Chapter 7: Q4DQ (page 342)
Why might a business prefer a note receivable to an account receivable?
An organization earnsinterest revenueon anote receivables issued by a debtor.
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Refer to the financial statements and notes of Apple in Appendix A. In its presentation of accounts receivable on the balance sheet, how does it title accounts receivable? What does it report for its allowance as of September 26, 2015?
The following list describes aspects of either the allowance method or the direct write-off method to account for bad debts. For each item listed, indicate if the statement best describes either the allowance (A) method or the direct write-off (DW) method.
5. Sales and any bad debt expense are usually not recorded in the same period; thus, proper matching (of revenue and expense recognition) does not consistently occur.
Daley Company estimates uncollectible accounts using the allowance method at December 31. It prepared the following aging of receivables analysis.
c. Prepare the adjusting entry to record bad debts expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $100 debit.
Explain why writing off a bad debt against the Allowance for Doubtful Accounts does not reduce the estimated realizable value of a company’s accounts receivable.
Refer to the information in Exercise 7-11 and prepare the journal entries for the following selected transactions of Danica Company for 2017. 2017
Jan. 27 Received Lee’s payment for principal and interest on the note dated December 13.
Mar. 3 Accepted a \(5,000, 10%, 90-day note dated March 3 in granting a time extension on the past-due account receivable of Tomas Company.
17 Accepted a \)2,000, 30-day, 9% note dated March 17 in granting H. Cheng a time extension on his past-due account receivable.
Apr. 16 Cheng dishonored his note when presented for payment.
May 1 Wrote off the Cheng account against the Allowance for Doubtful Accounts.
June 1 Received the Tomas payment for principal and interest on the note dated March 3.
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