| Course | AC300 Intermediate Accounting I |
|---|---|
| Unit | Unit 7 |
| Paper type | Receivables valuation problem |
| Length | About 600 words, 5 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | BS in Accounting |
| Updated | October 2026 |
Free sample paper for AC300 Unit 7
Past Losses Adjusted for a Slowdown: A Unit 7 Expected Credit Loss Estimate and a $400,000 Factoring, Two Ways
[Student Name]
Purdue University Global
AC300: Intermediate Accounting I
Unit 7 Receivables Valuation Problem
[Instructor Name]
[Date]
Clearspan Glass & Glazing, its customers, the factor and all figures are composite; the standards and textbook cited are real.
Aging With Adjusted Loss Rates, December 31
Each band shows the balance, the historical loss rate, the forecast-adjusted rate and the expected loss.
1. Current: $520,000; 0.8 percent; 1.0 percent; $5,200.
2. 1 to 30 days past due: $180,000; 2.0 percent; 2.5 percent; $4,500.
3. 31 to 60 days: $90,000; 6.0 percent; 7.5 percent; $6,750.
4. 61 to 90 days: $40,000; 15.0 percent; 18.0 percent; $7,200.
5. Over 90 days: $20,000; 40.0 percent; 45.0 percent; $9,000.
Total receivables: $850,000. Required allowance: $32,650.
Historical rates alone would have required $27,160. The difference, $5,490, reflects management's forecast: general contractors' backlogs fell sharply in the fourth quarter, and two of Clearspan's largest customers have slowed their payments.
Why the Rates Were Adjusted
The current expected credit loss model requires the allowance to reflect losses expected over each receivable's life, starting from Clearspan's own loss history and then moving it for what is happening now and what can sensibly be predicted (Financial Accounting Standards Board, 2016). Clearspan raised each band's rate by about a quarter, a judgment documented in a memo citing the contractors' backlog data and its own recent collection trend.
The forecast adjustment adds $5,490 to the allowance before a single customer has defaulted, because the model asks what the receivables will actually yield, not only what similar receivables yielded in past years.
A Note on Retainage
Glazing contractors usually wait for part of each bill. General contractors hold back retainage, often 5 to 10 percent, until a building is finished and accepted. Clearspan's $850,000 excludes $96,000 of retainage, which is aged separately because its collection depends on project completion rather than on the invoice date. A slowdown that delays completions delays retainage too, so the same forecast should inform that estimate.
Allowance Adjustment
Existing allowance: $18,400 credit. Required: $32,650. Adjustment: $14,250. Entry: Credit Loss Expense, debit $14,250; Allowance for Credit Losses, credit $14,250. Net receivables: $850,000 minus $32,650 equals $817,350.
Factoring $400,000 of Current Receivables
Clearspan transfers $400,000 of current receivables to a factor, which charges a 3 percent fee, $12,000, and holds back 5 percent, $20,000, until customers pay.
Treatment A, a sale. The transfer is without recourse, Clearspan surrenders control, and the receivables are legally isolated from it, so the sale conditions for transfers of financial assets are met (Financial Accounting Standards Board, 2009). Entry: Cash, debit $368,000; Due From Factor, debit $20,000; Loss on Sale of Receivables, debit $12,000; Accounts Receivable, credit $400,000.
Treatment B, a secured borrowing. The agreement lets Clearspan repurchase the receivables at will and gives the factor full recourse, so Clearspan keeps effective control and the conditions fail. Entry: Cash, debit $368,000; Finance Charge Expense, debit $12,000; Liability to Factor, credit $380,000. The $400,000 of receivables stays on Clearspan's balance sheet, and the liability is reduced as customers pay the factor.
Comparing the Two
Cash received is the same, $368,000. Under Treatment A, receivables and the allowance attached to them leave the books and the fee is a loss. Under Treatment B, receivables stay, a liability appears, and the fee is a financing cost. A lender reading the balance sheet sees $380,000 more debt under Treatment B, which is why the terms, not the label, decide the accounting (Kieso et al., 2019).
References
Financial Accounting Standards Board. (2009). Accounting for transfers of financial assets: An amendment of FASB Statement No. 140 (Statement of Financial Accounting Standards No. 166). https://www.fasb.org
Financial Accounting Standards Board. (2016). Financial instruments, credit losses (Topic 326): Measurement of credit losses on financial instruments (Accounting Standards Update No. 2016-13). https://www.fasb.org
Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate accounting (17th ed.). Wiley.
AC300 Unit 7 instructions, in plain terms
The seventh AC300 unit covers receivables, and the problem usually pairs an estimate of uncollectible accounts with a transfer such as factoring or pledging. Begin with an aging schedule that shows each band's balance and rate. Under the current expected credit loss model, the rate starts from history and is adjusted for current conditions and reasonable forecasts, so say what changed and by how much. Compute the required allowance and the adjustment from the existing balance, then record it. For the transfer, apply the three sale conditions: legal isolation, the transferee's right to pledge or exchange, and no effective control kept by the transferor. Record both treatments when the prompt asks for a comparison. Explain how each treatment changes the balance sheet a lender reads. Show net receivables after the adjustment. Cite the 2016 credit loss update and the transfer standard in APA 7.
How the AC 300 Unit 7 example is put together
The sample presents the aging schedule as five numbered bands, each with balance, historical rate, adjusted rate and expected loss, totaling $32,650. It contrasts that with $27,160 from history alone and gives the reason for the $5,490 difference. A section links the higher rates to the 2016 credit loss update and its life-of-asset view. The highlighted sentence explains that the forecast raises the allowance before any customer defaults. A short section explains why retainage is aged separately. The allowance entry and net receivables of $817,350 follow. The factoring section sets out the 3 percent fee and 5 percent holdback, records Treatment A as a sale with a receivable from the factor, and records Treatment B as a borrowing when recourse and a repurchase right keep control with Clearspan. A comparison shows equal cash and $380,000 more debt under the borrowing.
Reading the AC300 Unit 7 grading rubric
AC300 points for this problem go first to the aging computation and the allowance entry, since every later figure depends on them. The adjustment must be the difference between required and existing balances, not the required total. Forecast adjustments earn credit only when they are explained with evidence, such as backlog data or collection trends. The transfer section is graded on whether the three sale conditions are applied, not just named. Entries must show the holdback as an asset and the fee as a loss under sale treatment, or as a finance charge under borrowing treatment. A comparison of the two balance sheets shows analysis. Some Purdue Global sections weigh the explanation as heavily as the numbers, so a paragraph per decision protects the grade. Labeled steps and APA 7 references to the authoritative updates finish the problem.
Common AC300 Unit 7 mistakes, and how to avoid them
Students often record the required allowance as the expense, ignoring the existing balance. Others apply historical rates without any forecast adjustment, which reflects the old incurred loss approach. Retainage is sometimes mixed into the aging schedule as if it were overdue. On the transfer, the holdback is treated as part of the loss, or the receivables are removed even when the company keeps a repurchase right. Recourse alone is sometimes assumed to make a transfer a borrowing, when the test is control. Some papers state the conditions in a list and never apply them to the facts. A problem answered with numbers and no reasons leaves the grader nothing to credit when one figure is off. If your problem uses pledging, assignment or a note receivable instead, our accountants can work it through with the same structure.
Get an AC300 Unit 7 example written to your instructions
Aging figures, loss history and forecast facts drive part one; transfer terms drive part two. With those from your Unit 7 problem, plus the rubric and instructions, both parts are worked and the sale conditions tested before any entry. Turnaround is 24-48h, and the first custom sample carries no fee. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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AC300 Unit 7 questions, answered
What if the course still uses the incurred loss approach?
Some AC300 materials predate the current expected credit loss model, and their problems estimate uncollectible accounts from history alone. The aging mechanics stay the same; only the adjustment column disappears. Whichever model the problem names governs, and where the facts mention a forecast, a sentence notes that the newer model requires the forecast to be reflected.
When is a transfer of receivables a borrowing instead of a sale?
When any of the three conditions fails, most often because the contractor keeps effective control, for example through an agreement to repurchase the receivables. The receivables then stay on the balance sheet, the cash received is recorded as a liability, and the fee becomes interest expense over the borrowing period. That version appears as well when a problem asks for the contrast.
Why does the holdback not count as part of the loss?
Because the factor returns it once customers pay, less any returns or allowances the contract names. Until then it is an asset, a receivable from the factor. Only the 3 percent fee, plus any recourse obligation, is a cost of the transfer. Many AC300 problems include a holdback specifically to see whether it is mistaken for part of the fee.
Where can I find a free AC300 Unit 7 sample paper?
This page holds a complete AC300 Unit 7 receivables problem for a composite glazing contractor, with a forecast-adjusted aging, a $14,250 allowance entry, a $400,000 factoring recorded two ways and APA 7 references.
Why does the AC300 Unit 7 allowance rise before any customer defaults?
Clearspan's estimate has to cover losses over each receivable's life, not just those already incurred. Clearspan's forecast of slower construction raises each band's rate, adding $5,490 to what history alone would require.