Objectives: Chapter Seven
The following learning objectives for this chapter map to the curriculum design for our online university-level courses. These courses are offered through Utah State University, and result in the awarding of up to 6 hours of highly transferrable college credit. To learn more, check out the classroom link.
The costs and benefits of selling on credit.
Understand the costs and benefits of credit.
Note the distinction between trade and nontrade receivables.
Identify the benefits to a firm that arise out of credit card sales.
What is the difference (operationally and from an accounting perspective) between bank and nonbank card sales?
Accounting considerations for uncollectible receivables.
Be able to apply the direct write-off method.
Know the deficiencies of the direct write-off method.
Understand the general impact of the allowance methods for uncollectible accounts.
Know why an allowance method is preferred over the direct write-off approach.
Alternative approaches to account for uncollectibles.
Define "net realizable value."
Apply the balance sheet approaches to estimate uncollectible accounts.
Be able to prepare an aging of accounts receivable.
Apply the income statement approaches to estimate uncollectible accounts.
Know how to write off an account, and reinstate an account previously written off, using the allowance method.
Be able to calculate accounts receivable turnover and days outstanding, and understand the importance of these measures.
Notes receivable and interest, including dishonored obligations.
What is the difference between an account receivable and a note receivable?
Be able to define terms related to notes (e.g., maker, payee, principal, etc.).
How is "interest" on an obligation calculated?
Be able to account for the various phases in the life cycle of a note, including issuance, interest accruals, and maturity.
Know how to account for the dishonor of a note.