Exam 5: Cash and Receivables

Identify if the following investments meet the requirements to be classified as cash and cash equivalents. a. b. c. d. e. Chequing account in U.S. dollars. Investment in a mutual fund that invests in common shares of public corporations. Investment in long-term government bonds. Term deposit maturing 100 days after the year-end Cash in a sinking fund account for a future re-purchase of common shares. Cash and cash equivalents (Yes/No) Readily cconvertible cto cash? (Yes/No) Risk of change in cash value? (High/Med/Low)

What amount will be included in "cash and cash equivalents"? Treasury bills maturing in 140 days \ 12,000 Investment in a money market fund 18,000 U.S. dollar bonds of a publicly traded company 10,000 Treasury bills maturing in 30 days 24,000

During May 2021, ABC Company wrote a cheque (#345)to a supplier as a payment on its account. The cheque was written for the correct amount of $16,900. The May bank statement listed the cheque at $61,900 and an ending account balance of $(50,500)in overdraft. Required: a. Given the above information, prepare the portion of the May cash reconciliation that reconciles the bank balance to the cash balance to be used in the financial statements. b. Where on the balance sheet should the cash (or overdraft)balance be shown?

Fruit Valley Inc. reported cash sales of $250,000, credit sales of $850,000, 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 end of the year. What was the balance in the accounts receivable account at the beginning of the year?

What is a "promissory note"?

The following accounts were abstracted from Almond Co.'s unadjusted trial balance at December 31, 2019: Accounts receivable Allowance for uncollectible accounts Net credit sales \ 3,850,000 51,000 \5 ,950,000 The company estimates that 5 percent of the gross accounts receivable will become uncollectible. After adjustment at December 31, 2019, the allowance for doubtful accounts should have a credit balance of

Micelle Inc. reported credit sales of $700,000 and cash sales of $100,000 for last year. 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. Assuming there are no write-offs made during the year, what was the balance in the allowance for doubtful accounts at the end of the year?

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?

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?

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

Based on the following information for calendar 2021: Accounts receivable, January 1 \ 125,000 Credit sales during the year 1,400,000 Allowance for doubtful accounts, January 1 15,000 Cash collected on accounts receivable during the year 1,350,000 If the allowance for doubtful accounts is estimated at 10% of the ending accounts receivable balance, what is the bad debts expense for 2021?

K-Jones Ltd. 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 the allowance for doubtful account?

What is not included in "cash and cash equivalents"?

The December 31, 2021 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, 2020, bearing interest at 7% per year (which approximates the market interest rate), with principal and interest (total $133,750)due on January 1, 2021. However, the hotdog chain has had numerous delays obtaining the required licenses to operate on street corners. Consequently, on January 1, 2021, the chain and PAW renegotiated the promissory note so that the $133,750 in principal and interest would come due on January 1, 2023. Aside from the initial recording of the note receivable on January 1, 2020, PAW has not recorded any other journal entries relating to this note. Present the necessary journal entries to correct PAW's accounts in 2020 and 2021. Round all values to the nearest dollar.

Johnson Credit Union is a small, regional financial institution with a loyal customer base. Like most financial institutions, Johnson has a significant portfolio of home mortgages. Because of the nature of its operations, the risks relating to these mortgages are geographically concentrated. To reduce this risk, the credit union securitized $25 million of mortgages receivable for proceeds of $21.5 million. Under the securitization arrangement, investors in the mortgage-backed securities bear the cost of any defaults on the mortgages. Johnson's only continuing involvement in the mortgages is the administration of the cash receipts and the transfer of that cash to the investors. Required: a. Should Johnson record this securitization as a sale or as a borrowing transaction? Explain. b. Record the entry in Johnson's books relating to Johnson's securitization of mortgage receivables.

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?

What amount will be included in "cash and cash equivalents"? Treasury bills maturing in 30 days \ 24,000 Six-month U.S. term deposit 12,000 U.S. dollars on hand 18,000 Bonds of a publicly traded U.S. company 10,000

Gossamer Furnishings extends generous payment terms to its customers. As a result, it has accumulated a substantial portfolio of accounts receivable. To improve cash flow, the company decided to sell $600,000 of these receivables to a factor. The company had previously checked the credit worthiness of its customers, so it is confident that few accounts will become uncollectable. Therefore, Gossamer chose to factor these receivables with recourse. In exchange for these receivables, the factor paid Gossamer 93¢ on each dollar of receivables on the date of transfer. The factor also held 2¢ on each dollar for potential uncollectable accounts. Ultimately, the factor collected $593,800 from these receivables. Record the entries on Gossamer's books relating to the $600,000 factoring of accounts receivable.

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

Jackie Co.'s allowance for doubtful accounts was $15,000 at the end of 2022 and $205,000 at the end of 2021. For the year ended December 31, 2022, Jackie reported bad debt expense of $48,000 in its income statement. What amount did Jackie debit to the appropriate account in 2022 to write off actual bad debts?