Fill$-$in$-$the$-$Blank Equations

Accounts receivable $-$ Allowance for doubtful accounts $=$

After the adjusting entry is recorded, Allowance for Doubtful Accounts should always

have :

salance.

Interest :

$$ Interest rate $($ Ter$\frac{m}{360}$ days$)$

$=$ Face amount $+$ Interest

Accounts receivable turnover $=$ Sales,

Days' sales in receivables $\frac{365}{?}$

Exercises

ToolBox Co$.$ sells a large piece of equipment to another company on November $6,20$ Y$5.$

ToolBox Co$.$ receives a down payment of $$1,000$ on the date of sale and will receive a

$$400$ monthly payment on the $15$th of every month, beginning in January of the

following year, for five years. What type of receivable will ToolBox Co$.$ record? Will the

receivable be classified as current or noncurrent:

Bon Firewood sells products to customers at a markup of its original cost. Customers

typically pay on account, but large customers are allowed to receive the products and

pay the amount owed within $30$ days. What type of receivable will Bon Firewood record

for these customers? How will the receivable be classified on the balance sheet?

A small business records its bad debt expense when a customer is identified as being

unable to pay the amount owed. Which method of accounting for uncollectible

receivables does the business use?

Paper Supply Inc. accounts for its uncollectible receivables using the GAAP required

method. Does Paper Supply Inc. use the direct write$-$off or allowance method to account

for its uncollectible receivables?

Kitchen Gadgets estimates its uncollectible accounts as a percentage of credit sales for

the period. Which method of accounting for uncollectible receivables does the business

use?

Prepare the journal entries to record the following transactions for Carolina Costumes

using the direct write$-$off method:

a$.$ Received $$1,450$ from Dillon Berry and wrote off the remainder owed of $$2,130$

as uncollectible on September $12,20$ Y$5.$