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1、大家好大家好Cash and Receivables2-2.Accounts ReceivableResult from the credit sales of goods or services to customers. Are classified as current assets. Are recorded net of trade discounts. To give quantity discounts to large customersCash discountsCash Discounts2/10,n/30Number of days discount is availab
2、leOtherwise, net (or all) is due CreditperiodDiscount percentCash DiscountsOpportunity cost for Cash discount If interest rate of loan is 18%, a certain company provides credit policy is 2/10,n/30, this credit policy is useful ,or not? Why ?Work in group(10 minutes for discussion)Cash DiscountsSales
3、 are recorded at the invoice amounts.Sales discounts are recorded as reduction of revenue if payment is received within the discount period.Gross MethodSales are recorded at the invoice amount less the discount.Sales discounts forfeited are recordedas interest revenue if payment is received after th
4、e discount period.Net MethodSales DiscountsAlternative Methods of Accounting for Sales DiscountsGross Price MethodGross Price MethodNet Price MethodNet Price MethodSold $7,000 of merchandise to various customers on December 4, 2009 with terms of 2/10, n/30Accounts Receivable 7,000Sales7,000Accounts
5、Receivable 6,860Sales6,860$7,000 - ($7,000 x 0.02)Sales DiscountsAlternative Methods of Accounting for Sales DiscountsGross Price MethodGross Price MethodNet Price MethodNet Price MethodOn December 13 received payment on goods at $5,500. Cash 5,390Sales Discount110Accts. Receivable5,500Cash 5,390Acc
6、ts. Receivable5,390$5,500 - ($5,500 x 0.02)Sales DiscountsAlternative Methods of Accounting for Sales DiscountsGross Price MethodGross Price MethodNet Price MethodNet Price MethodReceived payment on goods at $1,500 on December 30Cash 1,500Accts. Receivable1,500Cash 1,500Accts. Receivable1,470Interes
7、t revenues 30$1,500 - ($1,500 x 0.02)Cash Discounts On October 5, Hawthorne sold merchandise for $20,000 with terms 2/10, n/30. On October 14, the customer sent a check for $13,720 taking advantage of the discount to settle $14,000 of the amount. On November 4, the customer paid the remaining $6,000
8、. Exercise P85 E 2-4Tracy Company, a manufacturer of air conditioners, sold 100 units to Thomas Company on November 17, 2011. The units have a list price of $600 each, but Thomas was given a 30% trade discount. The terms of the sale were 2/10, n/30. Required: 1. Prepare the journal entries to record
9、 the sale on November 17 (ignore cost of goods) and collection on November 26, 2011, gross method 2. Prepare the journal entries to record the sale on November 17 (ignore cost of goods) and collection on December 15, 2011, gross method 3. Repeat requirements 1 and 2 , net method.Answer 2Requirement
10、1Sales price = 100 units x $600 = $60,000 x 70% = $42,000November 17, 2011Accounts receivable42,000Sales revenue 42,000November 26, 2011Cash (98% x $42,000) 41,160Sales discounts (2% x $42,000) 840Accounts receivable42,000Requirement 2November 17, 2011Accounts receivable42,000Sales revenue42,000Dece
11、mber 15, 2011Cash42,000Accounts receivable42,000Requirement 3Requirement 1, using the net method:November 17, 2011Accounts receivable41,160Sales revenue (98% x $42,000) 41,160November 26, 2011Cash41,160Accounts receivable41,160Requirement 2, using the net method:November 17, 2011Accounts receivable4
12、1,160Sales revenue (98% x $42,000)41,160December 15, 2011Cash42,000Accounts receivable41,160Interest revenue 840The net method the net method reflects the reality of the situation-the real price is $41,160 and $840 is an interest for not paying timely. customer should accept cash discount, for the i
13、nterest is high, not 2%, but ($2/$98) *365/20= 37.23% effective rate Certainly, the customer could consider the investment profit for these 20 days. The gross or net method Which is correct? About income statement - no effect ! Gross Method Net MethodSales $20,000 $19,600Less: Sales discounts (280)
14、0Net sales revenue 19,720 19,600Interest revenue 0 120Total revenue $19,720 $19,720About conceptsThe difference is the timing of the recognition of any discounts.the gross method is used by most companies, because it doesnt require adjusting entries for discounts not taken. Subsequent Valuation of A
15、ccounts Receivable 后续计量three situations could cause the cash collected to be less than the initial valuation of the account receivables:(1) cash discount (2) sale return(3) some account receivables cant be collectedMerchandise may be returned by a customer to a supplier.A special price reduction, ca
16、lled an allowance, may be given as an incentive to keep the merchandise.Sales ReturnsOverstate or understate Suppose merchandise is sold for $10,000 in December 2011, the merchandise cost $6,000. If all of the merchandise is returned in 2012.gross profit will be overstated in 2011 and understated in
17、 2012 by $4,000. Assets at the end of 2011 also will be overstated by $4,000 because a $10,000 receivable would be recorded instead of $6,000 in inventory. To avoid misstating the financial statements, sales revenue and accounts receivable should be reduced by the amount of returns in the period of
18、sale if the amount of returns is anticipated to be material. estimated returns by debiting a sales returns account (which is a contra account to sales revenue) and crediting an allowance for sales returns account (which is a contra account to accounts receivable)Sales ReturnsDuring the first year of
19、 operations, Hawthorne sold $2,000,000 of merchandise that had cost them $1,200,000 (60%). experience indicates 10% return. During the year $130,000 was returned prior to customer payment. Record the returns and the end of the year adjustment. Actual ReturnsSales returns130,000Accounts receivable 13
20、0,000Inventory 78,000Cost of goods sold (60%) 78,000Adjusting EntriesSales returns 70,000Allowance for sales returns 70,000Inventory-estimated returns 42,000Cost of goods sold (60%) 42,000If the estimates are correct in the future: Allowance for sales returns 70,000 Accounts receivable 70,000Keyword
21、s 2Allowance method 备抵法Direct write-off method 直接冲销法Bad debts expense 坏账损失Allowance for uncollectible account 坏账准备Percentage of credit sales 销售额百分比法Percentage of accounts receivable 应收账款余额百分比法Aging of accounts receivable 账龄法Desired balance 期望的余额Uncollectible Accounts Receivable Bad debts result from
22、 credit customers who are unable to pay the amount they owe, regardless of continuing collection efforts.Bad debts expense is an inherent cost of providing credit. Its an operating expense incurred to make sales. 提供信贷的固有成本,为提高销售额而发生的营业费用.Uncollectible Accounts ReceivableMost businesses record an est
23、imate of the bad debt expense by an adjusting entry at the end of the accounting period.Bad debt expensexxxAllowance for uncollectible accounts xxxContra asset account toAccounts Receivable.Normally classified asa selling expense andclosed at year-end.Allowance for Uncollectible AccountsNet realizab
24、le value is the amount of the accounts receivable that the business expects to collect.Accounts ReceivableLess: Allowance for Uncollectible AccountsNet Realizable Value1.Relationship to sales (income statement approach):a. Percentage of sales2.Relationship to accounts receivable (balance sheet appro
25、ach):a.Percentage of accounts receivableb.Aging of accounts receivableEstimated Bad Debts MethodIncome Statement ApproachFocuses on past credit sales to make estimate of bad debt expense.Emphasizes the matching principle by estimating the bad debt expense associated with the current periods credit s
26、ales. Bad debt expense is computed as follows:In 2012, MusicLand has credit sales of $400,000 and estimates that 0.6% of credit sales are uncollectible.What is Bad Debt Expense for 2012?Income Statement ApproachMusicLand computes estimated Bad Debt Expense of $2,400.Bad debt expense2,400Allowance fo
27、r uncollectible accounts 2,400Balance Sheet ApproachFocuses on the collectability of accounts receivable to make the estimate of uncollectible accounts.Involves the direct computation of the desired balance in the allowance for uncollectible accounts. Compute the desired balance in the Allowance for
28、 Uncollectible Accounts.Bad Debt Expense is computed as:On Dec. 31, 2012, MusicLand has $50,000 in Accounts Receivable and a $200 credit balance in Allowance for Uncollectible Accounts. Past experience suggests that 5% of receivables are uncollectible. What is MusicLands Bad Debt Expense for 2012?Ba
29、lance Sheet ApproachComposite RateDesired balance in Allowancefor Uncollectible AccountsBalance Sheet ApproachComposite RateBad debt expense2,300Allowance for uncollectible accounts 2,300Year-end Accounts Receivable is broken down into age classifications.Each age grouping has a different likelihood
30、 of being uncollectible.Compute desired balance.Balance Sheet Approach Aging of ReceivablesUse desired balance less the existing balance in theallowance account. At December 31, 2012, the receivables for EastCo, Inc. were categorized as follows:Balance Sheet Approach Aging of ReceivablesBalance Shee
31、t Approach Aging of ReceivablesEastCos existing balance in the allowance account is $500.the desired balance is $1,350.Bad debt expense 850Allowance for uncollectible accounts 850Uncollectible AccountsAs accounts become uncollectible, write-off this count:When a customer makes a payment after an acc
32、ount has been written off, two journal entries are required.Allowance for uncollectible accounts 500Accounts receivable 500Accounts receivable 500Allowance for uncollectible accounts 500Cash500 Accounts receivable 500 Bad debts are simply recorded as they occur (without the use of an allowance accou
33、nt). Direct Write-off MethodBad debts expense xxxAccounts receivable xxxExample 4The following information relates to a companys accounts receivable (AR): AR balance at the beginning of the year, $300,000; allowance for uncollectible accounts at the beginning of the year, $25,000 (credit balance); c
34、redit sales during the year, $1,500,000; AR written off during the year, $16,000; cash collections from customers, $1,450,000. Suppose the company estimates bad debts is equal to 2% of credit sales, calculate : (1) bad debt expense for the year (2) the year-end balance in the allowance for uncollect
35、ible accounts. (3) if bad debts will equal 10% of the year-end balance in accounts receivable ?Answer 1(1) Bad debt expense = $1,500,000 x 2% = $30,000(2) Allowance for uncollectible accounts: Beginning balance$25,000 Add: Bad debt expense30,000 Deduct: Write-offs(16,000) Ending balance$39,000Answer
36、 2(1)Allowance for uncollectible accounts:Beginning balance$ 25,000 Deduct: Write-offs(16,000) desired balance (33,400)*Bad debt expense $24,400(2)desired balance = $334,000* x 10% = $33,400*Accounts receivable:Beginning balance$ 300,000 Add: Credit sales1,500,000 Deduct: Cash collections(1,450,000)
37、 Write-offs (16,000)Ending balance$ 334,000*Exercise P86 E 2-7 2-9Keywords 3Interest-Bearing Notes 带息票据Noninterest-Bearing Notes 不带息票据Face amount (face value) 票面价值Maturity value 到期价值Financial institutions 金融机构secured borrowing 质押取得借款Pledge 质押mortgage 抵押Collateral 担保物Keywords 3sale of receivables 应收债
38、权出售Factoring 应收账款销售Securitization 证券化Discounting 贴现Recourse 追索权with recourse 附追索权without recourse 不附追索权Assigning (法律)把财产、利息等从一人转入另一人 Transferor 让与人，出让人Transferee 受让人Financing With Receivables应收债权融资和出售Companies may use their receivables to obtain immediate cash through financial institutions . Sale o
39、f ReceivablesSale of ReceivablesSecured BorrowingSecured BorrowingReasons: shortens cash in operating cycles;avoid the difficulties of collecting receivables.Ways:Secured BorrowingThe company pledge receivables to borrow money.the financial institution lent the amount of money is less than the amoun
40、t of receivables. The difference provides some protection for possible uncollectible accounts. Also, the financial institution charges the borrower finance charge in addition to interest on the loan. Secured BorrowingOn December 1, 2011, the Santa Teresa Glass Company 从从银行借款行借款 $500,000 ,年利率年利率为12%
41、,按月支付按月支付. The company 以以$620,000 的的应收收账款作款作为贷款担保款担保,银行按抵押行按抵押账款的款的1.5% 收取收取费用用. Teresa Glass records the borrowing as follows:Cash 490,700Finance charge expense* (1.5% $620,000) 9,300 Liability-financing arrangement . 500,00期期间,公司的收公司的收账、现金折扣、金折扣、销售退回、坏售退回、坏账冲冲销等等业务照常照常记录。公司也将向。公司也将向银行行还款。款。12月，月，该
42、公司收回公司收回$400,000的的应收收账款。款。 Santa Teresa Glass records the following entries:Cash 400,000 Accounts receivable 400,000interest expense ($500,000 *12%*1/12) 5,000 liability-financing arrangement 400,000 Cash 405,000Sale of ReceivablesTreat as a sale if all of these conditions are met:receivables are re
43、moved from transferor.transferee has right to deal with receivables.transferor does not have control over the receivables.If the transaction fails to meet the three conditions necessary to be classified as a sale, it will be treated as a secured borrowing.Sale of Receivables Two popular arrangements
44、 used for the sale of receivables are factoring and securitization . Factoring ArrangementsFactor (银行等金融机构行等金融机构)Supplier (Transferor)Retailer 1. Merchandise2. Accounts Receivable3. Accounts Receivable4. Cash5. CashA factor is a financial institution that buys receivablesfor cash, handles the billin
45、g and collection of thereceivables and charges a fee for the service.Factoring the factor only gave the transferor between 65%-90% of the receivables. The remained balance is retained as security until all of the receivables are collected, then gave the transferor the net of the financing fee. The f
46、ee charged by this factor ranges from 3%-6%. Securitization the company creates a special purpose entity (SPE), usually a trust or a subsidiary. The SPE buys a pool of trade receivables, credit card receivables, or loans from the company, and then sells related securities, such as bonds or commercia
47、l paper, that are collateralized by the receivables. Sale of ReceivablesWithout recourseAn ordinary sale of receivables to the factor.all risk of uncollectibility passes to the factor. Control of receivable passes to the factor.With recourseTransferor (seller) retains risk of uncollectibility.the se
48、ller guarantees that the buyer will be paid even if some receivables prove to be uncollectible.Sale of ReceivablesIn December 2011, the Company 将价值$600,000的应收账款出售给 Factor Bank,此为不附追索权的应收债权出售. Factor bank 支付了账面价值的90% (90%$600,000= $540,000), 保留的 10% 包含4% 的费用和垫支在收款中可能发生的sales returns and allowances. 当
49、Factor Bank 收回货款后, 再支付剩余的部分, 估计这10%的债权的公允价值为$50,000.如果是附追索权的应收债权出售, 追追偿金金额为$5,000.If the factor collects all of the receivables, eliminates the recourse liability and increases income U.S. GAAP vs. IFRSU.S. GAAP focuses on whether control of assets has shifted from the transferor to the transferee.
50、The U.S. GAAP and the IFRS approaches often lead to similar accounting treatment for transfers of receivables. IFRS requires a more complex decision process. The company has to have transferred the rights to receive the cash flows from the receivable, and then considers whether the company has trans
51、ferred “substantially all of the risks and rewards of ownership,” as well as whether the company has transferred control.Example H.L Cor. plans to transfer $300,000 of accounts receivable to M.Cor. in exchange for cash. H.L retain all the risks and rewards of ownership but shift control over the rec
52、eivables to M. Assuming all other criteria are met for recognizing a sale, how would H.L account for this transaction under IFRS or U.S. GAAP? Under IFRS, treat as a secured borrowing, because they retain all of the risks and rewards of ownership. Under U.S. GAAP, treat as a sale, because they have
53、transferred control. Notes ReceivableA written promise to pay a specificamount at a specific future date.Even for maturities less than 1 year, the rate is annualized.Interest-Bearing NotesNovember 1, 2012Notes receivable 25,000Cash 25,000December 31, 2012Interest receivable 500Interest revenue 500Ma
54、y 1, 2013Cash 26,500Note receivable 25,000Interest receivable 500Interest revenue 1,000 On November 1, 2012, West, Inc. loans $25,000 to Winn Co. The note bears interest at 12% and is due on May 1, 2013.Prepare the journal entry on November 1, 2012, December 31, 2012, (year-end) and May 1, 2013 for
55、West.Interest-Bearing NotesIn ChinaYear-end, face value of the note should plus the interest of the note.Noninterest-Bearing Notes Actually do bear interest. Interest is deducted from the face value of the note.Noninterest-Bearing NotesOn Jan. 1, 2012, West, Inc. accepted a $25,000 noninterest-beari
56、ng note from Winn, Co as payment for a sale. The note is discounted at 12% and is due on Dec. 31, 2012.Prepare the journal entries on Jan. 1, 2012, and Dec. 31, 2012.January 1, 2012Notes receivable 25,000Discount on notes receivable 3,000Sales revenue 22,000($25,000 * 12% = $3,000)December 31, 2012C
57、ash 25,000Discount on notes receivable 3,000Interest revenue 3,000Note receivable25,000Effective rate is: 3,000/22,000 = 13.6%Noninterest-Bearing Notesin China maturity value is equal to face valueAlso called: NOTES RECEIVED SOLELY FOR CASH 为交交换现金而金而产生的票据生的票据Noninterest-Bearing NotesOn Jan. 1, 2012,
58、 West, Inc. accepted a $25,000 noninterest-bearing note from Winn, Co as payment for a sale. The note is due on Dec. 31, 2012. Prepare the journal entries on Jan. 1, 2012, and Dec. 31, 2012.January 1, 2012Notes receivable 25,000Sales revenue 25,000December 31, 2012Cash 25,000Note receivable25,000 Tr
59、ansfers of Notes ReceivableThe transfer of a note receivable to a financial institution is called discounting.STEP 1: Accrue interest earned on the note receivable prior to its being discounted.STEP 2: Add interest to maturity to calculate maturity value. STEP 3: Deduct discount to calculate cash pr
60、oceeds.Interest receivable 5,000Interest revenue 5,000 Transfers of Notes ReceivableOn December 31, Stridewell accepted a nine-month, 10% note for $200,000 from a customer. Three months later on March 31, Stridewell discounted the note at its local bank. The banks discount rate is 12%. $200,000 10%
61、3/12Before preparing the journal entry to record the discounting, Stridewell must record the accrued interest on the note from December 31 to March 31.Transfers of Notes ReceivableCash 202,100Loss on sale of note receivable 2,900Notes receivable 200,000Interest receivable 5,000$205,000 - $202,100Exercise P 84 BE 2-16$30,000 Face amount 450 Interest to maturity ($30,000 x 6% x 3/12) 30,450 Maturity value (406) Discount ($30,450 x 8% x 2/12) $30,044 Cash proceeds
