Exam 7: Receivables and Investments

Cyprus Corp. received a 7%, 6-month promissory note with a face amount of $8,000 from the Mustafa Company for the sale of merchandise on May 1, 2014. Cyprus' accounting year­end is December 31. REQUIRED: Identify the maturity date of the note.

-Refer to the data for Music Corporation. If the aging approach is used to estimate bad debts, what amount should be recorded as bad debt expense for 2015?

The total amount of interest calculated annually on a $7,000 promissory note payable for 3 years at 12% that is not Compounded is

An increase in accounts receivable is reported on the statement of cash flows under the indirect method as an addition.

What should a company do to improve its accounts receivable turnover rate?

Match the following definitions with their appropriate terms in the next 14 questions. -Note receivable

If a company uses the direct write-off method of accounting for bad debts,

Evanston Inc. started the year with $35,000 in accounts receivable and ended the year with $50,000 in the account. Describe how information regarding the company's accounts receivable should be reflected on its statement of cash flows, assuming use of the indirect method.

When a note receivable has been discounted by a company

During 2014, the accounts receivable turnover rate for Cordner Company increased from 10 to 14 times per year. Which one of the following statements is the most likely explanation for the change?

Write a short paragraph explaining the following: 1. When bad debts are estimated, why is the balance in Allowance for Doubtful Accounts considered when the percentage of accounts receivable approach is used but not when the percentage of net credit sales approach is used? 2. When estimating bad debts on the basis of a percentage of accounts receivable, what is the advantage of using an aging schedule?

The 2015 annual report of Ski Products, Inc. reported the following amounts in millions of dollars: REQUIRED: 1. Compute Ski's accounts receivable turnover ratio for the year ended May 31, 2015. Assume that all sales are on credit. 2. What is the average collection period in days for an account receivable? Explain your answer. 3. Ski's main products are medium to high­end skis and snow boards. Give some examples of the types of customers you would expect Ski to have. Do you think the average collection period for sales to these customers is reasonable? What other information do you need to fully answer that question?

Clarion Corp. invested cash in a 6-month certificate of deposit CD on November 1, 2015. If Clarion Corp. has an accounting period that ends on December 31, 2015, when should Clarion recognize interest revenue from the CD?

Bonds issued by corporations or governmental bodies as a form of borrowing are called ____________________.

Utah Co. sold merchandise to Big Sky Corp. on December 1, 2014, for $9,000, and accepted a promissory note for payment in the same amount. The note has a term of 90 days and a stated interest rate of 8%. Utah's accounting period ends on December 31. What amount should Utah recognize as interest revenue on the maturity date of the note?

Match the following definitions with their appropriate terms in the next 14 questions. -Interest

The data presented below is for Craft, Inc. for 2015. What is the effect on liquidity when Craft records its estimate for bad debt expense using the allowance method?

Refer to the data for Beatrice Equipment. Determine the balance of Accounts Receivable at December 31, 2014.

On July 1, 2015, Frank Corp. purchased $100,000 of 8% bonds at face value. Interest is paid annually on June 30. If the accounting year for Frank ends at December 31, 2015, what will be reported with respect to the bonds on that date?

Securities issued by corporations as a form of ownership in the business, such as common and preferred stock, are called equity securities.