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Exam 6: Cash and Receivables

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Question 1

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Which is not a key element of internal control over cash receipts?

A) daily recording of all cash receipts in the accounting records
B) daily entry in a voucher register
C) immediate counting by the person opening the mail or using the cash register
D) daily bank deposits

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Question 2

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The following information is provided: Required: a. Prepare the adjusting entry if bad debts are estimated to be 1.5% of net sales. b. Compute the amount of the adjusting entry if bad debts are estimated to be 3% of ending accounts receivable.

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Question 3

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Under U.S. GAAP, a company can designate a receivable, upon initial recognition, to be recognized at fair value without meeting any criteria. IFRS has established qualifying criteria for fair value designation. Required: Describe the IFRS qualifying criteria that must be met to designate a receivable as fair value.

Some companies use automated payment processing technology in which paper checks that may arrive at a lockbox are converted into electronic payments then the check itself is destroyed. This process is referred to as

The sales returns and allowances account is reported as a

Hunter's, Inc. reported a balance of $1,410 in its cash account at the end of the month. There were $1,200 of deposits in transit and $1,150 of checks outstanding. The bank statement showed a balance of $1,510, service charges of $70, and the collection of a note plus interest. The note had a face value of $170. How much interest did the bank collect for the company?

A disadvantage of basing bad debt expense on the historical relationship between actual bad debts and the outstanding accounts receivable balance at the end of the year is that

A company can record the transfer of accounts receivable as a sale if all of the following are true except

In order to be classified as a cash equivalent, an investment must have a maturity date of

The net price method of recording sales and receivables generally requires less record keeping and is more cost effective

On September 1, 2013, Geco Co. sold $40,000 of goods and accepted a one-year, 12% note. Required: a. If no reversing entries were made after December 31, 2013, and adjusting entries were made, record the collection of the note on September 1, 2014. b. Assume instead that a noninterest-bearing note for $44,800 for the same goods was issued. What balance sheet accounts and amounts would be disclosed on December 31, 2013?

The following are transactions of the Morrison Company: a. On November 5, sold merchandise on account for $46,000 with terms of 3/15, n/30. b. On November 20, payment was received on $32,000 worth of merchandise sold on November 5. c. On December 5, further collections were made on $8,000 of merchandise sold on November 5. d. On December 8, merchandise sold for $4,000 on November 5 was returned by the purchaser and credit was granted by Morrison Company. Required: Consider the journal entry required for each transaction a-d. In the spaces below, record the appropriate dollar amounts to be debited or credited on the appropriate line for each account under the gross price and net price methods.. Indicate that the amount is a debit or credit by placing a Dr) or Cr) after the amount. Leave spaces blank for any accounts NOT affected by a transaction.

The Boise Tractor Company hired a new auditor DeBruins & Co. Upon review of their accounting records DeBruins made some suggestions regarding the information classified in the single account titled Accounts Receivable. The auditors found the following: Required: 1) Prepare the journal entry to separate the items into their proper accounts. 2) How should the items be reflected on Boise Tractors balance sheet?

On November 1, 2014, Yellow Grove Co. sold $45,000 of goods and accepted a note bearing 8% interest. The note was due in one year. Required: a. Prepare the journal entry to accrue interest for December 31, 2014. b. Record the collection of the note on October 31, 2015, assuming the accrual entry above was reversed on January 1, 2015

How does GAAP require receivables to be recorded? What about trade receivables?

Prepare the journal entries for the following transactions: a. Sold $150,000 of goods to Georgia Co. on account. b. Collected $50,000 from Georgia Co. c. Accepted a $100,000, one-year, 10% note from Georgia Co. for the amount remaining on the account. d. After 60 days, discounted the note from Georgia Co. at First National Bank at a 12% interest rate. Required: Prepare the journal entries for each transaction.

O'Tole Co. reports assigned accounts receivable of $190,000 that relate to an unpaid note payable of $75,000. Correct balance sheet disclosure is

On August 1, Party Hearty Company sold merchandise on credit with a list price of $6,300. Terms were 2/10, n/30. Which of the following entries correctly applies the indicated method to receive the appropriate customer payment on August 15?

When accounts receivable are assigned, the risk of ownership

All of the following are important elements of internal control over cash except