1. Accounting for Receivables Chapter Seven Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

2. 7-1 Revenue Recognition Event 1 Revenue Recognition During 2011, Allen’s Tutoring Services, a service company, renders services on account for customers in the amount of $14,000.

3. 7-2 Collection for Receivables Event 2 Collection of Receivables During the year, ATS collects cash of $12,500 on its accounts receivable.

4. 7-3 Recognizing Uncollectible Accounts Expense Event 3 Recognizing Uncollectible Accounts Expense Based upon past experience, ATS estimates that $75 of its current accounts receivable balance will eventually prove to be uncollectible.

5. 7-4 Subsequent Period Event 1 Write-Off of an Uncollectible Account Receivable During 2012, ATS determines that an account receivable of $70 will not be collected. The company elects to write-off the account.

6. 7-5 Accounts Receivable Event 2 Revenue Recognition During 2012, ATS renders services on account in the amount of $10,000. Event 3 Collection on Accounts Receivable During 2012, ATS collects $8,430 on its accounts receivable.

7. 7-6 Collect on a Written-off Account Event 4 Reinstatement of Account Written-Off Of the accounts receivable previously written-off, it turns out that the company will collect $10. Event 5 Collection of Recovered Amount Of the accounts receivable previously written- off, it turns out that the company will collect $10.

8. 7-7 Year-End Adjusting Entries Event 6 Adjustment for Bad Debts Expense At the end of 2012, ATS estimates that its bad debts will amount to 1.35% of its service revenue.

9. 7-8 Financial Statements

10. 7-9 Notes Receivable Event 1 Loan of Money On November 1, 2011, ATS loans $15,000 cash to Stanford Cummings. Cummings issues ATS a note promising to repay the loan, with interest, in one year.

11. 7-10 Interest Revenue Event 2 Recognition of Interest Revenue At the end of 2011, ATS must accrue interest on its note receivable. $15,000 × 6% × 2/12 = $150 interest revenue

12. 7-11 Collection of a Note Receivable Event 3 Collection of Principal and Interest On November 1, 2012, ATS collects the principal and interest due on the note receivable. ATS first recognizes interest revenue for the 10 months of 2012. $15,000 × 6% × 10/12 = $750 interest revenue

13. 7-12 Collection of a Note Receivable Event 3 Collection of Principal and Interest Now that the entire $900 of interest receivable has been accrued, ATS records the collection of $15,900 in principal and interest on the note.

14. 7-13 Credit Card Sales Event 1 Recording a Credit Card Sale ATS accepts a credit card in payment for services of $1,000. The credit card company charges a fee of 5% of the transaction.

15. 7-14 Credit Card Sales Event 2 Collection of a Credit Card Receivable ATS collects the full amount due from the credit card company.