《financial Accouning, 9e财务会计 Warren》ch08.pptVIP

Accounts Receivable—used for selling merchandise or services on credit, and normally expected to be collected in a relatively short period. Notes Receivable—used to grant credit on the basis of a formal instrument of credit, called a promissory note. Other Receivables—include interest receivable, taxes receivable, and receivables from officers and employees. Separating the Receivable Functions This method is consistent with the matching principle. Management makes an estimate each year of the portion of accounts receivable that may not be collectible. Uncollectible Accounts Expense is debited and Allowance for Doubtful Accounts is credited. Actual accounts that prove to be uncollectible are debited to Allowance for Doubtful Accounts and credited to Accounts Receivable. This method is not consistent with the matching principle. Accounts that prove to be uncollectible are written off in the year they become worthless. Uncollectible Accounts Expense is debited and Accounts Receivable is credited for each such transaction. Receivables on the Balance Sheet Crabtree Co. Balance SheetDecember 31, 2006 Assets Current assets: Cash $119,500 Notes receivable 250,000 Accounts receivable $445,000 Less allowance for doubtful accounts 15,000 430,000 Interest receivable 14,500 Merchandise inventory 714,000 Total days in note 90 days Number of days in March 31 Issue date of note March 16 Remaining days in March –15 days 75 days Number of days in April –30 days 45 days Number of days in May –31 days Residual days in June 14 days Answer: June 14 Notes Receivable Notes Receivable The amount that is due at the maturity or due date is called the maturity value. Received a $6,000, 12%, 30-day note dated November 21, 2006 in settlement of the account of W. A Bunn Co. Notes Receivable Principal + Interest = Maturity Value $6,000 + $60.00 = $6,060.00 Principal x Rate x Time = Interest $6,000 x 12% x 30/360 = $60.00 Inte