Exam 6: Cash and Receivables

Compensating balance agreements that do not legally restrict the amount of funds shown on the balance sheet should be reported in the

Which of the following is not a disadvantage of using the direct write-off method for recording uncollectible accounts?

On October 1, Robins's Online Sales sold goods for $50,000 and accepted a six-month noninterest-bearing note. Current interest rates were 10%. The December 31 adjusting entry should be

The following are transactions of the Morrison Company: a.On November 5, sold merchandise on account for $46,000 with terms of 3/15, n/30. b.On November 20, payment was received on $32,000 worth of merchandise sold on November 5. c.On December 5, further collections were made on $8,000 of merchandise sold on November 5. d.On December 8, merchandise sold for $4,000 on November 5 was returned by the purchaser and credit was granted by Morrison Company. Required: Record the appropriate amounts under the gross price and net price methods in the spaces below. For each method, write the amount to be debited or credited on the appropriate line for each account shown. Indicate that the amount is a debit or credit by placing a (d) or (c) after the amount.

Freeman Corporation estimates uncollectible accounts using a percentage of outstanding accounts receivable. After the year-end adjustment for bad debt expense was made, the company's records reflected the following information (in 000's): The bad debt expense for the year was

What three conditions must be met for GAAP to consider the transfer of financial assets as a sale?

When a company decides to sell its goods on credit, it should evaluate the effect on profit of

What entry format is appropriate if sales returns and allowances occur on factored accounts?

If the transferor of accounts receivable cannot meet all conditions for a sale, the transferor records the proceeds received as a debit to Cash and records a corresponding credit to a(n)

Which of the following would not be a contractual restriction to the cash available to pay current obligations?

Angler Fish Co. factored $540,000 of its accounts receivable to Gause Finance Co. Gause Finance advanced 85% of the factored receivables and charged a 10% commission on the gross amount of the receivables. All conditions for a sale have been met. Required: Prepare the journal entries necessary to record the following: a.The sale of the receivables. b.Sales Returns and Allowances of $2,200 on a factored account. c.The conclusion of the sale agreement.

Theoretically, the amount of estimated future returns and allowances on credit sales should be recorded during the period of the sale so as not to overstate sales and ending accounts receivable. In practice, these estimates are rarely recorded because

Which of the following is a key element of internal control over cash payments?

Which of the following would not be reported on the financial statements?

Which of the following is true concerning the bank reconciliation?

The method for estimating bad debts that results in current revenues and anticipated current expenses being matched is the

When accounting for uncollectible accounts,

A student in the accounting principles course comes to you, an upper-division accounting major, for an explanation of the difference between the gross price and net price methods of recording credit sales. The principles student wants to know why, if there is no difference in net income, a company would prefer one method over the other. Required: Explain the basics of each method, how each method is reported on the income statement, and the advantages and disadvantages of each method.

Items classified as "cash" on the balance sheet

Below is a list of items. Classify each into one of the following balance sheet categories: