Exam 7: Cash and Receivables

On July 1, 2018, Cromartie Furniture established a $150 petty cash fund. A check for $150 was made out to the petty cash custodian. During July, the petty cash custodian paid the following bills from the petty cash fund: Office supplies \ 36 Postage 22 Delivery charges 40 Bottled water 28 Total \ 126 -At the end of July the petty cash fund was replenished. The journal entry to establish the petty cash fund includes:

On November 10 of the current year, Cherokee Industries sold materials to a customer for $8,000 with credit terms 2/10, n/30. Cherokee uses the net method of accounting for cash discounts. What entry would Cherokee make on December 10, assuming the correct payment was received on that date?

If a company uses the balance sheet approach to estimate bad debt expense, bad debt expense for a period can be determined by:

Cash equivalents would include investments in marketable equity securities as long as management intends to sell the securities in the next three months.

Gershwin Wallcovering Inc. shipped the wrong shade of paint to a customer. The customer agreed to keep the paint upon being offered a 15% price reduction. Gershwin would record this reduction by crediting accounts receivable and debiting:

Calistoga Produce estimates bad debt expense at ½% of credit sales. The company reported accounts receivable and allowance for uncollectible accounts of $471,000 and $1,650, respectively, at December 31, 2017. During 2018, Calistoga's credit sales and collections were $315,000 and $319,000, respectively, and $1,720 in accounts receivable were written off. - Calistoga's 2018 bad debt expense is:

Chen Inc. accepted a two-year noninterest-bearing note for $605,000 on January 1, 2018. The note was accepted as payment for merchandise with a fair value of $500,000. The effective interest rate is 10%. The cash collection on December 31, 2019, would be recorded as: