西方财务会计-Chapter课件

Chapter6AccountsReceivableAndNotesReceivableChapter6AccountsReceivableA1IntroductionInadditiontocash,cashequivalents,andshort-terminvestments,thecurrent(liquid)assetsofanentityincludereceivablesthatresultfromcreditsalestocustomers.Thesereceivablesinclude(1)accountsreceivablesand(2)notesreceivable.IntroductionInadditiontocas2AccountsReceivable

Accountsreceivablearerelativelyliquidasset,usuallyconvertingintocashwithinaperiodof30to60days.Therefore,accountsreceivablefromcustomersareclassifiedascurrentasstsandarelistedinthebalancesheetimmediatelyaftercashandshort-terminvestments.

AccountsReceivableAcco3AccountsReceivableThreeImportantConceptsaboutA/R1.CashDiscounts(SalesDiscounts)2.SalesReturnsandAllowances

3.BadDebts(UncollectibleAccounts)

AccountsReceivableThreeImpo4UncollectibleAccounts

Whenacompanygrantscredittoitscustomers,thereusuallyareafewwhodonotpaywhattheypromised.Theaccountsofsuchcustomersarecalleduncollectibleaccountsorbaddebts.Thebaddebtsamountsthatcannotbecollectedisanexpenseofsellingoncredit.Whenthebaddebtexpenseisrecorded,acontraassetaccount–Allowanceforuncollectibleaccountsisestablishedtoreportaccountsreceivableinthebalancesheetattheamountsexpectedtobecollected.UncollectibleAccountsWh5UncollectibleAccountsReceivableWhencreditisextended,someamountofuncollectiblereceivablesisgenerallyinevitable.Ifuncollectiblereceivablesareprobableandcanbeestimated,anestimateshouldbemadeoftheamountuncollectibleandrecordedintheperiodinwhichtherevenuewasproduced(allowancemethod).Wecanalsowriteoffuncollectibleaccountsdirectlytoanexpenseaccountifwedon’twanttomaintainanallowanceaccountforaccountsreceivable(directwritingoffmethod)UncollectibleAccountsReceiva6AllowanceMethodWhenweestimatetheamountofouruncollectiblereceivables,wemakethefollowingadjustingentry:TheAllowanceforDoubtfulAccountsisacontraaccounttoAccountsReceivables.AllowanceMethodWhenweestima7AllowanceMethod

Asaccountsbecomeuncollectible,thefollowingentryismade:ThebalanceintheAllowanceaccountreducesAccountsReceivableontheBalanceSheet.AllowanceMethodAsaccountsb8AllowanceMethodIfanaccountpreviouslywrittenoffprovestobecollectibleinasubsequentperiod,thefollowingentriesaremade:AllowanceMethodIfanaccount9EstimatingBadDebtsCreditSalesMethodAccountsReceivableMethodAgingofaccountsreceivableEstimatingBadDebtsCreditSal10EstimatingBadDebts:

CreditSalesMethodThismethodemphasizesthematchingprinciple

andisconsideredanincomestatementapproach.Anaveragepercentagerelationshipbetweenactualbaddebtlossesandnetcreditsalesisdeterminedbasedonhistoricalinformation.Andthepercentageisappliedtocurrentperiodnetcreditsalestoestimatebaddebtexpensefortheyear.EstimatingBadDebts:

CreditS11CreditSalesMethod

Example

Renco,Inc.EstimateofBadDebtsSalesfor19X92,000,000$Cashsalesduringtheperiod(250,000)

Netcreditsales1,750,000

Baddebtpercentage1.25%Baddebtexpense21,875$

CreditSalesMethod

ExampleRe12CreditSalesMethod

ExampleCreditSalesMethod

Example13AccountsReceivableMethod

ExampleSingleCompositeRateCrecore,Inc.determinedthatthebalanceintheAllowanceforDoubtfulAccountsshouldbe2.5%ofAccountsReceivable.Atyear-endAccountsReceivablehadabalanceof$191,000,andtheAllowanceaccounthadacreditbalanceof$1,250.PreparetheadjustingentrytorecordBadDebtExpense.AccountsReceivableMethodEx14AccountsReceivableMethod

ExampleAccountsReceivableMethodEx15AccountsReceivableMethod

ExampleAccountsReceivableMethod

Exa16TheWayofDisposingBadDebts

Writingoffuncollectibleaccounts(textbook)

Duringthefollowingyear,thecompanywillfindthatsomeofitsaccountsarenotcollectible.Whenalleffortstocollectanaccountfail,theaccountiswrittenoff.IfthecompanydecidestowriteoffBaker’s$200past-dueaccount,Feb.6AllowanceforUncollectibleAccounts200AccountsReceivable200

TheWayofDisposingB17Notice:writingoffabaddebtdoesnotaffectowners’equity,nordoesitchangethenetamountofaccountsreceivable.Seepage138Iftheestimateofdoubtfulaccountswasagoodone,mostoftheallowanceaccountwillbeusedupbytheendofthenextaccountingperiod.Theamountremaininginthisaccountattheendoftheyear,whetheradebitoracredit,isagainadjustedtobringtheaccounttotheproperbalancewhenanewestimateismade.Notice:writingoffabaddebt18Collectingwritten-offaccounts

Occasionallyanaccountthatwaswrittenofislatercollected.Forexample,TrammelCorporationcollectsa$80accountthatwaswrittenoflastyear.Mar.11AccountsReceivable80AllowanceforUncollectibleAccounts80TorestorePalmer’saccountpreviouslywrittenoff.11Cash80AccountsReceivable80CollectedPalmer’saccount.Collectingwritten-offaccount19DirectwritingoffmethodDirectwritten-offmethodtowriteofftheactualbaddebts___whenanaccountisconsideredtobeuncollectible,thefollowingentrymaybemade:BadDebtsExpense###AccountsReceivable###Towriteoffsomebody’saccount.___Noadjustingentrytomadeattheendoftheaccountingperiod.DirectwritingoffmethodDirec20NotesReceivable

Apromissorynoteisalegaldocumentsignedbythemaker,orborrower,promisingtopaytothelender,orpayee,theprincipalamountofthenoteplusinterestatastatedrate.Anotereceivableisanpromissorynote.(seenextslide)

NotesReceivableApromi21NotesReceivableAnunconditionalwrittenpromise...

Made&signedbythemaker(borrower)...

Topaythebearerorstatedpayee...

Adefiniteamountofmoney...NotesReceivableAnuncondition22NotesReceivableFrequentlybusinessesacceptnotesfromtheircustomersinexchangeformerchandiseorforaccountsreceivablethatthecustomerdoesnotpaywhendue.Thebusinessmayacceptthenotetoaccommodatethecustomerortomakethesale,whichmightbelostifcashpaymentwererequired.Anotecanbesoldtoabankorotherinstitutionwhentheholderneedscash(discounting).Inthiscase,thepayeeendorsesthenotebysigningitontheback(endorsement).NotesReceivableFrequentlybu23AccountingForNotesReceivable

Anotereceivedfromacustomersisanassetbecauseitbecomesaclaimagainstthebuyersfortheamountdue.OnDec.1BeylorCompanyreceiveda$6,00060-day9percentnotefromMissMendozaforservicesperformed.Dec.1NotesReceivable6,000ServiceRevenue6,000received60-day9percentnotefromMendoza.

AccountingForNotesReceivabl24AccountingForNotesReceivable

AtDecember31,theendofthecompany’sfiscalyear,theinterestearnedtodateonnotesreceivableshouldbeaccruedbyanadjustingentryasfollows:Dec.31Interestreceivable45Interestrevenue45

toaccrueinterestforthemonthofDecemberonMissMendozanote($6000*9%*1/12=$45)AccountingForNotesReceivabl25AccountingForNotesReceivableSixtydayslaterwhenthenoteiscollectedJan.30Cash6,090NotesReceivable6000InterestReceivable45InterestRevenue45

AccountingForNotesReceivabl26SimpleInterestNote(example)OnNovember1,19X5,Winn,Inc.loans$25,000toWestward,Co.Thenotebearsinterestat12%andisdueonNovember1,19X6.PreparethejournalentryonNovember1,19X5,December31,19X5(year-end)andNovember1,19X6.SimpleInterestNote(example27SimpleInterestNote

(example)SimpleInterestNote(example28SimpleInterestNote

(example)$25,000×12%=$3,000-$500=$2,500SimpleInterestNote(example29DishonoredNotesAnotethatisnotrenewedorcollectedatmaturityisdishonored.Interestcontinuestoaccrueonthematurityvalueofthenote.Ifthenotecannotbecollected,theamountofthelossdependsuponwhetherithasalreadybeenconsideredinthebaddebtestimation.DishonoredNotesAnotethatis30AccountingForNotesReceivable:DishonoredNotes

Sometimeswhenanotematures,thecustomerisunableorunwillingtopaythedebt.AtthattimethenoteshouldbetransferredfromNotesReceivabletoaspecialaccountfordishonorednotes.

AccountingForNotesReceivabl31DishonoredNotesIfMendozadoesnotpayhernotewhendue,Jan.30AccountsReceivable6,090NotesReceivable6,000InterestRevenue45InterestReceivable45

torecordnoteindefault

Theinterestrevenuehasbeenearnedandisthereforerecorded.

DishonoredNotesIfMendozadoe32AccountingForNotesReceivable:DishonoredNotes

If,however,thecompanyisnotsuccessfulincollectingthenote,orifitcollectsonlyapartofthenote,alossisincurred.

AccountingForNotesReceivabl33DishonoredNotesForexample,BeylorCompanymayturnthedefaultednoteovertoacollectionagency.Iftheagencycollectsthenoteandchargesafeeof40percentoftheamountcollected,July29Cash3,654

LossonDefaultedNote2,436AccountsReceivable6,090

Receivedproceedsofpast-duenotefromcollectionagency.

note:Thelossmayalsoberecordedasacollectionexpense.DishonoredNotesForexample,B34DiscountingNotesReceivable

Ifabusinessneedscashanddoesnotwishtoholditsnotestomaturity,itcandiscountnoteswithabankinexchangeforcash.Thebankbuysthenotesandholdsthemtomaturity,earninginterestonitsinvestment.Whenabankdiscountsanotereceivable,itfirstcalculatesthematurityvalueofthenote.Then,usingitsowndiscountrate,itcalculatestheamountofinterestthatitwillchargeforthenote.Theinterestchargebythebankiscalculatedonthematurityvalueofthenoteandisdeductedfromthematurityvaluetoarriveattheamountofproceeds,whichthebankpaystothesellerofthenote.DiscountingNotesReceivable35DiscountingNotesReceivableNoteissoldtoafinancialinstitution.

Discountfeeisthediscountratetimesthematurityvalueofthenoteforthetimeremainingtomaturity.

Makerofthenotepaysthefinancialinstitutionatmaturity.DiscountingNotesReceivableNo36DiscountingNotesReceivable:(example)

IfBeylordiscountstheMendozanoteimmediatelyuponreceivingit,andthebankchargesa10percentdiscountrate,Maturityvalue$6,090.00Less:Discount101.50Proceedstoseller$5,988.50

DiscountingNotesReceivable:37DiscountingNotesReceivable(example)Dec.1Cash5,988.50InterestExpense11.50NotesReceivable6,000discountedMendozanoteat10percent.

Note:theInterestExpenserepresentsthecostofobtainingcashtoday,ratherthanwaitinguntilthematures.Thebank’sdiscountrateishigherthantheinterestratethatwillbepaidbythenote;therefore,Baylormustmakeupthedifferencetothebank.DiscountingNotesReceivable(e38DiscountingNotesReceivable:(example)

IfBeylorhadwaited30daysbeforediscountingthenote,then

Maturityvalue$6,090.00Less:Discount50.75Proceedstoseller$6,039.25

DiscountingNotesReceivable:39DiscountingNotesReceivable:(example)Dec.31Cash6,039.25NotesReceivable6,000InterestRevenue39.25

discountedMendozanoteat10percent

DiscountingNotesReceivable:40DiscountingNotes:

(exerciseforstudents)OnMay30,Apexdiscountsacustomer’s$25,000noteatthebank.ThenotewasdatedMay1andmaturesin90days.Thenotebearsinterestat12%andthebankchargesadiscountof15%onthematurityvalueofthenote.

Preparethejournalentrytorecordthediscountingofthenote.DiscountingNotes:

(exercise41DiscountingNotes:

(answer)DiscountingNotes:

(answer)426.3-3SellingNotesReceivableCreatesContingentLiabilities

Whenanoteisdiscountedwiththebank,thesellerofthenoteisliabletothebankfortheproceedsonthenotesifthemakerdoesnotpay.Acontingentliabilityarisingfromdiscountingofnotesmustbedisclosedinthefinancialstatements.Thisisusuallyaccomplishedbymeansofafootnoteindicatingtheamountofthediscountednotesandexplainingthatthereisacontingentliabilityforthisamount.

Inourexample,ifthemakerofthenotedoesnotpaythebankatmaturity,Beylorwillhavetopaythebank$6,090.BeylormaydiscloseitscontingentliabilityinitsDec.31’sbalancesheetthroughsomefootnote.(seetextbook)6.3-3SellingNotesReceivable43SellingNotesReceivableCreatesContingentLiabilities

Ifthemakerofthediscountednotedefaultsonthenote,thebankreturnsthenotetotheendorseranddemandspayment.

Forourexample,assumethattheMendozanotewasdiscountedonDec.31,aspreviouslyillustrated.OnJan.30thenoteisnotpaidaspromised.ThebankreturnsthenotetoBeylorCompanyandcollectsthematurityvalue.Jan.30AccountsReceivable6,090Cash6,090BeylorwillnowattempttocollectthenotefromMendoza.Ifitsucceedsincollectingonlypartofthenote,theremainderiswrittenoffasaloss.SellingNotesReceivableCreat44SellingNotesReceivableCreatesContingentLiabilities

Iffinancialstatementsarepreparedbeforethenoteiscollected,theaccruedinterestrevenuemustberecorded,andtheportionofthediscountthathasbeenearnedmustbewrittenoff.ByDecember31,interestforsixmonthshasbeenearnedonthenote,partasaccruedinterestandpartasexpireddiscount.SellingNotesReceivableCreat45西方财务会计-Chapter课件46Chapter6AccountsReceivableAndNotesReceivableChapter6AccountsReceivableA47IntroductionInadditiontocash,cashequivalents,andshort-terminvestments,thecurrent(liquid)assetsofanentityincludereceivablesthatresultfromcreditsalestocustomers.Thesereceivablesinclude(1)accountsreceivablesand(2)notesreceivable.IntroductionInadditiontocas48AccountsReceivable

Accountsreceivablearerelativelyliquidasset,usuallyconvertingintocashwithinaperiodof30to60days.Therefore,accountsreceivablefromcustomersareclassifiedascurrentasstsandarelistedinthebalancesheetimmediatelyaftercashandshort-terminvestments.

AccountsReceivableAcco49AccountsReceivableThreeImportantConceptsaboutA/R1.CashDiscounts(SalesDiscounts)2.SalesReturnsandAllowances

3.BadDebts(UncollectibleAccounts)

AccountsReceivableThreeImpo50UncollectibleAccounts

Whenacompanygrantscredittoitscustomers,thereusuallyareafewwhodonotpaywhattheypromised.Theaccountsofsuchcustomersarecalleduncollectibleaccountsorbaddebts.Thebaddebtsamountsthatcannotbecollectedisanexpenseofsellingoncredit.Whenthebaddebtexpenseisrecorded,acontraassetaccount–Allowanceforuncollectibleaccountsisestablishedtoreportaccountsreceivableinthebalancesheetattheamountsexpectedtobecollected.UncollectibleAccountsWh51UncollectibleAccountsReceivableWhencreditisextended,someamountofuncollectiblereceivablesisgenerallyinevitable.Ifuncollectiblereceivablesareprobableandcanbeestimated,anestimateshouldbemadeoftheamountuncollectibleandrecordedintheperiodinwhichtherevenuewasproduced(allowancemethod).Wecanalsowriteoffuncollectibleaccountsdirectlytoanexpenseaccountifwedon’twanttomaintainanallowanceaccountforaccountsreceivable(directwritingoffmethod)UncollectibleAccountsReceiva52AllowanceMethodWhenweestimatetheamountofouruncollectiblereceivables,wemakethefollowingadjustingentry:TheAllowanceforDoubtfulAccountsisacontraaccounttoAccountsReceivables.AllowanceMethodWhenweestima53AllowanceMethod

Asaccountsbecomeuncollectible,thefollowingentryismade:ThebalanceintheAllowanceaccountreducesAccountsReceivableontheBalanceSheet.AllowanceMethodAsaccountsb54AllowanceMethodIfanaccountpreviouslywrittenoffprovestobecollectibleinasubsequentperiod,thefollowingentriesaremade:AllowanceMethodIfanaccount55EstimatingBadDebtsCreditSalesMethodAccountsReceivableMethodAgingofaccountsreceivableEstimatingBadDebtsCreditSal56EstimatingBadDebts:

CreditSalesMethodThismethodemphasizesthematchingprinciple

andisconsideredanincomestatementapproach.Anaveragepercentagerelationshipbetweenactualbaddebtlossesandnetcreditsalesisdeterminedbasedonhistoricalinformation.Andthepercentageisappliedtocurrentperiodnetcreditsalestoestimatebaddebtexpensefortheyear.EstimatingBadDebts:

CreditS57CreditSalesMethod

Example

Renco,Inc.EstimateofBadDebtsSalesfor19X92,000,000$Cashsalesduringtheperiod(250,000)

Netcreditsales1,750,000

Baddebtpercentage1.25%Baddebtexpense21,875$

CreditSalesMethod

ExampleRe58CreditSalesMethod

ExampleCreditSalesMethod

Example59AccountsReceivableMethod

ExampleSingleCompositeRateCrecore,Inc.determinedthatthebalanceintheAllowanceforDoubtfulAccountsshouldbe2.5%ofAccountsReceivable.Atyear-endAccountsReceivablehadabalanceof$191,000,andtheAllowanceaccounthadacreditbalanceof$1,250.PreparetheadjustingentrytorecordBadDebtExpense.AccountsReceivableMethodEx60AccountsReceivableMethod

ExampleAccountsReceivableMethodEx61AccountsReceivableMethod

ExampleAccountsReceivableMethod

Exa62TheWayofDisposingBadDebts

Writingoffuncollectibleaccounts(textbook)

Duringthefollowingyear,thecompanywillfindthatsomeofitsaccountsarenotcollectible.Whenalleffortstocollectanaccountfail,theaccountiswrittenoff.IfthecompanydecidestowriteoffBaker’s$200past-dueaccount,Feb.6AllowanceforUncollectibleAccounts200AccountsReceivable200

TheWayofDisposingB63Notice:writingoffabaddebtdoesnotaffectowners’equity,nordoesitchangethenetamountofaccountsreceivable.Seepage138Iftheestimateofdoubtfulaccountswasagoodone,mostoftheallowanceaccountwillbeusedupbytheendofthenextaccountingperiod.Theamountremaininginthisaccountattheendoftheyear,whetheradebitoracredit,isagainadjustedtobringtheaccounttotheproperbalancewhenanewestimateismade.Notice:writingoffabaddebt64Collectingwritten-offaccounts

Occasionallyanaccountthatwaswrittenofislatercollected.Forexample,TrammelCorporationcollectsa$80accountthatwaswrittenoflastyear.Mar.11AccountsReceivable80AllowanceforUncollectibleAccounts80TorestorePalmer’saccountpreviouslywrittenoff.11Cash80AccountsReceivable80CollectedPalmer’saccount.Collectingwritten-offaccount65DirectwritingoffmethodDirectwritten-offmethodtowriteofftheactualbaddebts___whenanaccountisconsideredtobeuncollectible,thefollowingentrymaybemade:BadDebtsExpense###AccountsReceivable###Towriteoffsomebody’saccount.___Noadjustingentrytomadeattheendoftheaccountingperiod.DirectwritingoffmethodDirec66NotesReceivable

Apromissorynoteisalegaldocumentsignedbythemaker,orborrower,promisingtopaytothelender,orpayee,theprincipalamountofthenoteplusinterestatastatedrate.Anotereceivableisanpromissorynote.(seenextslide)

NotesReceivableApromi67NotesReceivableAnunconditionalwrittenpromise...

Made&signedbythemaker(borrower)...

Topaythebearerorstatedpayee...

Adefiniteamountofmoney...NotesReceivableAnuncondition68NotesReceivableFrequentlybusinessesacceptnotesfromtheircustomersinexchangeformerchandiseorforaccountsreceivablethatthecustomerdoesnotpaywhendue.Thebusinessmayacceptthenotetoaccommodatethecustomerortomakethesale,whichmightbelostifcashpaymentwererequired.Anotecanbesoldtoabankorotherinstitutionwhentheholderneedscash(discounting).Inthiscase,thepayeeendorsesthenotebysigningitontheback(endorsement).NotesReceivableFrequentlybu69AccountingForNotesReceivable

Anotereceivedfromacustomersisanassetbecauseitbecomesaclaimagainstthebuyersfortheamountdue.OnDec.1BeylorCompanyreceiveda$6,00060-day9percentnotefromMissMendozaforservicesperformed.Dec.1NotesReceivable6,000ServiceRevenue6,000received60-day9percentnotefromMendoza.

AccountingForNotesReceivabl70AccountingForNotesReceivable

AtDecember31,theendofthecompany’sfiscalyear,theinterestearnedtodateonnotesreceivableshouldbeaccruedbyanadjustingentryasfollows:Dec.31Interestreceivable45Interestrevenue45

toaccrueinterestforthemonthofDecemberonMissMendozanote($6000*9%*1/12=$45)AccountingForNotesReceivabl71AccountingForNotesReceivableSixtydayslaterwhenthenoteiscollectedJan.30Cash6,090NotesReceivable6000InterestReceivable45InterestRevenue45

AccountingForNotesReceivabl72SimpleInterestNote(example)OnNovember1,19X5,Winn,Inc.loans$25,000toWestward,Co.Thenotebearsinterestat12%andisdueonNovember1,19X6.PreparethejournalentryonNovember1,19X5,December31,19X5(year-end)andNovember1,19X6.SimpleInterestNote(example73SimpleInterestNote

(example)SimpleInterestNote(example74SimpleInterestNote

(example)$25,000×12%=$3,000-$500=$2,500SimpleInterestNote(example75DishonoredNotesAnotethatisnotrenewedorcollectedatmaturityisdishonored.Interestcontinuestoaccrueonthematurityvalueofthenote.Ifthenotecannotbecollected,theamountofthelossdependsuponwhetherithasalreadybeenconsideredinthebaddebtestimation.DishonoredNotesAnotethatis76AccountingForNotesReceivable:DishonoredNotes

Sometimeswhenanotematures,thecustomerisunableorunwillingtopaythedebt.AtthattimethenoteshouldbetransferredfromNotesReceivabletoaspecialaccountfordishonorednotes.

AccountingForNotesReceivabl77DishonoredNotesIfMendozadoesnotpayhernotewhendue,Jan.30AccountsReceivable6,090NotesReceivable6,000InterestRevenue45InterestReceivable45

torecordnoteindefault

Theinterestrevenuehasbeenearnedandisthereforerecorded.

DishonoredNotesIfMendozadoe78AccountingForNotesReceivable:DishonoredNotes

If,however,thecompanyisnotsuccessfulincollectingthenote,orifitcollectsonlyapartofthenote,alossisincurred.

AccountingForNotesReceivabl79DishonoredNotesForexample,BeylorCompanymayturnthedefaultednoteovertoacollectionagency.Iftheagencycollectsthenoteandchargesafeeof40percentoftheamountcollected,July29Cash3,654

LossonDefaultedNote2,436AccountsReceivable6,090

Receivedproceedsofpast-duenotefromcollectionagency.

note:Thelossmayalsoberecordedasacollectionexpense.DishonoredNotesForexample,B80DiscountingNotesReceivable

Ifabusinessneedscashanddoesnotwishtoholditsnotestomaturity,itcandiscountnoteswithabankinexchan