Question 1

Under the allowance method of recognizing uncollectible accounts, the entry to write off an uncollectible account

Accepted Answer

A)  increases the allowance for doubtful accounts. 
B)  has no effect on the allowance for doubtful accounts. 
C)  has no effect on net income. 
D)  decreases net income.

Question 2

The following information is available for Pirate Company: Allowance for Doubtful Accounts at December 31, 2020....................................$\$ 7,000$
Credit Sales during 2021 .......................................................................................270,000
Accounts Receivable deemed worthless and written off during 2021...................2,800
As a result of a review and aging of Accounts Receivable in early January 2022, however, it has been determined that an Allowance For Doubtful Accounts of $7,500 is required at December 31, 2021. What amount should Pirate record as bad debt expense for calendar 2021?

Accepted Answer

A)  $4,200 
B)  $3,300 
C)  $7,500 
D)  $74,000

Question 3

Cookie Ltd. receives a four-year, $100,000 zero-interest-bearing note. The present value of this note is $82,270. Interest income to be recognized for calendar 2021 will be

Accepted Answer

A)  $10,000. 
B)  $4,319.18. 
C)  $8,227.00. 
D)  $7,910.75.

Question 4

Regarding treatment of cash and cash equivalents under ASPE vs. IFRS, which of the following is NOT correct?

Accepted Answer

A)  IFRS allows preferred shares acquired close to their maturity date to qualify as a cash equivalent. 
B)  Cash equivalents under ASPE may be highly liquid investments readily convertible to cash. 
C)  Cash equivalents under ASPE may be investments convertible to unknown amounts of cash with material risk of change and value. 
D)  All of these statements are correct.

Question 5

Under the allowance method of recognizing uncollectible accounts, the entry to recognize the collection of a previously written off uncollectible account

Accepted Answer

A)  increases net income. 
B)  has no effect on the allowance for doubtful accounts. 
C)  decreases the allowance for doubtful accounts. 
D)  increases the allowance for doubtful accounts.

Question 6

The likelihood of loss because of the failure of the other party to fully pay the amount owed is called

Accepted Answer

A)  accounting risk. 
B)  bad debts. 
C)  credit risk. 
D)  currency risk.

Question 7

ASPE/IFRS Differences
While most requirements set out under ASPE are not likely to change in the short term, what is one area open to change? Explain.

Accepted Answer

The answer of ASPE/IFRS Differences
While most requirements set out under...

Question 8

What is the single most important indicator used to identify impaired accounts receivable?

Accepted Answer

A)  the customer's payment history 
B)  the age of the accounts 
C)  credit reports and references 
D)  industry in which the company operates

Question 9

Lebanon Ltd. prepared an aging of its accounts receivable at December 31, 2020 and determined that the net realizable value of the receivables was $290,000. Additional information for calendar 2020 follows: Allowance for doubtful accounts, beginning. .........................................$\$ 34,000$
 Uncollectible account written off during year.......................................... 23,000 
Accounts receivable, ending.................................................................... 320,000
 Uncollectible accounts recovered during year. ........................................5,000For the year ended December 31, 2020, Lebanon's bad debt expense should be

Accepted Answer

A)  $20,000. 
B)  $23,000. 
C)  $16,000. 
D)  $14,000.

Question 10

At the beginning of 2020, Graham Company received a three-year zero-interest-bearing $5,000 trade note. The market rate for equivalent notes was 10% at that time. Gannon reported this note as a $5,000 trade note receivable on its 2020 year-end statement of financial position and $5,000 as sales revenue for 2020. What effect did this accounting for the note have on Gannon's net earnings for 2020, 2021, 2022, and its retained earnings at the end of 2022, respectively?

Accepted Answer

A)  overstate, overstate, understate, zero 
B)  overstate, understate, understate, understate 
C)  overstate, overstate, overstate, overstate 
D)  None of these answer choices are correct.

Question 11

Cash management from a business perspective
Cite and explain three (3) practices and/or procedures companies engage in to manage their cash balances.

Accepted Answer

The answer of Cash management from a business perspective
Cite and...

Question 12

If receivables are used as collateral in borrowing transactions,

Accepted Answer

A)  the receivables generally come under the control of the lender. 
B)  a liability is reported on the borrower's statement of financial position. 
C)  the receivables will be reported as a liability. 
D)  the transaction would be reported as a sale.

Question 13

Control of petty cash
Under an imprest petty cash system, the petty cash custodian has a significant amount of responsibility. Describe two (2) procedures a company could put in place to obtain more complete control over the petty cash fund.

Accepted Answer

The answer of Control of petty cash
Under an imprest petty...

Question 14

Accounts receivable assigned
Moonbeam Ltd. assigned $520,000 of their accounts receivable to Sunbright Finance Company, as security for a loan of $430,000. Sunbright charged a 3.5% commission on the face amount of the loan, and the note bears interest at 9%.
During the first month, Moonbeam collected $260,000 on assigned accounts. This amount was paid to the finance company along with one month's interest on the note.
Instructions
Prepare the required journal entries on Moonbeam's books related to the transfer of the accounts receivable, the loan, and the payment to the finance company.

Accepted Answer

The answer of Accounts receivable assigned
Moonbeam Ltd. assigned $520,000 of...

Question 15

Definitions
Provide clear, concise answers for the following:
1. What are cash and cash equivalents and how are they reported?
2. What are receivables and how are they reported?
3. How are receivables measured?
4. How are impairments relating to uncollectible receivables accounted for?
5. How can receivables be "converted" to cash prior to their collection from customers?
6. How are receivables analyzed?
7. Identify the main differences between private entity GAAP and IFRS with respect to the accounting for receivables?

Accepted Answer

The answer of Definitions
Provide clear, concise answers for the following:
1....

Question 16

During the year, Popsicle Inc., which uses the allowance method, made an entry to write off a $4,000 uncollectible account. Before this entry was posted, the balance in accounts receivable was $80,000 and the balance in the allowance account was $7,000. The net realizable value of accounts receivable after the write off entry was

Accepted Answer

A)  $80,000. 
B)  $77,000. 
C)  $76,000. 
D)  $73,000.

Question 17

Cookie Ltd. receives a four-year, $100,000, zero-interest-bearing note. The present value of this note is $82,270. Assuming the note was issued on January 1, 2020, and the effective interest method is used, the interest income to be recognized for calendar 2020 will be

Accepted Answer

A)  $5,000. 
B)  $9,000.46. 
C)  $4,113.50. 
D)  $6,587.31.

Question 18

Terminology
In the space provided at right, write the word or phrase that is defined or indicated.

Accepted Answer

The answer of Terminology
In the space provided at right, write...

Question 19

Note with fair value not equal to cash consideration
On January 1, 2020, Cameroon Corp. lent $50,000 to its CEO, interest-free. The loan is repayable in full in five years. The market rate for similar loans (with similar credit risk) is 4%.
Instructions
a)Calculate the present value (fair value) of this loan (round to the nearest dollar). Why is it not the same as the actual cash advanced?
b)Prepare the journal entry to record this transaction.

Accepted Answer

The answer of Note with fair value not equal to...

Question 20

On February 1, 2020, Strawberry Corp. factored receivables with a carrying amount of $250,000 to Shortcake Inc. Shortcake assessed a finance charge of 3% of the receivables and retained 5% of the receivables. Relative to this transaction, you are to determine the amount of loss on disposal to be reported in the income statement of Strawberry Corp. for February. Assume that Strawberry factors the receivables on a without recourse basis. The loss to be reported is

Accepted Answer

A)  $ 0. 
B)  $7,500. 
C)  $15,000. 
D)  $14,550.

Exam 7: Cash and Receivables

Under the allowance method of recognizing uncollectible accounts, the entry to write off an uncollectible account

Cookie Ltd. receives a four-year, $100,000 zero-interest-bearing note. The present value of this note is $82,270. Interest income to be recognized for calendar 2021 will be

Regarding treatment of cash and cash equivalents under ASPE vs. IFRS, which of the following is NOT correct?

Under the allowance method of recognizing uncollectible accounts, the entry to recognize the collection of a previously written off uncollectible account

The likelihood of loss because of the failure of the other party to fully pay the amount owed is called

ASPE/IFRS Differences While most requirements set out under ASPE are not likely to change in the short term, what is one area open to change? Explain.

What is the single most important indicator used to identify impaired accounts receivable?

Cash management from a business perspective Cite and explain three (3) practices and/or procedures companies engage in to manage their cash balances.

If receivables are used as collateral in borrowing transactions,

Control of petty cash Under an imprest petty cash system, the petty cash custodian has a significant amount of responsibility. Describe two (2) procedures a company could put in place to obtain more complete control over the petty cash fund.

Cookie Ltd. receives a four-year, $100,000, zero-interest-bearing note. The present value of this note is $82,270. Assuming the note was issued on January 1, 2020, and the effective interest method is used, the interest income to be recognized for calendar 2020 will be

Terminology In the space provided at right, write the word or phrase that is defined or indicated.