Exam 6: Cash and Receivables

You are in the process of preparing a bank reconciliation for Charter Boat Company as of May 31. Listed below is information necessary to prepare the reconciliation. Required: In the spaces provided, place the appropriate letter to indicate whether each item of information should be a. deducted from the balance per bank statement b. added to the balance per bank statement c. deducted from the balance per company records d. added to the balance per company records e. omitted from the reconciliation

Which method for estimating uncollectible accounts receivable is considered to be income-statement oriented?

Angler Fish Co. factored $540,000 of its accounts receivable to Gause Finance Co. Gause Finance advanced 85% of the factored receivables and charged a 10% commission on the gross amount of the receivables. All conditions for a sale have been met. Required: Prepare the journal entries necessary to record the following: a. The sale of the receivables. b. Sales Returns and Allowances of $2,200 on a factored account. c. The conclusion of the sale agreement when Angler would collect any balance remaining.

A student in the accounting principles course comes to you, an upper-division accounting major, for an explanation of the difference between the gross price and net price methods of recording credit sales. The principles student wants to know why, if there is no difference in net income, a company would prefer one method over the other. Required: Explain the basics of each method, how each method is reported on the income statement, and the advantages and disadvantages of each method.

Prior to recording the recovery and collection of a $2,200 account receivable previously written off and the adjusting entry for bad debt expense for the year, the general ledger reflected the following information: Required: a. Compute the amount of the bad debt expense, assuming it is based on 1.8% of net sales. b. Prepare the adjusting entry for bad debts assuming it is based on 3% of the ending accounts receivable.

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

On October 1, Robins's Online Sales sold goods for $50,000 and accepted a six-month noninterest-bearing note. Current interest rates were 10%. The December 31 adjusting entry should be

The estimated value of sales returns should reduce gross sales in the period items are sold, not in the later period items are returned.

Brad's Market's accountant is preparing its May bank reconciliation and has collected the following data: Additionally, deposits in transit and outstanding checks from April's reconciliation were $4,400 and $2,800, respectively. The correct balance for Cash at May 31 should be

Freeman Corporation estimates uncollectible accounts using a percentage of outstanding accounts receivable. After the year-end adjustment for bad debt expense was made, the company's records reflected the following information: The bad debt expense for the year was

Because a larger number of investors are involved in factoring than in securitization, companies can factor much larger amounts of receivables.

On September 1, 2015, Excellent Company received an $80,000, 12%, 120-day note from a credit customer wishing to extend its repayment period. On October 1, 2015, thirty days after the note was received, Excellent discounted the note at the bank at 14%. How much cash did Excellent Company receive from the bank?

Hole Sailors, Inc. sold merchandise on credit with a list price of $12,000. Terms were 1/20, n/45. Which of the following entries correctly applies the indicated method to record the sale?

When using the direct write-off method, bad debts are written off directly to the allowance for uncollectible accounts.

Based on the following information as of December 31: Required: Compute the total amount that will appear for current assets on the December 31 balance sheet.

On January 1, 2014, Jonas Company established a petty cash fund of $500. By March 31, 2014, when the fund was replenished, the following petty cash vouchers had been issued: January 26, postage, $48; February 16, postage, $52; February 6, airport limousine fares, $24; January 18, office supplies, $67; March 8, postage, $38; March 4, local express delivery charges on purchases, $65. There was $209 in coins and currency left in petty cash before replenishment. Required: a. Prepare the journal entries to record the transactions relating to Jonas Company's petty cash fund for the first quarter of 2014. b. On April 1, the size of the petty cash fund was decreased to $425. What journal entry if any) is necessary to record this action?

Gazoo Co. sold goods with a list price of $45,000 gross billings) on terms of 2/10, n/30 on December 14, 2014. Accounts receivable and sales were recorded using the net method. By December 23, Gazoo had collected on $25,000 gross billings) of these receivables. On January 2, additional collections were made on sales of $5,000 gross billings) and sales returns and allowances of $3,000 gross billings) were granted by Gazoo. On January 15, 2015, all remaining balances were collected. Required: Prepare journal entries for the following: a. Collections received by December 23, net method of accounting for sales discounts. b. Any required adjustment, December 31, net method. c. Sales returns and allowances granted on January 2, net method. d. Collections received on January 15, net method.

Concerning the various methods for accounting for uncollectible receivables, the percentage of credit sales method is an example of the allowance method.

A disadvantage of using the gross price method to account for cash discounts extended by the seller to its customer is that