Exam 7: Cash and Receivables

On January 1, 2014, Lynn Company borrows $2,000,000 from National Bank at 11% annual interest. In addition, Lynn 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 Lynn pays on its $2,000,000 loan is

The category "trade receivables" includes

The opening balance of Accounts Receivable for George Company was $25,000. Net sales (all on account) for the year amounted to $150,000. The Company doesn't offer any cash discount. During the year $130,000 was collected on accounts receivable. Compute accounts receivable turnover ratio for the year.

Which of the following is a method to generate cash from accounts receivable?

Cash equivalents are investments with original maturities of six months or less.

Nenn Co.'s allowance for uncollectible accounts was $190,000 at the end of 2014 and $180,000 at the end of 2013. For the year ended December 31, 2014, Nenn reported bad debt expense of $26,000 in its income statement. What amount did Nenn debit to the appropriate account in 2014 to write off actual bad debts?

Wilkinson Corporation factored, with recourse, $400,000 of accounts receivable with Huskie Financing. The finance charge is 3%, and 5% was retained to cover sales discounts, sales returns, and sales allowances. Wilkinson estimates the recourse obligation at $9,600. What amount should Wilkinson report as a loss on sale of receivables?

Fair Value Option.Ellison Company sells large store-rack systems and frequently accepts notes receivable from customers as payment. Ellison conducts a through credit check on its customers, and it charges a fairly low interest rate (1/2 of 1% payable monthly) on these notes. Ellison has elected to use the fair value option for one of these notes and has the following data related to the carrying and fair value for its note InstructionsPrepare the journal entry at December 31 (Ellison's year-end) for 2014 and 2015, to record the fair value option for these notes.

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

Of the following conditions, which is the only one that is not required if the transfer of receivables with recourse is to be accounted for as a sale?

Use the following information for questions 104 and 105. A trial balance before adjustments included the following: -If the estimate of uncollectibles is made by taking 2% of net sales, the amount of the adjustment is

Equestrain Roads accepted a customer's $50,000 zero-interest-bearing six-month note payable in a sales transaction. The product sold normally sells for $46,000. If the sale was made on June 30, how much interest revenue from this transaction would be recorded for the year ending December 31?

IFRS does not permit the reversal of impairment losses, as does U.S. GAAP.

Equestrain Roads sold $80,000, of goods and accepted the customer's $80,000 10%,1-year note payable in exchange. Assuming 10% approximates the market rate of return, how much interest would be recorded for the year ending December 31 if the sale was made on June 30?

What is the normal journal entry for recording bad debt expense under the allowance method?

Accounts receivable assigned. Prepare journal entries for Mars Co. for: (a) Accounts receivable in the amount of $1,000,000 were assigned to Utley Finance Co. by Mars as security for a loan of $850,000. Utley charged a 3% commission on the accounts; the interest rate on the note is 12%. (b) During the first month, Mars collected $400,000 on assigned accounts after deducting $900 of discounts. Mars wrote off a $1,060 assigned account. (c) Mars paid to Utley the amount collected plus one month's interest on the note.(d) Explain the differences in accounting for a secured borrowing and a sale of receivables.

If a petty cash fund is established in the amount of $250, and contains $150 in cash and $95 in receipts for disbursements when it is replenished, the journal entry to record replenishment should include credits to the following accounts

Which of the following items should not be included in the Cash caption on the balance sheet?

Why would a company sell receivables to another company?

Companies must measure the loss on impairment at an undiscounted amount, not at a present-value amount, when it records the loss.