Exam 7: The Revenuereceivablescash Cycle

The books of Barry's Service,Inc.disclosed a cash balance of $68,757 on June 30.The bank statement as of June 30 showed a balance of $54,780.Additional information that might be useful in reconciling the two balances follows: (a)Check number 748 for $3,000 was originally recorded on the books as $4,500. (b)A customer's note dated March 25 was discounted on April 12.The note was dishonored on June 29 (maturity date).The bank charged Barry's account for $14,265,including a protest fee of $42. (c)The deposit of June 24 was recorded on the books as $2,895,but it was actually a deposit of $2,700. (d)Outstanding checks totaled $9,885 as of June 30. (e)There were bank service charges for June of $210 not yet recorded on the books. (f)Barry's account had been charged on June 26 for a customer's NSF check for $1,296. (g)Barry properly deposited $600 on June 3 that was not recorded by the bank. (h)Receipts of June 30 for $13,425 were recorded by the bank on July 2. (i)A bank memo stated that a customer's note for $4,500 and interest of $165 had been collected on June 27,and the bank charged a $36 collection fee. Prepare a bank reconciliation statement,using the form reconciling bank and book balances to the correct cash balance.

The following information is available for Longview Company: As a result of a review and aging of accounts receivable,it has been determined that the Allowance for Doubtful Accounts should show a balance of $2,400 at December 31,2014.What amount should Longview record as bad debt expense for the year ended December 31,2014?

A firm factors $40,000 of accounts receivable without recourse.The factor agrees to provide financing based on these receivables,but imposes a 10% fee.In addition,the transferor and transferee agree that $3,000 of sales returns and allowances can be expected from these accounts.What is the loss or expense to recorded by the transferor?

Which of the following factors are used to compute the number of days' sales in accounts receivable?

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. A sale of receivables results in the receivables being removed from the books of the transferor and the recognition of gain or loss.From the transferee's standpoint,a sale of receivables results in the receivables being recorded on its books at their fair value. Required: Identify the conditions that must exist for a transfer of receivables to be accounted for as a sale.

Under GAAP,an entry should be made to the Bad Debt Expense account

In preparing a bank reconciliation,interest paid by the bank on the account is

Which of the following is NOT a basic characteristic of a system of cash control?

See Abe Company information above.How much was the total Sales Discounts given to Bee during July?

What is the accounting principle underlying the recognition of an estimated liability for warranties in the period of product sale?

When the direct write-off method of recognizing bad debt expense is used,the entry to write off a specific customer account would

Accounts receivable usually are factored

Carter Appliance Center sells washing machines that carry a three-year warranty against manufacturer's defects.Based on company experience,warranty costs are estimated at $60 per machine.During the year,Carter sold 48,000 washing machines and paid warranty costs of $340,000.In its income statement for the year ended December 31,Carter should report warranty expense of

Based on the aging of its accounts receivable at December 31,Quanto Company determined that the net realizable value of the receivables at that date is $760,000.Additional information is as follows: Quanto's doubtful accounts expense for the year ended December 31 is

An analysis and aging of accounts receivable of the Gibson Company at December 31,2014,showed the following: Compute the net realizable value of the accounts receivable of Gibson Company at December 31,2014.

If the balance shown on a company's bank statement is less than the correct cash balance,and neither the company nor the bank has made any errors,there must be

The annual report of McGregor Manufacturing showed the following in the 2014 balance sheet: Footnote information: The fair value of the notes receivable was estimated by discounting the future cash flows using current rates available to similar borrowers under similar circumstances. All notes receivable bear interest at 5% to 12% and require future principal payments of approximately $547,000 in 2015,$3,742,000 in 2016,$1,015,000 in 2017,$683,000 in 2018,$661,000 in 2019,and $25,353,000 thereafter.The current portion of these long-term notes is included in other receivables in the consolidated balance sheets. Required: 1.Estimate the average term of the notes and the interest rates at which these notes were issued by customers of McGregor. 2.Why would the interest rates vary so much? 3.Are the stated rate and the prevailing market rate of interest similar or quite different at the date of issue?

Which of the following accounts is not affected when an account receivable written off as uncollectible is unexpectedly collected?

Which of the following is one of the two steps of the 2-step test for derecognition of receivables stated in IAS 39,International Accounting Standard 39,"Financial Instruments: Recognition and Measurement"?

Teeming Company uses the allowance method of accounting for bad debts. The following summary schedule was prepared from an aging of accounts receivable outstanding on December 31 of the current year. The following additional information is available for the current year: -See Teeming Company information above.If Teeming determines bad debt expense using 1.5 percent of net credit sales,the net realizable value of accounts receivable on the December 31 balance sheet will be