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Wiley CPAexcel Exam Review 2014 Focus Notes: Financial Accounting and Reporting by Ray Whittington

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Focus on: Monetary Assets and Liabilities—Module 12

Bank Reconciliation

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Accounts Receivable

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Net realizable value = Accounts receivable – Allowance for Uncollectible Accounts

Uncollectible Accounts

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Allowance Methods—GAAP

Matching concept—Bad debt expense in period of sale
Measurement concept—Accounts receivable at net realizable value

Direct Write-off Method—Non-GAAP

Violates matching concept—Bad debt expense when account written off
Violates measurement concept—Accounts receivable overstated at gross amount

Notes Received for Cash

Calculating Payment

Principal amount ÷ Present value factor = Payment amount

Present value factor for annuity based on number of payments and interest rate

Allocating Payments

Payment amount – Interest = Principal reduction

Calculating Interest

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Notes Received for Goods or Services

Note Balance

Short term: Amount = Face value

Long term: Amount = Fair value of goods or services

Present value of payments if fair value not known

Journal entry:

Note receivable—Face amount (given) xxx
Revenue—Calculated amount
xxx
Discount on note receivable ...

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