Exam 5: Cash and Receivables

A $100,000 sale transaction is made with terms of 5/10, net 30. What entry is made to the accounts receivable account when the sale is made under the net method of recording a discount?

Explain what is meant by "channel stuffing" and how this can be used to manipulate earnings.

Which statement is not correct?

A $100,000 sale transaction is made with terms of 5/10, net 30. What amount is debited to the accounts receivable account when the sale is made under the gross method of recording a discount?

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

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

On January 1, 2019, 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, 2019, and $800 each January 1 from 2020 to 2023. Color normally charges 8% interest to its customers. What amount of revenue and accounts receivable should Color recognize on January 1, 2019?

Which statement is correct?

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 net method of recording a discount?

Which statement is correct?

Explain why it is important to segregate duties of employees dealing with cash in an organization. Provide at least three examples of ways which this segregation could be made on the receivables side.

The accounting records of 10Com Ltd. show the following for 2021: Accounts receivable, Jan. 1, 2021 \ 55,000 Accounts receivable, Dec. 31, 2021 85,000 Allowarce for doubtful accounts, Jan. 1, 2021 6,300 tad debt expense before year end adjusting or closing entries, Dec 31, 2021 3,400* Fustomer accounts written off as uncollectable during 2021 5,55 *The credit side of the journal entry (or entries)related to this amount went to allowance for doubtful accounts. ** Account write-offs were debited to the allowance for doubtful accounts. More Info For 2021, cash sales were $970,000, while credit sales were $720,000. Recently, 10Com's management has become concerned about various estimates used in its accounting system, including those relating to receivables and uncollectable accounts. The company is considering two alternatives. For the purpose of comparing these two alternatives, the company has made the following estimates for each alternative. •Alternative 1: Bad debts approximating 0.7% of credit sales. •Alternative 2: Aging of the accounts receivable at the end of the period, where 80% would incur a 2% loss, while the remaining 20% would incur a 9% loss. Required: For each of the two alternatives listed above, calculate the bad debts expense for 2021 and the allowance for doubtful accounts balance at the end of 2021.

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 some controls that can be used in an organization to safeguard cash and other assets.

Which statement about using the percentage of credit sales to estimate bad debt expense is not correct?

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

Pauline Company estimates the allowance for doubtful accounts by aging its accounts receivable. At the end of 2021, the balance in the allowance account was $50,000. During 2022, the company wrote off $5,000 in bad debts and collected a $3,000 receivable that had been previously written off as uncollectable. At the end of 2022, the aging schedule indicated that the balance of the allowance for doubtful accounts should be $64,000. What is the bad debts expense for 2022?

What amount will be included in "cash and cash equivalents"? Investment in shares of a public company \ 12,000 Investment in a money market fund 18,000 Bonds of a publicly traded company 10,000 Two-month U.S. dollar term deposits 24,000

Which statement is not correct about estimating the allowance for doubtful accounts under the balance sheet approach?

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?