Exam 5: Cash and Receivables

Fitness Machines reported cash sales of $50,000, credit sales of $800,000 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?

Intercoastal Shelving Company made a sale to Superb Knives for $8,800 on December 10, 2019. Since it was approaching year end, Intercoastal wanted to encourage prompt payment, so it provided generous discounts for those clients able to pay promptly. Thus Intercoastal offered terms of 5/10, net 20. Superb paid the invoice on January 20, 2020. How should Intercoastal record the invoice and its subsequent collection if the company uses (a)the gross method or (b)the net method?

Which statement is correct?

What is included in "cash and cash equivalents"?

Identify the two criteria for classifying an investment as a cash equivalent.

Which statement about receivables is correct?

Which statement is correct about estimating the allowance for doubtful accounts?

Spiders Geophysics issues an invoice to Huslia Goldmines for $150,000 on August 5, 2021. The invoice states the payment terms are 5/10, net 30. Huslia pays the invoice on August 14, 2021. How should Spiders record the invoice and its subsequent collection if it uses (a)the gross method or (b)the net method?

Collier Port Authority has had a long-standing relationship with a nearby lumber company, which ships a significant amount of lumber through the port. To help finance the lumber company's operations, Collier advanced $10 million to them in return for a promissory note which specified payment of the $10 million, plus interest at 15%, due at the end of two years. However, due to adverse conditions in the lumber industry, the lumber company was unable to meet its obligation and pay Collier at the end of the two years. In light of the importance of the relationship between Collier and the lumber company, Collier extended the due date by three years (after the original two years), but increased the repayment amount to $14 million, inclusive of interest. The market interest rate for the loan remained at 15%. Record the journal entries relating to the note receivable from the date of issuance to the restructuring date, inclusive.

Sabrina Inc. reported credit sales of $700,000 and cash sales of $100,000. 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. What was the bad debt expense for the year?

Marvelos Inc. reported credit sales of $1,000,000, cash sales of $100,000 and bad debt write-offs of $10,000 for last year. The ending balance in accounts receivable was $1,500,000. Bad debt expense was $15,000. The allowance for doubtful accounts had a balance of $40,000 at the beginning of the year. What was the balance in the allowance for doubtful accounts at the end of the year?

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?

A $50,000 sale transaction is made with terms of 2/10, net 30. What amount is debited to the accounts receivable account when the sale is made under the gross method of accounting for cash discounts?

Which of the following is a difference between trade and non-trade receivables?

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

Which of the following would not be an example of segregation of duties?

Explain why the definition of cash and cash equivalents is important for the financial statements. How would a transfer from one bank account to another be reported in the cash flow statement?

EasyCredit Inc. reported cash sales of $45,000, credit sales of $280,000 and write-offs of bad debts of $7,000 for last year. Accounts receivable had a balance of $327,000 at the beginning of the year and $381,000 at the end of the year. How much cash was collected from customers during the year?

What dollar amount will be included in "cash and cash equivalents"? Treasury bills maturing in 30 days \ 11,000 Investment in a money market fund 8,000 Cash restricted for plant expansion 1,000 Three-month term deposits 2,000

Soorya Inc. had the following balances for fiscal 2021. Jan 1,2021 Dec 31,2021 Accounts receivable 2,500,000 2,000,000 Allowance for doubtful accounts 125,000 unknown Additional information on 2021 transactions: Sales Q1 Q2 Q3 Q4 Cash Credit 100,000 200,000 150,000 250,000 Discounts given (only on credit sales) 25,000 40,000 35,000 50,000 Bad debts write-offs 15,000 10,000 20,000 5,000 collection on previously 101,000 0 5,000 20,000 Written off accounts Here is an aging of the accounts receivable: Days outstanding Accounts receivable balance @ Jan 1, 2021 Accounts receivable balance @ Dec 31, 2021 Estimate \% uncollectable (consistent rate for 5 years) 0-30 1,900,000 1,000,000 0\% 31-60 250,000 350,000 10\% 61-90 250,000 350,000 20\% 90 100,000 300,000 50\% Required: a)How much cash was collected from accounts receivable during 2021? b)Prepare the journal entry to record the discounts using both the gross and net method of accounting; assume that the total discounts given related to sales totaling $450,000. Also prepare the journal entry that would be required if the discounts were not taken by customers under the net method. c)Assume all discounts were taken by customers and that the company used the gross method. Complete the following chart: Balance at end of fiscal 2021 Gross Sales Net Sales Bad debt expense d)What would the bad debt expense be if Soorya wanted to use the percentage of sales method and felt that its experience showed that 4.5% of sales were not collectible?