 7-30
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$1,000.00 July 10, 2011 Ninety days Barton Company, Los Angeles, CA One thousand and no/100 --------------------------------- Dollars First National Bank of Los Angeles, CA 42 12% Julia Browne after    date I promise to pay to the order of  Payable at Value received with interest at                     per annum No.              Due  Oct. 8, 2011 Term Payee Maker Notes Receivable Principal Interest Rate Due Date 7-31
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Or months. Even for maturities less than one year, the rate is annualized. Interest Computation 7-32 Principal of the note × Annual interest rate × Time expressed in years = Interest
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On March 1, 2011, Matrix, Inc. purchased a copier for $12,000 from Office Supplies, Inc. Matrix gave Office Supplies a 9% note due in 3 months in payment for the copier. What is the maturity date of the note? Computing Maturity and Interest 7-33
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Computing Maturity and Interest The note is due and payable on June 1, 2011. How much interest will Matrix pay to Office Supplies, Inc. on this note? 7-34
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Total interest due at June 1. Computing Maturity and Interest Principal of the note × Annual interest rate × Time expressed in months = Interest $ 12,000 × 9% × 3/12 = $ 270 7-35
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Recognizing Notes Receivable Here are the entries to record the note on March 1, and the settlement on June 1, 2011. 7-36 DR CR Mar. 1 Notes Receivable 12,000 Sales 12,000 Sold goods in exchange for note DR CR Jun 1 Cash 12,270 Interest Revenue 270 Notes Receivable 12,000 Collected note and interest due
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Recording End-of-Period Interest Adjustments On December 1, 2011, Matrix, Inc. purchased a copier for $12,000 from Office Supplies, Inc. Matrix issued a 9% note due in 3 months in payment for the copier. What adjusting entry is required on December 31, the end of the company’s accounting period? $12,000 × 9% × 1/12 = $90 7-37 DR CR Dec. 31 Interest Receivable 90 Interest Revenue 90 To accrue interest on note
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Recording End-of-Period Interest Adjustments Recording collection on note at maturity. 7-38 DR CR Mar. 1 Cash 12,270 Interest Receivable 90 Interest Revenue 180 Notes Receivable 12,000 To record full payment of note
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This ratio provides useful information for evaluating how efficient management has been in granting credit to produce revenue. Net sales Average accounts receivable, net Accounts Receivable Turnover 7-39 Accounts receivable turnover =
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