Exam 7: Financial Assets

Kennedy Company uses the balance sheet approach in estimating uncollectible accounts expense.The company prepares an adjusting entry to recognize this expense at the end of each month.During the month of July,the company wrote-off a $3,500 receivable and made no recoveries of previous write-offs.Following the adjusting entry for July,the credit balance in the Allowance for Doubtful Accounts was $3,000 larger than it was on July 1.What amount of uncollectible account expense was recorded for July?

Balance sheet method-journal entries The general ledger controlling account for Accounts Receivable has a balance of $120,500 at year-end before adjustment.The company uses the balance sheet approach to estimate uncollectible accounts.By aging the individual customers' accounts,it was determined that the doubtful accounts amounted to $5,020.Prepare the year-end adjusting entry for uncollectible accounts under each of the following independent assumptions. (a. )Allowance for Doubtful Accounts has a credit balance of $2,850. (b. )Allowance for Doubtful Accounts has a debit balance of $925.

Entries made in the general journal after preparing a bank reconciliation are called closing entries.

On December 30,2018,Varsity Corporation sold available for sale marketable securities costing $800,000 for $860,000 cash.The securities were purchased on January 2,2016 and the market value of the securities on December 31,2016 and December 31,2017 was $820,000 and $780,000,respectively.How much gain or loss will Varsity report in its income statement for the year ending December 31,2018?

One of the major steps in achieving internal control over accounts receivable is that the Billing department reviews the sales order,the customer's credit file,and decides whether and how much credit should be extended.

Service charges are an example of a transaction that appears in the bank statement but which may not yet have been recorded by the company.

Assuming Neptune does not sell this investment,the fair value accounting adjustment necessary at December 31,2018,includes:

When an Allowance for Doubtful Accounts is used,accounts receivable are valued in the balance sheet at their estimated net realizable value.

While preparing the bank reconciliation,an accountant discovered that a $426 check returned with the bank statement had been recorded erroneously in the depositor's accounting records as $462.In preparing the bank reconciliation the appropriate action to correct this error would be to:

The Allowance for Doubtful Accounts should be listed on the balance sheet as a current liability.

A good system of internal control will include all of the following except:

Watins,Inc.'s 2018 income statement reported net sales of $5,000,000.Watin's average accounts receivable during 2018 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. )Sold merchandise on account. (b. )Sold available for sale marketable securities at a gain.Cash proceeds from the sale were equal to the current market value of the securities reflected in the last balance sheet. (c. )Collected an account receivable. (d. )Adjusted the allowance for doubtful accounts to reflect the portion of accounts receivable estimated to be uncollectible at year-end. (e. )Made the fair value accounting adjustment reducing the balance in the available for sale marketable securities account to reflect a decrease in the market value of securities owned. Indicate the effects of each independent transaction or adjusting entry upon the financial measurements shown in the column headings below.Use the code letters,I for increase,D for decrease,and NE for no effect.

[The following information applies to the questions displayed below.] On June 1,2018,Jensen Company acquired an 8%,ten-month note receivable from a customer in settlement of an existing account receivable of $130,000.Interest and principal are due at maturity. -The proper adjusting entry at December 31,2018,with regard to this note receivable includes a:

With available for-sale securities,unrealized holding gains and losses are:

Evaluating the quality of receivables (a. )The 2018 annual report of Modern Books,a publicly traded corporation,reports accounts receivable (net of allowance for doubtful accounts),of $190,714 as of February 28,2018.What assurance do readers of Modern Books ' annual report have that these receivables really exist and are not fictitious assets recorded to make the balance sheet "look good"? (b. )The accounts receivable turnover rate is frequently used in evaluating the liquidity of accounts receivable.How is the accounts receivable turnover rate computed? What type of information does the accounts receivable turnover rate provide?

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:

Financial assets:

On May 1,2018 (maturity date),the note is collected in full by Salem Corporation.Assuming a fiscal year-end of December 31,Salem recognizes which of the following in its income statement for 2018 with regard to this note?

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 column headings below.Use the code letters,I for increase,D for decrease,and NE for no effect.