UT Knoxville ACCT 200 - Review
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ACCT 200 1st Edition Lecture 11 Outline of Last Lecture I. TermsII. Separation of DutiesIII. ReconciliationsIV. Homework 5-8V. Homework 5-10VI. Homework 5-12VII. Homework 5-13VIII. Homework 5-1IX. Homework 5-3Outline of Current Lecture I. ReviewII. Uncollectibles III. Net Realizable ValueIV. EOP adjustmentV. Notes ReceivableVI. Things to rememberVII. Homework 6-2Current LectureI. ReviewThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.a. Receivables—assetsi. Current asset is less than one yearii. Long term asset is greater than one yearb. Accounts receivable—no interestc. Notes receivable—do have interestd. Interest receivable—comes about due to interest earned on a note receivableII. Uncollectibles a. Uncollectibility risk can be reduced by:i. Refusing to sell on account (only accept cash)1. This is a turn off to customersii. Transferring collection risk to credit card company1. Transaction fees can be between 5 and 10 percentiii. Transferring risk to factor (a company that buys another company’s accounts receivable for cash and then they try to collect on the original account receivable)collection agenciesIII. Net Realizable Valuea. If a company determines that their accounts receivable is not providing future value (i.e. it is uncollectible), then they must decrease the asset balance on the balance sheetb. Total estimated uncollectible amount is the allowance for doubtful accountsc. Net Realizable Value (NRV) =the ultimate amount of cash the company expects tocollectd. NRV=accounts receivable - allowance for doubtful accountse. A company comes up with the percentage taken off of accounts receivable based on previous experience with customersIV. EOP adjustmenta. Allowance for doubtful accounts is a contra assetb. Allowance for doubtful accounts also comes out of equityV. Notes Receivable—a note is an unconditional promise (more formal than accounts receivable; legally binding)a. Principal amount (face value)b. Maturity date—due datecollect face value with interesti. **this is the ONLY date CASH is received**c. interest rated. term (from issuance to maturity date)e. Notes receivable are generated when a company:i. Converts an open account receivable to a formal noteii. OR lends money to another businessVI. Things to remembera. MOST MISSED ON TESTwe use double entry accounting meaning every transaction affects two different accountsb. In this class, we use a 360 day yearthis just makes things easier calculation wisec. Interest revenue=principle x rate x timed. On the next exam, you should draw out timelines to help you solve these kinds ofproblemsVII. Homework 6-2a. Notes receivable increases $40,000Accounts receivable decreases $40,000b. $40000 x .09 x 25/360 = $250increase interest received $250increase interest revenue $250c. $40000 x .09 x 20/360 = $200increase cash $40450decrease note receivable ($40000)decrease interest received ($250)increase revenue

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