Exam 5: Cash and Receivables

Family Fun reported cash sales of $250,000, credit sales of $750,000, cash collections from receivables of $500,000, bad debt write-offs of $25,000 and bad debt expense of $35,000 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?

Beebo Ltd. provides for doubtful accounts based on 6% of credit sales. The following data are available for 2012. How much should the balance in the allowance for doubtful accounts be at December 31, 2012?

Khanna Inc. had the following transactions, information and balances in its accounting records for fiscal 2011: (CAD = Canadian dollars; USD = U.S. dollars) Required: a)Determine the amount of "cash" that will be reported on the balance sheet. b)Determine the amount of "cash equivalents" that will be reported on the balance sheet. c)Determine the amount of "trade accounts receivable" that will be reported on the balance sheet. d)Determine the amount of "other receivables" that will be reported on the balance sheet. e)Explain how the allowance for doubtful accounts will be presented on the balance sheet.

Based on the following information for calendar 2012: If the allowance for doubtful accounts is estimated at 10% of the ending accounts receivable balance, what is the bad debts expense for 2012?

What are the general recognition criteria for non-cash assets under GAAP?

Which statement is correct?

Pauline Company estimates the allowance for doubtful accounts by aging its accounts receivable. At the end of 2012, the balance in the allowance account was $50,000. During 2013, the company wrote off $5,000 in bad debts and collected a $3,000 receivable that had been previously written off as uncollectible. At the end of 2013, the aging schedule indicated that the balance of the allowance for doubtful accounts should be $64,000. What is the bad debts expense for 2013?

Spiders Geophysics issues an invoice to Huslia Goldmines for $150,000 on August 5, 2012. The invoice states the payment terms are 5/10, net 30. Huslia pays the invoice on August 14, 2012. How should Spiders record the invoice and its subsequent collection if it uses (a)the gross method or (b)the net method?

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

Which of the following is correct about "non-trade" receivable?

Philip Corp reported credit sales of $240,000 and write-offs of bad debts of $57,000 for last year. Accounts receivable had a balance of $1,127,000 at the beginning of the year and $881,000 at the end of the year. How much cash was collected from customers during the year?

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

XYZ Company estimates their allowance for doubtful accounts (ADA)by aging their accounts receivable. At the end of 2012, the balance in the ADA was $165,000. During 2013, XYZ wrote off $16,000 and collected a $14,500 receivable that had been previously written off as uncollectible. At the end of 2013, the aging schedule indicated that the balance in the ADA should be $187,000. How much is the bad debts expense for 2013?

What is included in "cash and cash equivalents"?

The December 31, 2012 financial statements of Pure Air Works (PAW)show $125,000 for "Note receivable." You learn that the company provided cash of $125,000 to a customer (a new chain of hotdog stands)in exchange for a promissory note. The note was issued on January 1, 2011, bearing interest at 7% per year (which approximates the market interest rate), with principal and interest (total $133,750)due on January 1, 2012. However, the hotdog chain has had numerous delays obtaining the required licenses to operate on street corners. Consequently, on January 1, 2012, the chain and PAW renegotiated the promissory note so that the $133,750 in principal and interest would come due on January 1, 2014. Aside from the initial recording of the note receivable on January 1, 2011, PAW has not recorded any other journal entries relating to this note. Present the necessary journal entries to correct PAW's accounts in 2011 and 2012. Round all values to the nearest dollar.

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

Define "cash" and explain how funds that are subject to restrictions should be accounted for in the accounting records.

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

Eastwick Company is preparing its financial statement for the year ended December 31, 2011. A summary of Eastwick's accounts receivable sub-ledger shows the following information: Required: a. Calculate the amount of bad debts expense required for 2011. b. Present the journal entry to record bad debts expense for 2011. c. Present the journal entry that was used to record write-offs for 2011. d. Independent of the information above, suppose Eastwick factored $1,500,000 of receivables without recourse. In exchange, it received $1,380,000. Present the journal entry to record this transfer of receivables. e. Independent of part (d), Eastwick instead factored the $1,500,000 of receivables with recourse and received $1,430,000 cash. Both Eastwick and the factor anticipate that 2% of these receivables will prove to be uncollectible, so the factor has held this amount to cover any uncollectible accounts. Should the amount of uncollectibles prove to be more or less than 2%, the difference will be paid by/refunded to Eastwick. Present the journal entry to record this transfer of receivables.

Which of the following would be an example of segregation of duties?