Exam 7: The Revenuereceivablescash Cycle

In preparing a monthly bank reconciliation,which of the following items would be added to the balance reported on the bank statement to arrive at the correct cash balance?

In calculating a company's accounts receivable turnover,which of the following sets of factors would be used?

Sandy Corporation uses the allowance method of accounting for uncollectible accounts.During 2014,Sandy had charged $80,000 to Bad Debt Expense,and wrote off accounts receivable of $90,000 as uncollectible.What was the amount of the decrease in working capital as a result of these entries?

Which of the following would be considered part of the category "trade receivables"?

Securitization is a widely-used arrangement for selling receivables.Many companies use credit card securitization and other forms of securitizations as part of their overall financing strategies. Required: Explain the nature of securitization,how it can be implemented,and the appropriate accounting procedures related to a securitization.Include in your discussion the effects of recourse provisions on the securitization.

The following information is from the records of Sumter,Inc.for the year ended December 31,2014. If the basis for estimating bad debts is 1 percent of net sales,the correct amount of doubtful accounts expense for 2014 is

Receivables can be used to generate cash through two general categories of transactions: 1.A secured borrowing 2.A sale of the receivables. Both of these types of transactions require a transfer of the receivables to a new holder,typically a financial institution. Required: Distinguish between a secured borrowing and a sale of receivables as regards the rights of the transferor and transferee as well as regards the accounting for each type of transaction.

Aspen Company provides for doubtful accounts expense at the rate of 3 percent of credit sales.The following data are available for last year: The allowance for doubtful accounts balance at December 31,after adjusting entries,should be

Barter Company borrows $20,000 for one year a 9% interest,but must maintain a $1,600 compensating balance.The effective rate of interest on this loan is

From inception of operations to December 31,2013,Centaur Corporation provided for uncollectible accounts receivable under the allowance method: Provisions were made monthly at 2 percent of credit sales; bad debts written off were charged to the allowance account; recoveries of bad debts previously written off were credited to the allowance account; and no year-end adjustments to the allowance account were made.Centaur's usual credit terms are net 30 days. The credit balance in the allowance for doubtful accounts was $260,000 at January 1,2014.During 2014,credit sales totaled $18,000,000,interim provisions for doubtful accounts were made at 2 percent of credit sales,$180,000 of bad debts were written off,and recoveries of accounts previously written off amounted to $30,000.Centaur installed a computer system in November 2014 and an aging of accounts receivable was prepared for the first time as of December 31,2014.A summary of the aging is as follows: Based on the review of collectibility of the account balances in the "prior to January 1,2014" aging category,additional receivables totaling $120,000 were written off as of December 31,2014.Effective with the year ended December 31,2014,Centaur adopted a new accounting method for estimating the allowance for doubtful accounts at the amount indicated by the year-end aging analysis of accounts receivable. (1)Prepare a schedule analyzing the changes in the allowance for doubtful accounts for the year ended December 31,2014.Show supporting computations in good form. (2)Prepare the journal entry for the year-end adjustment to the allowance for doubtful accounts balance as of December 31,2014.

Halen Company factored $50,000 of its accounts receivable with recourse.The factor retained 8% for sales adjustments and charged $3,000 as a financing fee.For simplicity,assume the estimated and actual amounts of the following items are equal: Assume the transfer is recorded as a sale by Halen Company.What is the loss or financing expense to be recognized on the transfer?

When the allowance method of recognizing bad debt expense is used,the entries at the time of collection of a small account previously written off would

A method of estimating bad debts that focuses on the balance sheet rather than the income statement is the allowance method based on

Harris,Inc.reported the following balances (after adjustment)at the end of 2014 and 2013. During 2014,Harris wrote off customer accounts totaling $3,200 and collected $800 on accounts written off in previous years.Harris' doubtful accounts expense for the year ending December 31,2014 is

See Abe Company information above.What was the total cash received from Bee during July?

Eastern Company sells products covered by a 3-year warranty.Based on past experience of other entities in the industry,Eastern expects to incur warranty costs equal to 1% of sales.Eastern's sales were $45,000 in 2013 and $50,000 in 2014.In 2014,the company spent $200 to repair goods sold in 2013 and $300 to repair goods sold in 2014.Eastern received no warranty servicing demands from its customers in 2013,the company's first year of operations. What is the balance in the warranty liability account on January 1,2015?

Bank statements provide information about all of the following except

Donovan Company had the following cash balances at December 31,2014: Cash in banks includes $125,000 of compensating balances against short-term borrowing arrangements at December 31,2014.The compensating balances are legally restricted as to withdrawal by Donovan.In the current asset section of Donovan's December 31,2014,balance sheet,what total amount should be reported as Cash?

The accountant for the Teffen Company assembled the following data: Prepare a 4-column bank reconciliation as of July 31,using the form that reconciles both the book and bank balances to a correct cash amount.

On August 1,a firm assigned $30,000 of its $56,000 of accounts receivable.The finance company advanced 90% of the assigned accounts less a $2,000 fee.Interest is 12% and payable monthly on the beginning-of-period loan balance.A loan payment is remitted at the end of each month.Each payment includes principal and interest.The amount of each loan payment equals the cash collected on receivables during the month plus interest on the loan balance. If $8,000 was collected on accounts receivable during August,the entry for the first loan payment would include a