Exam 7: Cash and Receivables

On January 1, 2006, Marr Co.exchanged equipment for a $400,000 zero-interest-bearing note due on January 1, 2009.The prevailing rate of interest for a note of this type at January 1, 2006 was 10%.The present value of $1 at 10% for three periods is 0.75.What amount of interest revenue should be included in Marr's 2007 income statement?

Trade receivables include notes receivable and advances to officers and employees.

Which of the following is true when accounts receivable are factored without recourse?

Travel advances should be reported as

Use the following information for questions On February 1, 2007, Norton Company factored receivables with a carrying amount of $300,000 to Koch Company.Koch Company assesses a finance charge of 3% of the receivables and retains 5% of the receivables.Relative to this transaction, you are to determine the amount of loss on sale to be reported in the income statement of Norton Company for February. -Assume that Norton factors the receivables on a with recourse basis.The recourse obligation has a fair value of $1,500.The loss to be reported is

The following accounts were abstracted from Todd Co.'s unadjusted trial balance at December 31, 2007: Debit Credit Accounts receivable \ 750,000 Allowance for uncollectible accounts 8,000 Net credit sales \ 3,000,000 Todd estimates that 2% of the gross accounts receivable will become uncollectible.After adjustment at December 31, 2007, the allowance for uncollectible accounts should have a credit balance of

The percentage-of-sales method results in a more accurate valuation of receivables on the balance sheet.

Mortonson Corporation factored, with recourse, $300,000 of accounts receivable with Huskie Financing.The finance charge is 3%, and 5% was retained to cover sales discounts, sales returns, and sales allowances.Mortonson estimates the recourse obligation at $7,200.What amount should Mortonson report as a loss on sale of receivables?

Delgado Corporation had a 1/1/07 balance in the Allowance for Doubtful Accounts of $20,000.During 2007, it wrote off $14,400 of accounts and collected $4,200 on accounts previously written off.The balance in Accounts Receivable was $400,000 at 1/1 and $480,000 at 12/31.At 12/31/07, Delgado estimates that 5% of accounts receivable will prove to be uncollectible.What is Bad Debt Expense for 2007?

Marley Company received a seven-year zero-interest-bearing note on February 22, 2007, in exchange for property it sold to O'Rear Company.There was no established exchange price for this property and the note has no ready market.The prevailing rate of interest for a note of this type was 7% on February 22, 2007, 7.5% on December 31, 2007, 7.7% on February 22, 2008, and 8% on December 31, 2008.What interest rate should be used to calculate the interest revenue from this transaction for the years ended December 31, 2007 and 2008, respectively?

Peterson Company has the following items at year-end: Cash in bank \ 30,000 Petty cash 500 Short-term paper with maturity of 2 months 8,200 Postdated checks 2,100 Peterson should report cash and cash equivalents of

Which of the following is considered cash?

Companies include postdated checks and petty cash funds as cash.

On January 1, 2007, Mann Company borrows $2,000,000 from National Bank at 11% annual interest.In addition, Mann is required to keep a compensatory balance of $200,000 on deposit at National Bank which will earn interest at 5%.The effective interest that Mann pays on its $2,000,000 loan is

Which of the following is a method to generate cash from accounts receivable? Assignment Factoring a. Yes No b. Yes Yes c. No Yes d. No No

When buying receivables with recourse, the purchaser assumes the risk of collectibility and absorbs any credit loss.

For the year ended December 31, 2007, Colt Co.estimated its allowance for uncollectible accounts using the year-end aging of accounts receivable.The following data are available: Allowance for uncollectible accounts, 1 / 1 / 07 \5 6,000 Provision for uncollectible accounts during 2007 (2\% on credit sales of \ 2,000,000) 40,000 Uncollectible accounts written off, 11/30/07 46,000 Estimated uncollectible accounts per aging. 12/31/07 69,000 After year-end adjustment, the uncollectible accounts expense for 2007 should be

Companies record and report long-term notes receivable at the present value of the cash they expect to collect.

Trade discounts are used to avoid frequent changes in catalogs and to alter prices for different quantities purchased.

All claims held against customers and others for money, goods, or services are reported as current assets.