| Course | ACC 317 Intermediate Accounting I |
|---|---|
| Module | Module 5 |
| Paper type | undergraduate receivables assignment on the CECL allowance and factoring |
| Length | About 1,010 words, 6 pages |
| Format | APA 7 student paper |
| School | Southern New Hampshire University |
| Program | BS Accounting |
| Updated | October 2026 |
Free sample paper for ACC 317 Module 5
How Much Will the Dealers Pay? An Expected Credit Loss Allowance and a Factoring Decision for a Composite Hot Tub Manufacturer
[Student Name]
Southern New Hampshire University
ACC 317: Intermediate Accounting I
Module Five Assignment
[Instructor Name]
[Date]
The organization, setting and figures below are a composite written as a model document. No real employer, client, colleague or patient is described.
How Much Will the Dealers Pay? An Expected Credit Loss Allowance and a Factoring Decision for a Composite Hot Tub Manufacturer
Introduction
A composite hot tub manufacturer in the Tennessee foothills sells most of its output on 60-day terms to about 140 independent dealers. At year end its dealer receivables total $8,820,000. Most dealers pay reliably, but receivables grew by more than $1 million during the year and several Gulf Coast dealers have slowed their payments. This assignment estimates the allowance for credit losses under the current expected credit loss model, records the year-end entry, shows how write-offs and recoveries are handled, and evaluates a bank's offer to buy part of the receivables for cash.
The Expected Credit Loss Model
Before 2016, GAAP required an allowance only for losses that had probably already been incurred. The FASB replaced that approach with the current expected credit loss model, under which an entity records its estimate of all credit losses expected over the life of its receivables, using historical experience adjusted for current conditions and reasonable and supportable forecasts (Financial Accounting Standards Board, 2016). For short-term trade receivables, an aging schedule with historical loss rates remains a practical starting point, but the company must then ask whether current conditions or forecasts make those rates too low or too high. Kieso et al. (2019) note that the aging method is favored by auditors because it ties the allowance to the actual composition of receivables at year end, which is also why it adapts well to the new model: each band can carry its own forward-looking judgment.
The change matters most in years like this one. Under the old incurred loss approach, the Gulf Coast dealers' late payments would have justified an allowance only once a specific loss was probable. Under the expected loss model, the deterioration in their region is reason enough to raise the estimate now, before any account is written off, so that the balance sheet shows what the company actually expects to collect.
Aging Schedule and Loss Rates
Loss rates come from five years of collection history, measured as the share of receivables in each band that were eventually written off.
Table 1. Aging Schedule and Historical Loss Estimate
| Age band | Balance | Historical loss rate | Expected loss |
|---|---|---|---|
| Current, not yet due | $6,000,000 | 0.8% | $48,000 |
| 1 to 30 days past due | 1,700,000 | 3% | 51,000 |
| 31 to 60 days past due | 620,000 | 10% | 62,000 |
| 61 to 90 days past due | 290,000 | 25% | 72,500 |
| Over 90 days past due | 210,000 | 60% | 126,000 |
| Total | $8,820,000 | $359,500 |
Forward-Looking Adjustment
Historical rates assume the future will look like the past. Two conditions suggest otherwise this year. Six dealers on the Gulf Coast, owned by one family group and carrying $540,000 of the receivables, lost a season of sales after hurricane damage and are paying 40 to 70 days late. And a regional slowdown in new home construction, which drives much of the demand for backyard tubs, is forecast to continue through the first half of the year. Applying an additional 7.5 percent expected loss to the Gulf Coast group's balances adds $40,500, bringing the required allowance to $400,000. The adjustment is documented with the dealers' payment history and the credit manager's notes, so that the auditors can see the basis for a figure that is, unavoidably, a judgment.
Adjusting Entry, Write-Off and Recovery
During the year the company wrote off $260,000 of uncollectible accounts against the allowance, which left a credit balance of $145,000 before adjustment. Because the aging approach estimates the required ending balance, the expense is the difference.
Table 2. Year-End Entries
| Entry | Debit | Credit | Amount |
|---|---|---|---|
| Adjust allowance to $400,000 | Credit loss expense | Allowance for credit losses | $255,000 |
| Write off a closed dealer's balance (January) | Allowance for credit losses | Accounts receivable | $38,000 |
| Reinstate after partial recovery (March) | Accounts receivable | Allowance for credit losses | $12,000 |
| Collect the recovered amount | Cash | Accounts receivable | $12,000 |
After adjustment, the balance sheet shows accounts receivable of $8,820,000 less an allowance of $400,000, or $8,420,000 net, the figure reported in Module Three. The write-off in January does not affect expense or net receivables, because the loss was already anticipated in the allowance. The recovery is recorded in two steps so that the dealer's account history shows that it eventually paid part of what it owed. That history matters to the credit manager, who uses it when deciding whether to sell to the same owners again under a new dealership name.
Jackson and Liu (2010) found that firms have used the allowance to manage earnings, both by building it in good years and by drawing it down to meet earnings targets. The forward-looking adjustment here is defensible only because it is tied to specific dealers and documented conditions; a round-number cushion added for comfort would not meet the standard.
Factoring Decision
To fund a spring inventory build, the company's bank has offered to buy $2,000,000 of current receivables without recourse, charging a 3 percent fee and holding back 5 percent until the dealers pay. The transfer would surrender control of the receivables to the bank, so it qualifies as a sale.
Table 3. Factoring Entry
| Account | Debit | Credit |
|---|---|---|
| Cash | $1,840,000 | |
| Due from factor (5% holdback) | 100,000 | |
| Loss on sale of receivables (3% fee) | 60,000 | |
| Accounts receivable | $2,000,000 |
The $60,000 fee buys roughly 60 days of financing on $1.9 million, an annualized cost of about 19 percent. The company's credit line charges about 7 percent, so a $1.9 million draw for 60 days would cost about $22,000. Factoring makes sense only if the credit line is fully drawn or if transferring the credit risk of specific dealers is worth the difference. Since $6 million of the receivables are current and the line has room, the company should decline the offer this year.
Conclusion
Under the expected credit loss model, the manufacturer's allowance should be $400,000: $359,500 from historical loss rates and $40,500 for current conditions affecting the Gulf Coast dealers. The year-end entry records $255,000 of credit loss expense, and net receivables are $8,420,000. Factoring would raise cash quickly but at roughly three times the cost of the bank line, so the company should use the line instead.
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). Author.
Jackson, S. B., & Liu, X. (2010). The allowance for uncollectible accounts, conservatism, and earnings management. Journal of Accounting Research, 48(3), 565-601. https://doi.org/10.1111/j.1475-679X.2009.00364.x
Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate accounting (17th ed.). Wiley.
What the ACC 317 Module 5 instructions ask for
The Module Five assignment in ACC 317 usually asks you to account for accounts receivable and sometimes notes receivable. Expect to estimate the allowance for credit losses, often from an aging schedule, record the adjusting entry given the existing allowance balance, and record write-offs and recoveries. Many versions add a transfer of receivables, such as factoring with or without recourse, or a note receivable with interest. Explain the method and the judgment behind the estimate, and note that under current GAAP the allowance reflects expected losses over the life of the receivables, including reasonable forecasts, not only losses already incurred. Present schedules and journal entries clearly and state the effect on the balance sheet and income statement.
How this ACC 317 Module 5 receivables assignment example is built
The sample ages the manufacturer's $8,820,000 of dealer receivables into five bands, from current to over 90 days past due, and applies loss rates drawn from five years of history, giving $359,500. It then adds a $40,500 forward-looking adjustment for a Gulf Coast dealer group whose sales fell after a hurricane season and a regional housing slowdown, setting the required allowance at $400,000. With a $145,000 credit balance before adjustment, the entry records $255,000 of credit loss expense. A write-off and a later recovery are journalized. The paper then analyzes a bank's offer to factor $2 million of receivables without recourse for a 3 percent fee and a 5 percent holdback, and weighs the cost against a draw on the credit line.
Where the ACC 317 Module 5 rubric puts the points
Rubrics for the ACC 317 receivables assignment generally score the allowance calculation, the adjusting entry, the treatment of write-offs and recoveries, any transfer or note, and the explanation of judgments. Top papers compute the required ending allowance first and then the expense as the difference from the existing balance, record write-offs against the allowance rather than expense, and reverse the write-off before recording a recovery. Graders reward awareness that CECL requires forward-looking information. Common deductions include adding the estimate to the existing allowance instead of adjusting to it, recording a factoring fee as interest when the transfer is a sale, and omitting the holdback receivable.
ACC 317 Module 5 help: the mistakes that cost points
The most common mistakes on this assignment are treating the aging estimate as the expense rather than the required ending balance, debiting bad debt expense when an account is written off under the allowance method, and recording a recovery without first reinstating the receivable. With factoring, students often forget the holdback or record the fee as interest when the transfer qualifies as a sale. If your problem uses a percentage of sales approach, includes notes receivable with discounting or asks about recourse, send it and the paper will follow that setup. Check that net receivables on the balance sheet equal gross receivables less the adjusted allowance before you write the explanation.
Get ACC 317 Module 5 written to your instructions
Send the ACC 317 Module 5 problem with its aging or sales data. The paper will compute the allowance, record the adjusting entry, handle write-offs and recoveries, and work any factoring or note in full, with the reasoning shown. The first one costs nothing and is typically ready in two days. The paper above is an original model document written by our desk, not a submitted student paper and not an official Southern New Hampshire University document.
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ACC 317 Module 5 questions, answered
Where can I find a free ACC 317 Module 5 receivables sample?
This page includes a full ACC 317 Module 5 receivables assignment with an aging-based expected credit loss allowance and a factoring analysis.
What is the CECL model?
The current expected credit loss model requires companies to estimate credit losses expected over the life of receivables, using past experience, current conditions and reasonable forecasts.
How do you calculate bad debt expense from an aging schedule?
Use the aging to find the required ending allowance, then record expense equal to the amount needed to bring the existing allowance balance to that figure.
How is a recovery of a written-off account recorded?
First reverse the write-off by debiting accounts receivable and crediting the allowance, then record the cash collection against accounts receivable.
Is factoring receivables without recourse a sale or a loan?
If the transfer meets the criteria for sale accounting, including surrender of control, it is a sale, and the fee is recorded as a loss on sale of receivables.