Exam 7: Cash and Receivables

False Value Hardware began 2018 with a credit balance of $32,000 in the allowance for sales returns account. Sales and cash collections from customers during the year were $650,000 and $610,000, respectively. False Value estimates that 6% of all sales will be returned. During 2018, customers returned merchandise for credit of $28,000 to their accounts. - What is the balance in the allowance for sales returns account at the end of 2018?

If a company adopts an accounts receivable factoring program, and accounts for the factoring as a sale of receivables, which of the following is true in the period the company starts the program (all else equal)?

Although the net method is theoretically more sound, many companies use the gross method of accounting for cash discounts related to sales on account. Explain this statement.

Cashmere Soap Corporation had the following items listed in its trial balance at 12/31/2018: Currency and coins \6 50 Balance in checking account 2,600 Customer checks waiting to be deposited 1,200 Treasury bills, purchased on 11/1/2018, mature on 4/30/2019 3,000 Marketable equity securities 10,200 Commercial paper, purchased on 11 / 1 / 2018 , mature on 1/30/2019 5,000 What amount will Cashmere Soap include in its year-end balance sheet as cash and cash equivalents?

Which of the following is true about accounting for a troubled debt restructuring?

When a creditor's receivable becomes impaired, the receivable is revalued based on the discounted present value of currently expected cash flows at the loan's original effective rate.

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 accounts receivable at December 31, 2018, are:

If a long-term noninterest-bearing note is received in exchange for merchandise sold, the amount of sales revenue recognized will be greater than the amount of the note.

On June 14, 2018, Rumsfeld Company sold 100 air-conditioning units to Powell Heating and Cooling. The units list for $600 each, but Powell was granted a 25% trade discount. All of Rumfeld's sales are subject to terms 2/10, n/30. Rumsfeld uses the gross method of accounting for sales discounts. Required: 1. Prepare the journal entry to record the sale. 2. Prepare the journal entry to record receipt of the payment, assuming the correct amount was received on June 22, 2018. 3. Prepare the journal entry to record receipt of the payment, assuming the correct amount was received on July 10, 2018.

During Bricker Company's first year of operations, credit sales totaled $200,000 and collections on credit sales totaled $145,000. Bricker estimates that $1,000 of its ending accounts receivable balance will not be collected. By year-end, Bricker had written off $330 of specific accounts as uncollectible. Required: 1. Prepare all appropriate journal entries relative to uncollectible accounts and bad debt expense. 2. Show the year-end balance sheet presentation for accounts receivable.

The net method of accounting for cash discounts requires adjusting entries for discounts taken.

On November 10 of the current year, Flores Mills sold carpet to a customer for $8,000 with credit terms 2/10, n/30. Flores uses the gross method of accounting for cash discounts. What is the correct entry for Flores on December 5, assuming the correct payment was received on that date?

Harvey's Wholesale Company sold supplies of $46,000 to Northeast Company on April 12 of the current year, with terms 1/15, n/60. Harvey uses the net method of accounting for cash discounts. What entry would Harvey's make on April 23, assuming the customer made the correct payment on that date?

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%. What is the correct entry to record the note?

In deciding whether financing with receivables is a secured borrowing or a sale under IFRS, the critical element is the extent to which:

Accounting for the pledging of accounts receivable as collateral for a loan requires:

On May 12, 2018, Falwell Computing sold five computers to Computing Plus for $10,000, subject to terms 3/10, n/30. Falwell uses the net method of accounting for sales discounts. Required: 1. Prepare the journal entry to record the sale. 2. Prepare the journal entry to record receipt of the payment, assuming the correct amount was received on May 20, 2018. 3. Prepare the journal entry to record receipt of the payment, assuming the correct amount was received on June 5, 2018.

As of December 31, 2018, Amy Jo's Appliances had unadjusted account balances in accounts receivable of $311,000 and $970 in the allowance for uncollectible accounts, following 2018 write-offs of $6,450 in bad debts. An analysis of Amy Jo's December 31, 2018, accounts receivable suggests that the allowance for uncollectible accounts should be 2% of accounts receivable. Bad debt expense for 2018 should be:

Oswego Clay Pipe Company sold $46,000 of pipe to Southeast Water District #45 on April 12 of the current year with terms 1/15, n/60. Oswego uses the gross method of accounting for cash discounts. What entry would Oswego make on April 12?

The following note disclosure is taken from the 2018 annual report to shareholders of Winchester International Corporation. NOTE 5: ALLOWANCE FOR LOAN LOSSES The allowance for loan loss is maintained at a level to absorb probable losses inherent in the loan portfolio. This allowance is increased by provisions charged to operating expense and by recoveries on loans previously charged off, and reduced by charge-offs on loans. The following is a summary of the changes in the allowances for loan losses for three years: Winchester also reported (in thousands) in its comparative balance sheet that it held Loans receivable, net, of $6,869,11 and $6,819,209 at December 31, 2018, and December 31, 2017, respectively. -Using a T-account for the Allowance for Loan Losses, identify the changes in the account during 2018.