Accounting for uncollectibles
What is an Uncollectible recorded as?
An Expense
What is the formula for Accounts
Receivables?
Beginning Balance
+ Sales on Account
- Cash collections
- Write-offs
Ending balance
What is the formula to calculate interest?
P x R x T
What is the formula for Straight Line Deprecation when determining the cost of an asset?
(Original Cost - Salvage) / Useful Life
What is the largest number on a multi-step income statement?
Sales
What is the impact of a write off
Net receivables stay the same
What is the formula for Allowance for Doubtful Accounts?
Beginning Balance
+ Estimated Uncollectibles
-Write-offs
Ending Balance
How do we classify the money we lend from a Note receivable
IA
How is accumulated depreciation calculated
Sum of all depreciation expense
What is a Gain?
Increase net income
• Not expected to recur from year-to-year
• Example: Selling land for more than we paid for it
How to calculate Net Receivables
Acc Receivables - ADA
What is the cashflow for accrued interest at year end?
0
What is the formula for determining Book Value?
Original Cost - Accumulated Depreciation
What is a Loss?
Decrease net income
• Not expected to recur from year-to-year
• Example: Selling land for less than we paid for it
How does the year-end adjustment to recognize uncollectible accounts expense affect the elements of the financial statements?
Decrease total assets and decrease stockholders’ equity. NRV Accounts Receivable decreases and Uncollectible Expense is recorded.
How is the cash we receive at the end from a Note Recievable, shown on the statement of cash flows?
IA - amount loaned out
OA - amount received from Interest Receivable
Where is a gain/loss shown on the income statement?
Other operating expenses
What items are included in the Non Operating Section of the Income Statement
+ Interest Receivable
- Interest Expense
+ Gains
- Losses
On January 1, Year 1, the Accounts Receivable balance was $24,200 and the balance in the Allowance for Doubtful Accounts was $2,500. On January 15, Year 1, an $710 uncollectible account was written-off. What is the net realizable value of accounts receivable immediately after the write-off?
$21,700
Before Write-Off: 24,200
Accounts Receivable - 24,200
Less: Allowance for Doubtful Accounts - (2,500)
After Write-Off
Accounts Receivable - 23,490
Less: Allowance for Doubtful Accounts -(1,790)
NRV Accounts Receivable
21,700 = 21,700
On August 1, Year 1 Western Company loaned $40,000 cash to Eastern Company. The one-year note carried a 6% rate of interest. The amount of interest revenue on the income statement and the amount of cash flow from operating activities shown on Western’s December 31, Year 1 financial statements would be
$1,000 interest revenue and zero cash flow from operating activities.
P x R x T = 40,000 x .06 x 5/12 = $1,000, No cash inflow for interest earned occurs in Year 1.
What is the format/all elements in order of a Multi-Step Income Statement? (8 items)
Sales
Less: Cost of Goods Sold
= Gross Margin (or Gross Profit)
Less: Operating Expenses
= Operating Income
Non operating items
+/- Other income/expense
= Net income