ACCT 2010 Exam 4 Test Questions and All Correct Answers Updated.

receivables - Answer right to receive cash in future for a current transaction 3 types of receivables: - Answer a. accounts receivable (trade) - selling of goods or services b. notes receivable - written promise to pay specified amount by a certain date (loan) c. other receivables - rent, dividends, interest, etc. receivables MUST be recorded at their ____ on the balance sheet - Answer NET REALIZABLE VALUE (amount they will actually collect) formula for NRV - Answer total AR balance - allowance for doubtful accounts 2 different types of bad debt expense: - Answer a. direct write-off method - not GAAP b. allowance method - required by GAAP, sticks to matching principle for both methods: - Answer 1. GAAP or non-GAAP 2. pros 3. cons 4. journal entries: recording of receivable, setting up allowance, writing off receivables, recovery of receivables, collection of receivables methods to estimate bad debt expense under ALLOWANCE method: - Answer a. percentage of sales b. percentage of accounts receivable c. aging of accounts receivables (KNOW) aging of accounts receivables: - Answer a. step 1 - determind "target" amount for the allowance account, based on total balance in each category (1-30 days, 30-60 days, etc) multiplied by percentage for that category b. step 2 - determine bad debt expense by comparing "target" to current balance in allowance account. the difference is bad debt expense for the period. interest can be either - Answer annual or partial year