Page 407 - Accounting Principles (A Business Perspective)

9. Receivables and payables

http://www.invesco.com
Follow some of the other options available at the site. Write a report to your instructor on your experience,
describing some of the things you learned at this site. You may want to pretend that you invested in one or more of

these funds for the duration of the quarter or semester and see how your investment would have fared during that
period. Many investors with a limited amount to invest can have a diversified portfolio by investing in mutual
funds. Thus, they spread their risk by investing in a mutual fund that, in turn, invests in many different companies.
Visit Procter & Gamble's site at:
http://www.pg.com
Procter & Gamble markets more than 250 brands to nearly five billion consumers in over 140 countries. Click on
any items that deal with financial news, annual report summary, stock quote, and anything else that looks

interesting. Write a memo to your instructor summarizing your findings. Include in your memo some of the
financial highlights contained in the annual report summary.
Answers to self test
True-false
False. The percentage-of-sales method estimates the uncollectible accounts from the net credit sales or net
sales of a given period.

False. Uncollectible accounts expense is recognized at the end of the accounting period in an adjusting entry.
True. The retailer deposits the credit card invoices directly in a special checking account.
False. Liabilities result from a past transaction.
True. Current liabilities are classified into those three categories.
True. The note has passed its maturity date and should be removed from the Notes Receivable account. The
maturity value plus any protest fee should be debited to Accounts Receivable.
False. Discount on Notes Payable is recorded when a non interest-bearing note is issued.

Multiple-choice
d. A write-off of an account receivable results in a debit to Allowance for Uncollectible Accounts and a credit to
Accounts Receivable for the same amount. The net amount (accounts receivable minus allowance for uncollectible
accounts) does not change.
a. The uncollectible accounts expense for 2010 is computed as follows:
Allowance balance after adjustment
($200,000 X 0.05) $ 10,000
Balance before adjustment ( 3,000)
Uncollectible accounts expense $7,000
c. Manufacturing companies tend to have the longest operating cycle. They must invest cash in raw materials,
convert these raw materials into work in process and then finished goods, sell the items on account, and then collect
the accounts receivable.
USD265,000
b. =USD 250,000;
1.06
USD 265,000 - USD 250,000 = USD 15,000.
c. 2,000×5 per cent=100 machines isdefective.
100 - 30 already returned = 70 more expected to be returned.
70×USD200=USD14,000estimated product warranty payable.

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