Kaplan-University AC 113 Unit 7

Receivables are an important part of business. Companies have to account for uncollectible accounts in order to properly determine cash flow. Inventory and the costing methods used to account for it is another important area of accounting. In this Discussion, you will look at receivables and inventory and how they are reported on the financial statements. The following is an excerpt from a conversation between the office manager, Terry Holland, and the president of Northern Construction Supplies Co., Janet Austel. Northern Construction Supplies sells building supplies to local contractors. Terry: Janet, we’re going to have to do something about these overdue accounts receivable. One-third of our accounts are over 60 days past due, and I’ve had accounts that have stayed open for almost a year! Janet: I didn’t realize it was that bad. Terry: Well, we could stop giving credit. Make everyone pay with cash or a credit card. We accept MasterCard and Visa already, but only the walk-in customers use them.

Almost all of the contractors put purchases on their bills. Janet: Yes, but we’ve been allowing credit for years. As far as I know, all of our competitors allow contractors credit. If we stopped giving credit, we’d lose many of our contractors. They’d just go elsewhere. 75,000. There’s no way they could put that kind of money on a credit card. Terry: That’s a good point. But we have to do something. Janet: How many of the contractor accounts do you actually end up writing off as uncollectible? Terry: Not many. Almost all eventually pay. It’s just that they take so long! Suggest one or more solutions to Northern Construction Supplies Co.’s problem concerning the collection of accounts receivable. This week’s Assignment will introduce you to how to determine due dates and interest amounts on notes, calculate and estimate doubtful accounts, and review lower of cost or marketing analysis for inventory.

Templates are required to use for the Assignments. Download the template from the spreadsheet icon below. To assist you in making sure that you are on the right track with your Assignment, view the solutions to self-check your work. If you have questions, please contact your instructor. Upload your Excel file to the Assignment Dropbox by the end of the unit. Note: In order to ensure full functionality for these homework templates, it is recommended that you download/save each Excel template to your computer in the .xlsx format. Newbury Bikes Co. is a wholesaler of motorcycle supplies. On the basis of the following data, determine the value of the inventory at the lower of cost or market. Which inventory cost flow assumption would value ending inventory at more recent costs? Businesses that sell most of their goods or services for cash and accept only credit cards would use which method of accounting for uncollectible receivables? 1,200 at fiscal year-end prior to adjustment.

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