Exam 6: Cash and Receivables

Splitter Corporation had total sales in the current year of $750,000 and credit sales of $650,000. The Accounts Receivable balance was $450,000 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

Under the allowance method, when an account is written off, total assets decrease

For a non-interest-bearing note, the maturity value of the note includes both principal and interest.

What two types of financing agreements are available to companies who wish to obtain cash from their accounts receivables? Why is it important to note whether or not the receivables are transferred with or without recourse?

For any given company, the amount of bad debt expense may be based on the historical relationships between actual bad debts incurred and

In order to resolve its cash flow problems, Town Home Company assigned $420,000 of its accounts receivable to Wargo Finance Company on August 1. Town Home received 85% of the assigned accounts receivable less a service charge of 5% of the cash received. Town Home was also charged 14% interest annually on the outstanding loan balance. By August 31, Town Home had collected $276,000, and remitted this amount plus the interest to date on August 31 to Wargo Finance. Required: a. Prepare journal entries to record the above assignment transactions on Town Home's books. b. If Town Home collected an additional $50,000 on outstanding accounts and remitted this to Wargo Finance on September 30, how much additional interest must be paid on September 30?

On December 31, the Jacob, Inc. general ledger contained the following balances prior to write-offs and adjustments: Before completing an aging analysis to determine the estimated amount uncollectible, Jacob decided to write off $7,500 of an account past due over 360 days. Aging of the accounts receivable balance after the write-off on December 31 indicated the following: Required: a. Prepare the necessary journal entry to record the write-off. b. Prepare the adjusting journal entry at December 31 to record Jacob, Inc.'s estimated bad debts assuming that the company uses the aging of accounts receivable method. c. What is the net realizable value of accounts receivable on the December 31 balance sheet?

During 2016, a company wrote off $7,500 in uncollectible accounts receivable. At the end of the year, bad debt expense was estimated using a percent of gross sales. In 2017, the company collected $1,500 from an account that was written off in 2016. Recording this collection would include

If the transferor of accounts receivable cannot meet all conditions for a sale, the transferor records the proceeds received as a debit to Cash and records a corresponding credit to an)

In general, GAAP requires receivables to be recorded and reported at their present value, but excludes accounts receivables from this rule.

February 1, Adams Company sold merchandise on credit with a list price of $8,400. Terms were 3/15, n/45. Which of the following entries correctly applies the indicated method to receive the appropriate customer payment on February 12?

Current accounts receivables are receivables that are expected to be collected within

Bad debt expense is normally reported on the income statement as an)

On May 17, Bruno Olive Co. accepted a $6,500, 8%, 90-day note from a customer. On June 11, the note was discounted at 10%. At maturity date, the note was dishonored and the bank charged a $25 protest fee. The amount that Bruno Olive Co. would debit to Notes Receivable Dishonored is

A bank reconciliation is an analysis of the difference between the financial accounting records and the bank records to ensure the accurate ending cash balance.

Increased use of automated technology for processing cash transfers decreases the need to rely on internal controls.

After completing the bank reconciliation, which of the following reconciling items would require an adjusting journal entry on the company's books?

Trade receivables are a sub classification of accounts receivable.

When a company sells a customer's note to a bank, the discount period is the length of time