Exam 8: Receivables

On February 1,2014,Singer,Inc.received a $100,000,nine-month,10% interest-bearing note from a customer.The note was discounted on April 1,2014 at Second National Bank at 12%. Required: Compute the amount of cash received by Singer from the bank and prepare the journal entry to record the discounting of the note.

The Pond Company sold some machinery to the Vista Company on January 1,2014,for which the cash selling price was $500,000.Vista entered into an installment sales contract with Pond at an interest rate of 10%.The contract required payments of $114,804 a year over six years,with the first payment due on December 31,2014. Required: Prepare an amortization schedule for the first two scheduled payments that shows (a)what portion of each payment will be included in interest income,and (b)the loan balance after each payment is made.

A securitization entity is a trust or corporation that is legally distinct from the transferor and may be created solely for the purpose of undertaking securitization transactions.

When accounts receivables growth exceeds sales growth,it indicates an aggressive revenue recognition policy or some other accounting irregularity.

For sale of receivables without recourse,what is,if any,the required disclosure? Explain the importance of this point.

The following information is available for the Bench Company: During 2014,Bench estimated that its bad debt expense should be 1% of all credit sales and made the appropriate monthly adjusting entries.As a result of a review and aging of accounts receivable in early January 2015,it has been determined that an allowance for uncollectible accounts of $3,200 is needed at December 31,2014. Required: What is the journal entry that Bench should make after the aging is completed?

What amount will Jensen recognize as interest income during 2015?

Playworld,Inc.sells playground equipment to schools and municipalities.Invoices are mailed at the end of each month for all goods shipped during that month;credit terms are net 30 days.Sales and accounts receivable data for 2015,2014,and 2015 were as follows: Required: a.Calculate the growth rates in sales and receivables during 2014 and 2015. b.Do your calculations indicate any potential problems with Playworld's receivables? If so,suggest a possible explanation for your findings.

At the end of the first quarter,which of the following entries will be made to record the interest earned by Palmer on the Perez note?

Bill and hold sales should never be booked as revenue before shipment occurs.

Securitizations have always been carefully designed to enable the transferor to consolidate the securitization entity.

An aging of accounts receivable is a determination of how long each receivable has been on the books.

Mortgage applications fraud played a role in the recent economic crisis.

Which one of the following is an example of an aggressive revenue recognition policy?

The sales returns and allowances account is

At the end of the first quarter,which one of the following entries will be made to record the interest earned by Palmer on the Berg note?

When troubled debt is restructured via continuation with modification of debt terms,the original loan is

Island Corporation owes Mutual Bank a 10% note payable for $100,000 plus $8,000 accrued interest on October 1, 2014. Island and Mutual Bank enter into an agreement whereby Island will pay Mutual $128,000 on the due date of the note on October 1, 2016. -What will be Island's carrying value of the restructured note?

If the present value interest factor for two years at 10% is .82645,what will be the new note receivable balance (rounded)for Mutual Bank?

Accelerating cash collection on notes receivable by assigning or selling them is referred to as discounting.