Exam 5: Cash and Receivables

Small Company (SC)is in its fourth year of retail operations. The owner/manager previously employed a part-time bookkeeper to sign cheques, as well as to prepare journal entries, bank reconciliations, and monthly financial statements. SC has just hired you as the first full-time accountant to replace the bookkeeper, and you are preparing the December 31, 2012 financial statements. Required: a. Briefly explain the concept of "segregation of duties." b. Identify an internal control issue relating to SC's cash-handling procedures, and provide your recommendation(s)to improve SC's internal controls over cash.

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?

Which statement is correct?

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 2% of credit sales. 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?

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

Pessimist Inc. reported credit sales of $5,400,000 and $4,800,000 for the years ended December 31, 2011 and 2012, respectively. Information on trade accounts receivable for the company is presented below. The balance of the allowance for doubtful accounts as of January 1, 2011 was $15,000. In addition, you learn that the company wrote off specific accounts of $18,500 in 2011, and the bad debts expense was $13,000 in 2012. Required: a. Determine the bad debts expense for 2011. b. Determine the amount of receivables written off during 2012. c. Prepare the journal entry to record the bad debts expense for 2011.

What amount will be included in "cash and cash equivalents"?

Royal Inc. offers terms of 4/10, net 60 for its accounts receivable. The company issues an invoice for $73,000. How should Royal record the invoice if it uses (a)the gross method and (b)the net method?

Medical Machines reported credit sales of $800,000, cash collections of $550,000 and bad debt write-offs of $15,000 for last year. Accounts receivable had a balance of $1,000,000 at the beginning of the year. What was the ending balance in the accounts receivable account?

Explain how a company's revenue recognition policy can be used to manipulate earnings.

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?

On January 1, 2013, Color Company agreed to sell a diamond to a customer at a special price of $4,000. In return, the customer signed a non-interest bearing note payable to Color Company. Payment terms were $800 on January 1, 2013, and $800 each January 1 from 2014 to 2017. Color normally charges 8% interest to its customers. What amount of revenue and accounts receivable should Color recognize on January 1, 2013?

Identify whether each of the following items should be classified in "cash and cash equivalents" on the balance sheet. Assume that the reporting entity has operations in Canada.

What amount will be included in "cash and cash equivalents"?

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?

The following accounts were abstracted from Almond Co.'s unadjusted trial balance at December 31, 2013: Debit Credit Accounts receivable $3,850,000 Allowance for uncollectible accounts 51,000 Net credit sales $5,950,000 The company estimates that 5 percent of the gross accounts receivable will become uncollectible. After adjustment at December 31, 2013, the allowance for doubtful accounts should have a credit balance of

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?

Medical Machines reported credit sales of $800,000, cash returns of $25,000 and bad debt expense of $150,000 for last year. Accounts receivable had a balance of $1,000,000 at the beginning of the year and $1,250,000 at the end of the year. Assuming there are no write-offs during the year, how much cash was collected from customers during the year?

What dollar amount will be included in "cash and cash equivalents"?

Sabrina Inc. reported credit sales of $700,000 and cash sales of $100,000. The ending balance in accounts receivable was $1,500,000. Bad debt expense is estimated at 1% of credit sales. The allowance for doubtful accounts had a balance of $40,000 at the beginning of the year. What was the bad debt expense for the year?