| Course | ACC-6040 Fundamentals of Accounting I |
|---|---|
| Module | Module 4 |
| Paper type | Written Assignment 4: revenue, receivables and cash at the rink |
| Length | About 732 words, 5 pages |
| Format | APA 7 student paper |
| School | Thomas Edison State University |
| Program | Master of Science in Accounting |
| Updated | October 2026 |
Free sample paper for ACC 6040 Module 4
Net Revenue, Doubtful Leagues and a Bank Statement: Garden State Ice Rinks' Receivables and Cash in 2027
Student Name
Master of Science in Accounting, Thomas Edison State University
ACC-6040: Fundamentals of Accounting I
Mentor Name
Month Day, Year
Net Revenue, Doubtful Leagues and a Bank Statement: Garden State Ice Rinks' Receivables and Cash in 2027
Introduction
Revenue on the income statement should reflect what the company expects to collect. Libby et al. (2017) present the adjustments that move gross revenue toward that figure: sales discounts, returns and allowances, and, for receivables, an allowance for amounts that will prove uncollectible. Cash, the most liquid asset, needs controls to make sure the balance is real.
Problem 1: Net Revenue
In 2027 Garden State recorded gross revenue of $2,140,000 across its two rinks. Customers paid $1,180,000 by credit card, on which processors charged 2.5%, or $29,500. Hockey leagues and schools, which buy ice time on credit, received terms of 2/10, n/30, and leagues paying within ten days took $11,600 of discounts.
Sales discounts reduce revenue because they reduce what customers pay; card fees are a cost of offering a payment method and are usually reported as an expense. Either way, the rink keeps less than its gross revenue.
| Net revenue, 2027 | Amount |
|---|---|
| Gross revenue | $2,140,000 |
| Sales discounts taken by leagues | (11,600) |
| Net revenue | 2,128,400 |
| Credit card processing fees, reported as a selling expense | 29,500 |
Problem 2: The Allowance Method
At December 31, 2027, receivables from leagues, schools and party customers total $184,000. An aging analysis estimates the amount that will not be collected.
Monthly provisions during the year added $5,800 to the allowance, which began the year at zero. A defunct travel hockey club's $4,200 balance was written off, debiting the allowance and crediting accounts receivable. In November the club's former treasurer paid $1,000 of it, reinstating that amount in the receivable and recording the cash. After these entries the allowance had a credit balance of $2,600 before adjustment, so the year-end adjustment is $9,820 minus $2,600, or $7,220, bringing total bad debt expense for 2027 to $13,020. Net receivables on the balance sheet are $174,180.
The allowance method matches expected losses to the period of the sale. Since 2023 private companies, like listed ones, must provide for credit losses expected over a receivable's whole life, so the rink starts from its aging schedule and adjusts it for today's economy. The direct write-off method, used for tax purposes, is not acceptable under GAAP when losses are material. Current U.S. rules require the allowance to reflect expected lifetime credit losses rather than losses already incurred (Financial Accounting Standards Board, 2016).
| Age | Balance | Estimated uncollectible | Required allowance |
|---|---|---|---|
| Not yet due | $128,000 | 1% | $1,280 |
| 1 to 30 days past due | 34,000 | 6% | 2,040 |
| 31 to 90 days past due | 15,000 | 20% | 3,000 |
| More than 90 days past due | 7,000 | 50% | 3,500 |
| Total | $184,000 | 5.4% blended | $9,820 |
Problem 3: Receivables Turnover
Garden State collects more slowly than its peer, mostly because it extended credit to new school customers when the second rink opened. The aging schedule shows $22,000 more than 30 days past due, which supports tightening terms or requiring deposits for school bookings. The allowance deserves a reader's attention because McNichols and Wilson (1988) found companies bending the bad debt provision to shape earnings; a slower turnover alongside a flat allowance is the pattern to watch.
| Measure | Garden State | Peer rink operator |
|---|---|---|
| Net credit revenue | $960,000 | $1,450,000 |
| Average receivables, beginning $26,000 and ending $174,180 | $100,090 | $118,000 |
| Receivables turnover | 9.6 times | 12.3 times |
| Average days to collect: 365 / turnover | 38 days | 30 days |
Problem 4: The Bank Reconciliation
Only the book side items require entries: a debit to bank fees expense, a debit to accounts receivable for the returned check and a credit to interest revenue, with offsetting cash entries. Separating the duties of receiving cash, recording it and reconciling the bank account makes it harder for errors or theft to go undetected.
The reconciliation is a control as well as a calculation. Prepared monthly by someone who neither receives cash nor signs checks, it catches errors and theft quickly. Outstanding checks and deposits in transit need no entry, because the bank will record them shortly; they explain timing differences rather than mistakes.
| Bank side | Amount |
|---|---|
| Balance per bank statement, December 31 | $318,400 |
| Add deposit in transit from New Year's Eve skating | 12,900 |
| Deduct outstanding checks | (21,600) |
| Adjusted bank balance | $309,700 |
| Book side | Amount |
| Balance per books | $311,250 |
| Deduct bank service and card terminal fees | (350) |
| Deduct school check returned for insufficient funds | (1,800) |
| Add interest earned on the operating account | 600 |
| Adjusted book balance | $309,700 |
References
Financial Accounting Standards Board. (2016). Financial instruments, credit losses (Topic 326): Measurement of credit losses on financial instruments (Accounting Standards Update No. 2016-13).
Libby, R., Libby, P. A., & Hodge, F. (2017). Financial accounting (9th ed.). McGraw-Hill Education.
McNichols, M., & Wilson, G. P. (1988). Evidence of earnings management from the provision for bad debts. Journal of Accounting Research, 26, 1-31. https://doi.org/10.2307/2491176
ACC 6040 Module 4 instructions, in plain terms
Sales revenue, receivables and cash are the subject of Written Assignment 4. Expect problems on sales discounts, returns and allowances, credit card fees, the allowance method by percentage of sales or aging, write-offs and recoveries, receivables turnover and days to collect, and cash controls including bank reconciliations. The problem set was created for this sample; they continue the invented rink operator, now with a full year and two rinks, so its balances connect with earlier assignments. Expect an aging schedule in most versions. The prompts typically cover sales with card fees and early-payment terms, an aging schedule, a write-off, a later recovery, turnover ratios and a bank reconciliation.
How the ACC 6040 Module 4 example is put together
The introduction explains why reported revenue and receivables are adjusted toward collectible amounts. Problem 1 computes net revenue and explains the different treatment of discounts and card fees. Problem 2 presents an aging schedule, records a write-off and recovery and computes bad debt expense from the allowance's balance before adjustment. Problem 3 computes turnover and days to collect, compares them with a peer and draws a credit policy conclusion, with research on the bad debt provision. Problem 4 reconciles the bank statement in two tables and states which items need entries and why. The analysis closes with the receivables turnover ratio. Each entry is shown with the reason it is needed, and the receivables turnover is interpreted against the rink's credit terms.
Where the marks sit in the ACC 6040 Module 4 rubric
Revenue and receivables problems count within the five-assignment group worth 25 percent. On this module, mentors check net revenue computations, the aging-based allowance, correct treatment of write-offs and recoveries, bad debt expense computed from the allowance's balance before adjustment, accurate turnover ratios with interpretation and a bank reconciliation in which both sides agree and only book side items are recorded. Explaining what the ratios mean for credit policy demonstrates understanding beyond computation. An aging schedule that totals to the allowance balance, and entries for the write-off and recovery that leave net receivables correct, demonstrate command of the method.
Common ACC 6040 Module 4 mistakes, and how to avoid them
Marks are lost for booking the target allowance as the expense while ignoring what the account already holds, for expensing write-offs under the allowance method and for journalizing items only the bank needs to record. Keep the allowance account in a T-account through the year: beginning balance, write-offs, recoveries, then the adjustment. Use average receivables for turnover. For each reconciling item, ask which side, bank or rink, has already recorded it. Prepare the aging schedule first, then compute the adjustment needed to bring the allowance to the required balance, remembering any existing balance in the account. A recovery takes two entries: put the receivable back, then record the cash. A free first sample of your own ACC-6040 Module 4 problems is available on request.
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ACC 6040 Module 4 questions, answered
Where can I find a free ACC 6040 Module 4 sample paper?
The rink's receivables and cash assignment is reproduced above: net revenue after discounts, an aging-based allowance with a write-off and recovery, turnover against a peer and a bank reconciliation.
How is bad debt expense computed with an aging schedule?
Use the aging to find the allowance you need, then book only the top-up from the balance already there.
How is a recovery of a written-off account recorded?
Reinstate the receivable by reversing the write-off for the amount recovered, then record the cash collection.
What does receivables turnover measure?
How many times a year average receivables are collected; dividing 365 by turnover gives average days to collect.
Are credit card fees deducted from revenue?
They are usually reported as a selling expense, while sales discounts are deducted from revenue.