Exam 7: Financial Assets

Bank reconciliation--computation and journal entry The Cash account in the ledger of Arnaz Company showed a balance of $13,307 at March 31. The bank statement, however, showed a balance of $9,936 at the same date. The only reconciling items consisted of a $4,902 deposit in transit, a bank service charge of $36, outstanding checks totaling $2,600, and an NSF check from L. Ball, one of Arnaz' customers. (a) What is the amount of the adjusted cash balance on March 31? (b) What is the amount of the NSF check? (c) Record the journal entry necessary, if any, to adjust Arnaz Company's accounting records at March 31:

What is the "adjusted cash balance" at June 30?

Which of the following is not considered a cash equivalent?

Bank reconciliation-classification Indicate how the following items would be treated in a bank reconciliation. You may choose from the following answers: (A) Deducted from the balance per accounting records. (B) Added to balance per accounting records. (C) Deducted from balance per bank statement. (D) Added to balance per bank statement.

Cash equivalents include money market funds, U.S. Treasury bills, and high-grade commercial paper.

A major purpose of using an Allowance for Doubtful Accounts is to recognize uncollectible accounts expense in the same accounting period as the related sales which caused the expense.

Watins, Inc.'s 2011 income statement reported net sales of $5,000,000. Watin's average accounts receivable during 2011 amounted to $450,000. Using 360 days to a year, Watin's:

Financial assets--effects of transactions Five events involving financial assets are described below: (a.) Received dividends earned on investment in marketable securities. (b.) Invested excess cash in marketable securities. (c.) Determined that a specific account receivable is worthless and wrote it off against the allowance for doubtful accounts. (d.) Made sale of merchandise for cash. (e.) Sold available-for-sale marketable securities at a loss. Cash proceeds from the sale were equal to the current market value reflected in the last balance sheet. Indicate the effects of each independent transaction or adjusting entry upon the financial measurements shown in the four column headings below. Use the code letters, I for increase, D for decrease, and NE for no effect.

During the year, Brown Corporation's average accounts receivable were $316,000. The current-year income statement reported net sales of $2,010,000, uncollectible accounts expense of $118,000, and net income of $982,000. Using 365 days to a year, compute the average number of days Brown waits to collect its accounts receivable. (Round answer to the nearest day, if necessary.)

Bank reconciliation At March 31, the balance of the Cash account according to the records of Fisher Company was $7,261. The March 31 bank statement showed a balance of $8,798. You are to prepare the bank reconciliation of Fisher Company at March 31, using the following supplementary information: (a.) Deposit in transit at March 31, $6,772. (b.) Outstanding checks: no. 120, $140; no. 121, $932; no. 127, $307; no. 134, $2,200. (c.) Service charge by bank, $50. (d.) A note receivable for $5,050 left by Fisher Company with bank for collection that had been collected and credited to company's account. No interest involved. (e.) A check for $90 drawn by a customer, Stuart Sands, but deducted from Fisher's account by the bank and returned with the notation "NSF." (f.) Fisher's check no. 480, issued in payment of $970 worth of office equipment, correctly written in the amount of $970 but erroneously recorded in Fisher's accounting records as $790.

The term "financial asset" is synonymous with the term "cash equivalent."

Compensating balances are not included in the amount of cash listed on a balance sheet.

In Hubbard's completed bank reconciliation at August 31, what dollar amount should be deducted from the balance per bank statement (indicated by 2 above)?

Anthony loaned $2,000 to Cleopatra for one year at 10% interest, all due at maturity. He insisted the terms of the transaction be formalized in a promissory note. In this situation:

The journal entry made by Salem to record this transaction on November 1, 2010, includes:

If the time span covered by a note is stated in days, the number of days for which interest accrues is computed by omitting the day on which the note is dated but including the day on which the note falls due.

Upon completion of the bank reconciliation, a journal entry will be required to update the depositor's accounting records. This entry will include a:

Windsor uses the income statement approach in estimating uncollectible accounts expense, and uncollectible accounts expense is estimated to be 2% of credit sales. What is the amount of uncollectible accounts expense recognized in Windsor's income statement for January?

The mark-to-market adjustment:

If the allowance method is used and an account receivable that had been previously written-off is collected, income is currently recorded.