Exam 7: Cash and Receivables

On November 1, 2010, Lemon Grove Co.sold $30, 000 of goods and accepted a note bearing 6% interest.The note was due in one year. Required: a. Prepare a reversing entry for January 1, 2011. b. Record the collection of the note on October 31, 2011.

When a company extends credit to its customers, the company realizes it will not likely collect all of the related accounts receivable.As some accounts may prove to be uncollectible, a company must estimate its bad debt expense. Required:

When accounting for uncollectible accounts,

When preparing a bank reconciliation, outstanding checks would be

Which of the following conditions must be met by a company (the transferor)to record the transfer of accounts receivable for which it surrenders control to another company as a sale?

In accounting for sales discounts, most companies use the

Fred's Fruit Smoothies began the year with a $3, 200 credit balance in its Allowances for Doubtful Accounts.During the year, it accrued $22, 000 of bad debt expense and wrote off accounts totaling $27, 000.At year-end, a percentage of the outstanding accounts receivable indicated that a $4, 800 allowance should be provided for on that date.The year-end adjustment for bad debt expense should be

All of the following are necessary components of internal control over cash except

Short-term noninterest-bearing notes receivable are usually recorded at their

Big Stores, Inc., accepts credit cards.The clearinghouse collection fee is 3%.If credit card sales are $75, 000 for the current month, the correct summary journal entry is

Companies should use petty cash funds to

Billings Corporation had total sales in the current year of $600, 000 and credit sales of $550, 000.The Accounts Receivable balance was $350, 000 on the balance sheet date and the Allowance for Doubtful Accounts had a credit balance of $10, 000 before adjusting entries.Bad debt expense is estimated as 2% of credit sales.The adjusting entry to record estimated bad debt expense would include a

On October 1, Bonnie's Online Sales sold goods for $20, 000 and accepted a six-month noninterest-bearing note.Current interest rates were 12%.The December 31 adjusting entry should be

The Steven Co.sells $50, 000 of accounts receivable to a factor and receives 92% of the value of the factored accounts less a 10% commission based on the gross amount of factored accounts receivable.After the journal entry to record this factoring transaction is made, Steven Co.'s total assets will be

The most theoretically sound method of accounting for cash discounts on credit sales is the

Littleton Corporation reports the following information: Balance in National Bank checking account \ 13,002 Certific ates of deposit 4,000 Petty cash 100 Cash on hand 2,580 Employees' IOUs 226 Balance in Society Bank checking account (300) Customer's postdated check 168 Balance in Peopless Savings and Loan savings account 9,000 Required: Compute the correct amount of cash that will appear as a current asset on Littleton Corporation's balance sheet.

Exhibit 7-1 Martin & Cox, Inc.accepted a $50, 000, 8%, 90-day note receivable for services rendered to a client.Thirty days later, Martin & Cox discounted the note at a bank at 10%.Assume interest has not been recognized for the first month. - Refer to Exhibit 7-1.The entry to record the proceeds from the sale of the note would include a

Based on the following information: Credit sales \ 172,000 Collections on accounts receivable during the year 170,000 Cash sales 810,000 Unadjusted balance in Allowance for Doubtful Accounts 40 Sales returns and allowances for credit sales 2,000 Accountsreceivable, beginning of the year 14,000 If bad debts are estimated to be 1 1/2% of ending accounts receivable, the adjusting entry to recognize bad debts will include a debit to Bad Debt Expense for

Which of the following is an advantage of using the net price method for recording cash discounts on credit sales?

Nontrade receivables, such as deposits with utility companies or advances to subsidiary companies, should be