Assignment from Reading Wk 2

Reading Responses Week Two

ACC-400 Accounting for Decision Making

August 5, 2014

Reading Responses Week Two

Resources: Financial Accounting: Tools for Business Decision Making, Chapter 8

Ch. 8: Questions 3 & 4

3.  As stated by Kimmel, Weygandt, & Kieso (2007), it has three essential features:

1. Estimate uncollectible accounts receivable and match them against revenues in the same accounting period in which the revenues are recorded.
2. Record estimated uncollectibles as an increase (a debit) to Bad Debts Expense and an increase (a credit) to Allowance for Doubtful Accounts (a contra asset account) through an adjusting entry at the end of each period.
3. Debit actual uncollectibles to Allowance for Doubtful Accounts and credit them to Accounts Receivable at the time the specific account is written off as uncollectible (p. 375)

4.  Response question number four from pages 375 – 376:

Cash realizable value is the net amount a company expects to receive in cash; this is after excluding the amount that will not be collected.  This occurs in an adjusting entry.  The entry to record the write-off of an uncollectible account reduces both Accounts Receivable and the Allowance for Doubtful Accounts (Kimmel, Weygandt, & Kieso, 2007).

Ch. 8: Exercise E8-5

1. Total of estimated uncollectible for Hachey Company.

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1. Record  for bad debts expense should read as follows:

2007

Mar 31        Bad Debts Expense                                        $6,712

                        Allowance for Doubtful Accounts                                $6,712

                                (To adjust allowance account to total

estimated uncollectibles)

1. Accounts receivable had a remarkable increase of $18,600 during 2007.  Ratios cannot be determined due to the lack of information for analysis.  However, company need to be more watchful or aggressive in the collection process on account over 60 days.  I will consider to offer customer with over 90-days past due account an additional discount of about a 10% to attempt recovery of the monies.

Resources: Financial and Managerial Accounting: The Basis for Business Decisions

Ch. 9: Exercise E9-9, The Write-Down of Impaired Assets, page 401

1. Companies should always write or report what is true and I understand that this is part of the principles of general accounting. After assessing the real value of the stores, the adjustment of the decreased value entry should be recorded because asset cannot be recovered, (Williams, Haka, & Bettner, 2005).
2. As explained by Williams, Haka, & Bettner (2005), impaired assets produce an expense and the depreciation of the asset reduces net income, but they have no effect on cash flows.  The result is to have net income be less than the net cash flows from operating activities (page 390).

References

Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2007). Financial accounting: Tools for business decision making (4th ed.). Hoboken, New Jersey: John Wiley & Sons.