Exam 6: Cash and Receivables

Emma Co.'s records reveal the following data at year-end: Required: Compute the correct amount of cash and cash equivalents that will appear as a current asset on Emma Co.'s balance sheet.

Although IFRS contain the same basic guidelines for accounting for cash and receivables as U.S. GAAP, some differences exist. Which of the following accounting treatments differs under IFRS versus GAAP?

Bad debt expense is normally reported on the income statement as a(n)

On May 17, Bruno Olive Co. accepted a $6,500, 8%, 90-day note from a customer. On June 11, the note was discounted at 10%. At maturity date, the note was dishonored and the bank charged a $25 protest fee. The amount that Bruno Olive Co. would debit to Notes Receivable Dishonored is

Cash control systems are designed to

The two forms of financing agreements that companies use to obtain cash from accounts receivables are pledging and assigning.

Bailey's Manufacturing Company is looking at changing their method of reporting bad debts expense. In past years the company has been able to use the direct write off method but have experienced significant growth in recent years. The accountants have prepared the following aging schedule based upon their current accounts receivable volume. Required: 1) Using the above information compute the estimated amount of uncollectible receivables. 2) Prepare the journal entry to record the estimated uncollectibles. 3) Instead of the aging method compute the estimated bad debts to be: a) 2.5% of net credit sales. b) 3.5% of gross accounts receivable

A company can record uncollectible account by two different procedures. What are the two procedures? Provide a brief description of both. Which one is preferable by GAAP, and why?

A sinking fund established for the purpose of paying off long term bonds would be recorded on the balance sheet as a cash equivalent.

Which of the following statements concerning compensating balance agreements is not true?

What two attributes do notes receivables have that account receivables do not?

When a company discounts a customer's note at the bank,

During 2016, a company wrote off $7,500 in uncollectible accounts receivable. At the end of the year, they estimated bad debt expense using a percent of gross sales. In 2017, the company recovered a $1,500 account that was written off in 2016. The recording of this recovery would include a

The sales returns and allowances account is reported as a

During 2015, Davidson's first year of operations, the following transactions occurred: •Credit sales of $2,000,000. •Collections on account of $1,700,000. •Accounts receivable written off during the year, $5,000. •Estimated uncollectible accounts, $8,000. •Accepted a $10,000, one-year, 12% note receivable on June 30. Required: Prepare the receivables portion of Davidson's first year operation's balance sheet as of December 31, 2015.

Describe the key elements for internal control of cash receipts and cash payments.

An advantage of basing bad debt expense on the historical relationship between bad debts and net credit sales is that

Which of the following is an advantage of using the net price method for recording cash discounts on credit sales?

What two types of financing agreements are available to companies who wish to obtain cash from their accounts receivables? Why is it important to note whether or not the receivables are transferred with or without recourse?

Max Corp. sold goods for $36,000 on July 17, 2014, and accepted a 12%, 90-day note. On August 1, the note was discounted at 15%. Required: a.Compute the proceeds. b.If the maker dishonored the note at maturity, prepare an entry (or entries) for Max Corp. assuming $75 of bank protest fees.