Exam 7: Financial Assets: Cash and Receivables

On January 1, 2013, a company purchased a $50,000, 16 percent interest-bearing note from ABC Associates without recourse. The note was dated January 1, 2012 and matures on June 30, 2013. The note specifies that the full 18 months of interest is payable on the maturity date. A 20 percent discount rate was agreed to by both parties. On January 1, 2013, ABC Associates should record a debit to cash for:

Digitex Inc. factored $50,000 of its accounts receivable with recourse. The factor retained 8% for sales adjustments and charged $3,000 as a financing fee. Estimated and actual amounts are as follows: Sales adjustments \ 2,500 Uncollectible accounts 500 Assume the transfer is recorded as a sale by Digitex. What is the loss or financing expense to be recognized on the transfer?

(a) A customer's $6,000, 15 percent, 120-day note dated December 1, 2008, was sold to the bank with recourse on December 31, 2008, at 18 percent to obtain quick cash for working capital purposes. Give the entry to record the proceeds. Assume interest has not been recorded on the note. Computations: (b) On the due date, the customer defaulted, the bank charges were $20. Give the required entry or entries.

When individual customers' accounts have credit balances of material amounts, these amounts:

At the end of 2003, the following balances appeared in the ledger accounts of a company prior to the adjusting and closing entries: Accounts receivable \ 156,000 Allowance for doubtful accounts 5,200 Credit sales 390,000 Account receivable to be written off 1,300 The estimated bad debt rate used by the company, based on outstanding customer receivables, is 3 percent. The amount that should be used in the correcting entry to record bad debt expense at the end of 2003 is $___________________.

Overdrafts in one chequing account can be offset by positive balances in other accounts, only if the accounts are at the same financial institution.