Exam 5: Cash and Receivables

Which statement about "cash and cash equivalents" is correct?

Propel Fly reported opening balances of $1,712,000 in accounts receivable and $147,000 in the allowance for doubtful accounts at the beginning of last year.During the year,sales on account totaled $2,500,000,collections of accounts receivable were $1,300,000,bad debt write-offs were $65,000 and bad debt expense was $89,000.What was the ending balance in accounts receivable?

Which statement best describes the gross method of accounting for cash discounts?

A $100,000 sale transaction is made with terms of 5/10,net 30.What amount is debited to the accounts receivable account when the sale is made under the gross method of recording a discount?

Explain why the definition of cash and cash equivalents is important for the financial statements.How would a transfer from one bank account to another be reported in the cash flow statement?

Karin-Jones Ltd.reported an opening balance of $1,712,000 in accounts receivable and of $147,000 in allowance for doubtful accounts for last year.During the year,sales on account were $2,500,000,collections of accounts receivable were $1,300,000,and bad debt expense was $89,000.At the end of the year,the company had a credit balance of $172,000 in the allowance for doubtful accounts.What amount of accounts receivable was written off during the year?

What is a "promissory note"?

A $50,000 sale transaction is made with terms of 2/10,net 30.Assuming that the customer takes the discount,what amount is booked to the "cash discount" account under the gross method of accounting for cash discounts?

Explain why an allowance for doubtful accounts is required under GAAP.Discuss how such an allowance should be established.

Fitness Machines reported credit sales of $880,000 and bad debt expense of $250,000 for last year.Accounts receivable had a balance of $1,400,000 at the beginning of the year and $1,350,000 at the end of the year.Assuming there are no write-offs made during the year,how much cash was collected from customers during the year?

Which statement about using the percentage of credit sales to estimate bad debt expense is not correct?

Which of the following would not be an example of segregation of duties?

Explain two problems associated with the direct write-off method.

Which statement is correct about the bank reconciliation?

Collier Port Authority has had a long-standing relationship with a nearby lumber company,which ships a significant amount of lumber through the port.To help finance the lumber company's operations,Collier advanced $10 million to them in return for a promissory note which specified payment of the $10 million,plus interest at 15%,due at the end of two years.However,due to adverse conditions in the lumber industry,the lumber company was unable to meet its obligation and pay Collier at the end of the two years.In light of the importance of the relationship between Collier and the lumber company,Collier extended the due date by three years (after the original two years),but increased the repayment amount to $14 million,inclusive of interest.The market interest rate for the loan remained at 15%. Record the journal entries relating to the note receivable from the date of issuance to the restructuring date,inclusive.

Explain why it is important to segregate duties of employees dealing with cash in an organization.Provide an example of ways which this segregation could be made on the payable side

A $50,000 sale transaction is made with terms of 2/10,net 30.What amount is debited to the accounts receivable account when the sale is made under the gross method of accounting for cash discounts?

Lenient Corp.reported cash sales of $1,145,000,credit sales of $1,880,000,cash returns of $50,000,bad debt write-offs of $300,000 and bad debt expense of $250,000 for last year.Accounts receivable had a balance of $3,400,000 at the beginning of the year and $2,350,000 at the end of the year.How much cash was collected from customers during the year?

Super Corp.reported credit sales of $2,000,000,cash sales of $200,000 and bad debt write-offs of $100,000 for last year.The ending balance in accounts receivable was $4,500,000.Bad debt expense was $250,000.The allowance for doubtful accounts had a balance of $400,000 at the beginning of the year.What was the balance in the allowance for doubtful accounts at the end of the year?

What criterion is not required for a "cash equivalent"?