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9-1
Chapter 9
Accounting for
Receivables
Chapter
9-2 Accounting Principles, Ninth Edition
Study Objectives
Chapter
9-4
Types of Receivables
Chapter
9-5 SO 1 Identify the different types of receivables.
Accounts Receivable
Chapter
9-7 SO 2 Explain how companies recognize accounts receivable.
Recognizing Accounts Receivable
Assets
Current Assets:
Cash $ 346
Accounts receivable 500
Less: Allowance for doubtful accounts 25 475
Merchandise inventory 812
Prepaid expenses 40
Total current assets 1,673
Assets
Current Assets:
Cash $ 346
Accounts receivable, net of $25 allowance
for doubtful accounts 475
Merchandise inventory 812
Prepaid expenses 40
Total current assets 1,673
Illustration 9-3
Percentage-of-Sales
Illustration: Assume that Gonzalez Company elects to use
the percentage-of-sales basis. It concludes that 1% of net
credit sales will become uncollectible. If net credit sales for
2010 are $800,000, the adjusting entry is:
* $800,000 x 1%
Chapter SO 3 Distinguish between the methods and bases
companies use to value accounts receivable.
9-19
Valuing Accounts Receivable
Percentage-of-Sales
Emphasizes the matching of expenses with revenues.
When the company makes the adjusting entry, it
disregards the existing balance in Allowance for Doubtful
Accounts.
Illustration 9-6
Percentage-of-Receivables
Illustration 9-7
Aging schedule
Percentage-of-Receivables
Illustration: If the trial balance shows Allowance for
Doubtful Accounts with a credit balance of $528, the company
will make the following adjusting entry.
* $2,228 - 528
Percentage-of-Receivables
Illustration 9-8
Summary
Percentage of Sales approach:
Focus on “Bad debt expense” estimate, existing
balance in the allowance account is ignored.
Method achieves a matching of cost and revenues.
Chapter
9-25 SO 4 Describe the entries to record the disposition of accounts receivable.
Disposing of Accounts Receivable
Sale of Receivables
A factor buys receivables from businesses and then
collects the payments directly from the customers.
Chapter
9-26 SO 4 Describe the entries to record the disposition of accounts receivable.
Disposing of Accounts Receivable
Cash 588,000
Service charge expense 12,000
Accounts receivable 600,000
Chapter
9-27 SO 4 Describe the entries to record the disposition of accounts receivable.
Disposing of Accounts Receivable
Chapter
9-28 SO 4 Describe the entries to record the disposition of accounts receivable.
Disposing of Accounts Receivable
Cash 970
Service charge expense 30
Sales 1,000
Chapter
9-29 SO 4 Describe the entries to record the disposition of accounts receivable.
Notes Receivable
Chapter
9-30 SO 5 Compute the maturity date of and interest on notes receivable.
Notes Receivable
Chapter
9-31 SO 5 Compute the maturity date of and interest on notes receivable.
Notes Receivable
Computing Interest
Illustration 9-13
Chapter
9-32 SO 5 Compute the maturity date of and interest on notes receivable.
Recognizing Notes Receivable
Chapter
9-33 SO 6 Explain how companies recognize notes receivable.
Notes Receivable
Chapter
9-34 SO 7 Describe how companies value notes receivable.
Notes Receivable
Chapter
9-35 SO 8 Describe the entries to record the disposition of notes receivable.
Notes Receivable
Chapter
9-37 SO 8 Describe the entries to record the disposition of notes receivable.
Notes Receivable
Chapter
9-38 SO 8 Describe the entries to record the disposition of notes receivable.
Notes Receivable
Chapter
9-39 SO 8 Describe the entries to record the disposition of notes receivable.
Notes Receivable
Chapter
9-40 SO 8 Describe the entries to record the disposition of notes receivable.
Statement Presentation and Analysis
Presentation
Identify in the balance sheet or in the notes each
major type of receivable.
B/S Report short-term receivables as current assets.
Report both gross amount of receivables and
allowance for doubtful account.
Report bad debts expense and service charge
expense as selling expenses.
I/S
Report interest revenue under “Other revenues
and gains.”
Chapter
9-41 SO 9 Explain the statement presentation and analysis of receivables.
Statement Presentation and Analysis
Analysis of Receivables
Illustration 9-15
Chapter
9-42 SO 9 Explain the statement presentation and analysis of receivables.
Statement Presentation and Analysis
Analysis of Receivables
Illustration 9-16
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Chapter
9-44