Exam 7: Cash and Receivables

Under IFRS, accounts receivable impairments are not recognized.

Frasquita acquired equipment from the manufacturer on 6/30/2018 and gave a noninterest-bearing note in exchange. Frasquita is obligated to pay $550,000 on 4/30/2019 to satisfy the obligation in full. -If Frasquita accrued interest of $15,000 on the note in its 2018 year-end financial statements, what amount would it record the equipment on its 6/30/2018 balance sheet?

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 June 10, assuming the customer made the correct payment on that date?

On January 1, 2018, Happy Tubs sold a hot tub to Monica, receiving a two-month, noninterest-bearing note in exchange for a hot tub that normally sells for $8,000. The note is for an amount that achieves an effective interest rate of 10% per year, and Happy Tubs views the financing component of this transaction to be significant. Required: 1. Prepare the journal entry to record the sale. 2. Prepare any adjusting entry necessary on December 31, 2018. 3. Prepare any adjusting entry necessary on December 31, 2019.

Montana Minerals sold coal to Beta Electric, receiving a six-month, noninterest-bearing note for $200,000. The implied discount rate on the note is 8% per annum. Montana uses a periodic inventory system, and views the financing component of this transaction to be significant. Required: 1. Prepare the journal entry to record the sale. 2. Compute the effective rate of interest.

-If HP is using the balance sheet approach to determining bad debt expense, what percentage of year-end gross receivables did it use in 2015 and 2014, respectively?

On December 1, 2018, General Mole borrowed $400,000 at 12% interest and pledged $500,000 in accounts receivable as collateral. Additionally, General Mole was charged a finance fee equal to 1% of the accounts receivable assigned. At the end of December, $300,000 of the assigned receivables were collected and remitted to the lender along with accrued interest. Required: Prepare journal entries to record the borrowing, the assignment of receivables, the collection on the receivables, and the recognition of interest expense.

On December 31, 2017, Central Freight reported an allowance for uncollectible accounts of $15,300. During 2018, Central wrote off $17,000 in accounts receivable. Included in the write-off was Roskoff Corp.'s account in the amount of $750. Roskoff subsequently paid this balance. At December 31, 2018, an analysis of the accounts receivable aging schedule indicated the need for an allowance for uncollectible accounts of $14,900. Required: Prepare all implied journal entries relative to bad debt expense and the allowance for uncollectible accounts.

Logistics Company had the following items listed in its trial balance at 12/31/2018: Balance in checking account, Bank of the East \4 42,000 Treasury bills, purchased on 11/1/2018, mature on 1/30/2019 20,000 Loan payable, long-term, Bank of the East 300,000 Included in the checking account balance is $50,000 of restricted cash that Bank of the East requires as a compensating balance for the $300,000 note. What amount will Logistics include in its year-end balance sheet as cash and cash equivalents?

Rusty Hardware makes only cash sales. It began 2018 with a credit balance of $32,000 in the refund liability account. Sales during 2018 were $600,000. Rusty estimates that 6% of all sales will be returned. During 2018, customers returned merchandise for credit of $28,000 to their accounts. -Rusty's 2018 income statement would report net sales of:

Wilson Company had the following cash balance items listed in its trial balance at 12/31/2018: Peters on Savings and Loan: \5 0,000 Right Bank: (5,000) Clinton County Trust Bank: 10,000 If Wilson reports under IFRS, its 12/31/2018 balance sheet would show what cash balance?

Under IFRS, accounts receivable can be accounted for as "available for sale" if that approach is elected upon initial recognition of the receivable.

Priscilla's Exotic Pets discounted a note receivable without recourse and the sales criteria were met. The discounting is recorded as:

The following aging information pertains to Jacobsen Co.'s accounts receivable at December 31, 2018: Estimated \% Days Outstanding Amount Uncollectible 0-30 \ 420,000 2\% 31-60 140,000 5\% 61-120 100,000 10\% Over 120 120,000 20\% During 2018, Jacobsen wrote off $18,000 in receivables and recovered $6,000 that had been written off in prior years. Jacobsen's December 31, 2017, allowance for uncollectible accounts was $40,000. Using the balance sheet approach, what amount of allowance for uncollectible accounts should Jacobsen report at December 31, 2018?

The allowance for uncollectible accounts is a:

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. -What kind of account is the Allowance for Loan Losses in Winchester's financial statements?

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. -If Winchester is using the balance sheet approach to determining loan losses and the Allowance account balance, what percentage did it use in 2018?

On February 1, 2018, Stealth Trucks sold a diesel rig to Kansas Transports for $250,000, receiving a $50,000 down payment and a 12-month, 10% note for the balance. Principal and interest are due at maturity, and the 10% interest rate reflected the market rate of interest at the time of sale. On August 1, 2018, Kansas Transports discounted the note without recourse at the First South Bank at 12% interest. Required: Prepare all required journal entries at August 1 to recognize interest revenue and the discounting of the note.

-What is the balance in HP's allowance for doubtful accounts at the end of the fiscal years 2015 and 2014, respectively?

In the balance sheet at the end of its first year of operations, Dinty Inc. reported an allowance for uncollectible accounts of $82,000. During the year, Dinty wrote off $32,000 of accounts receivable it had attempted to collect and failed. Credit sales for the year were $2,200,000, and cash collections from credit customers totaled $1,950,000. -What bad debt expense would Dinty report in its first-year income statement?