Exam 8: Receivables

Corona Industries purchased a stamping machine on January 2, 2011, for $100,000. It paid $20,000 down and financed the balance over 5 years at State Bank. Terms of the loan were 10% interest payable on December 31 each year with a required $16,000 principal payment. 2014 proves to be a difficult year and on December 1, Corona negotiates a debt restructuring with State Bank. The settlement calls for cash payment of accrued interest plus $4,000 on December 1 and the transfer of 200 acres of land held by Corona that cost $15,000. The land has a current market value of $22,000. -Which one of the following entries will Corona make to adjust the land just prior to transfer?

In practice,no end-of-period accrual is typically made for future returns and allowances.

Generally accepted accounting principles require that accounts receivable be carried on the balance sheet at their net realizable value as opposed to their face amount.

On December 31,2014,Zale Company had an unadjusted debit balance of $1,000 in its allowance for uncollectible accounts.An analysis of Zale's trade accounts receivable at that date revealed the following: \% Estimated Age Amount Uncollectible 0-30 days \ 125,000 2\% 31-60 days 34,000 5\% 61-90 days 8,500 20\% Over 90 days 4,700 50\% Required: What amount should Zale report as allowance for uncollectible accounts in its December 31,2014 balance sheet? Prepare any necessary adjusting entry at December 31,2014 related to this analysis.

International financial reporting standards require firms to report short-term receivables at fair value and to disclose their net realizable value in the notes to the financial statements.

Because the securitization entity's credit rating is based on the quality of the transferred receivables,it will be the same as the rating of the transferor's general debt.

Receivables that result from transactions other than trade receivables,if material,are separately disclosed on the balance sheet.

On August 1,2014,Jones discounted the note under the arrangement with National Bank.How much were the proceeds of the discounted note?

Corona Industries purchased a stamping machine on January 2, 2011, for $100,000. It paid $20,000 down and financed the balance over 5 years at State Bank. Terms of the loan were 10% interest payable on December 31 each year with a required $16,000 principal payment. 2014 proves to be a difficult year and on December 1, Corona negotiates a debt restructuring with State Bank. The settlement calls for cash payment of accrued interest plus $4,000 on December 1 and the transfer of 200 acres of land held by Corona that cost $15,000. The land has a current market value of $22,000. -What is the amount of the receivable restructuring gain or loss to State Bank?

Firms may choose the fair value option for either a single financial instrument or a group of financial instruments.

Which one of the following explanations for the growth of accounts receivable outstripping the growth of sales presents a red flag?

The following information relates to Kay Company's accounts receivable for 2014. Accounts receivable 1/1/14 \ 425,000 Credit sales for 2014 3,265,000 Sales returns during 2014 29,000 Accounts written off during 2014 18,500 Collections from customers during 2014 3,348,000 Estimated future sales returns at 12/31/14 40,000 Estimated uncollectible accounts at 12/31/14 90,000 Required: a.What amount should Kay report as gross accounts receivable at December 31,2014? b.What amount should Kay report as net accounts receivable at December 31,2014?

Mutual Bank will record this transaction to recognize

When a specific account receivable is written off,the entry

If the fair value option is elected,the carrying value of a note receivable would reflect general changes in interest rates and changes in the creditworthiness of the lender.

Per current GAAP,the sponsor of a securitization entity may be required to treat a securitization as a collateralized borrowing instead of a sale.

Net realizable value of receivables is gross receivables minus

What effective interest rate will Mutual Bank use for the restructured note?

When a note receivable has a stated interest rate that is lower than the prevailing rate for similar loans,it is recorded at

Ambiguity can arise as to whether receivables have been sold or instead are being used as collateral for a loan whenever certain obligations,duties,or rights regarding the transferred receivables are retained by the transferor.In distinguishing between sales and collateralized borrowings using receivables,the critical issue