Exam 7: Cash and Receivables

Wellington Corp. has outstanding accounts receivable totaling $5 million as of December 31 and sales on credit during the year of $25 million. There is also a debit balance of $20,000 in the allowance for doubtful accounts. If the company estimates that 8% of its outstanding receivables will be uncollectible, what will be the balance in the allowance for doubtful accounts after the year-end adjustment to record bad debt expense?

Jones Company has notes receivable that have a fair value of $570,000 and a carrying amount of $750,000. Jones decides on December 31, 2014, to use the fair value option for these recently-acquired receivables. Which of the following entries will be made on December 31, 2014 to record the unrealized holding gain/loss?

Lankton Company has the following account balances at year-end: Lankton should report accounts receivable at a net amount of

AG Inc. made a $15,000 sale on account with the following terms: 2/10, n/30. If the company uses the net method to record sales made on credit, what is/are the debit(s) in the journal entry to record the sale?

Recognition of a recourse liability will make a loss on sale of receivables larger than it would otherwise have been.

Assuming that the ideal measure of short-term receivables in the balance sheet is the discounted value of the cash to be received in the future, failure to follow this practice usually does not make the balance sheet misleading because

Tresh, Inc. had the following bank reconciliation at March 31, 2014: All reconciling items at March 31, 2014 cleared the bank in April. Outstanding checks at April 30, 2014 totaled $6,000. There were no deposits in transit at April 30, 2014. What is the cash balance per books at April 30, 2014?

On January 1, 2014, West Co. exchanged equipment for a $600,000 zero-interest-bearing note due on January 1, 2017. The prevailing rate of interest for a note of this type at January 1, 2014 was 10%. The present value of $1 at 10% for three periods is 0.75. What amount of interest revenue should be included in West's 2015 income statement?

Entries for bad debt expense. A trial balance before adjustment included the following: Give journal entries assuming that the estimate of uncollectibles is determined by taking (1) 5% of gross accounts receivable and (2) 1% of net sales.

Laventhol Corporation had accounts receivable of $100,000 at 1/1. The only transactions affecting accounts receivable were sales of $1,200,000 and cash collections of $1,150,000. The accounts receivable turnover is

Sun Inc. factors $3,000,000 of its accounts receivables without recourse for a finance charge of 5%. The finance company retains an amount equal to 10% of the accounts receivable for possible adjustments. Sun estimates the fair value of the recourse liability at $115,000. What would be recorded as a gain (loss) on the transfer of receivables?

Which of the following statements is correct regarding receivables?

Black Corporation had a 1/1/14 balance in the Allowance for Doubtful Accounts of $18,000. During 2014, it wrote off $12,960 of accounts and collected $3,780 on accounts previously written off. The balance in Accounts Receivable was $360,000 at 1/1 and $432,000 at 12/31. At 12/31/14, Black estimates that 5% of accounts receivable will prove to be uncollectible. What should Black report as its Allowance for Doubtful Accounts at 12/31/14?

Which of the following is a general rule of classifying receivables?

Jenny Manufactures sold toys listed at $240 per unit to Jack Inc. for $204, a trade discount of 15 percent. Jack Inc. in turn sells the toys in the market at $225. Jenny should record the receivable and related sales revenue (per unit) at:

On June 1, 2014, Yang Corp. loaned Gant $400,000 on a 12% note, payable in five annual installments of $80,000 beginning January 2, 2015. In connection with this loan, Gant was required to deposit $4,000 in a zero-interest-bearing escrow account. The amount held in escrow is to be returned to Gant after all principal and interest payments have been made. Interest on the note is payable on the first day of each month beginning July 1, 2014. Gant made timely payments through November 1, 2014. On January 2, 2015, Yang received payment of the first principal installment plus all interest due. AtDecember 31, 2014, Yang's interest receivable on the loan to Gant should be

Use the following information to answer Question 1 and 2. Harrison Company has a loan receivable with a carrying value of $15,000 at December 31, 2013. On January 3, 2014, the borrower, Thomas Clark Imports, declares bankruptcy, and Harrison estimates that it will collect only 60% of the loan balance. -Assume that on January 5, 2015, Harrison learns that Thomas Clark Imports has emerged from bankruptcy. As a result, Harrison now estimates that all but $1,500 will be repaid on the loan. Under IFRS, which of the following entries would be made on January 5, 2015?

For the year ended December 31, 2014, Dent Co. estimated its allowance for uncollectible accounts using the year-end aging of accounts receivable. The following data are available: After year-end adjustment, the uncollectible accounts expense for 2014 should be

For receivables sold with recourse, the seller guarantees payment to the purchaser if the debtor fails to pay.

Equestrain Roads sold $80,000, of goods and accepted the customer's $80,000 10%,1-year note receivable in exchange. Assuming 10% approximates the market rate of return, what would be the debit in this journal entry to record the sale?