Spiceland SM 7ech07

Find more slides, ebooks, solution manual and testbank on www.downloadslide.
com
Chapter 7
Cash and Receivables
QUESTIONS FOR REVIEW OF KEY TOPICS

Question 7-1
Cash equivalents usually include negotiable instruments as well as highly liquid investments
that have a maturity date no longer than three months from date of purchase.
Question 7-2
Internal control procedures involving accounting functions are intended to improve the
accuracy and reliability of accounting information and to safeguard the companys assets. The
separation of duties means that employees involved in recordkeeping should not also have physical
responsibility for assets.
Question 7-3
Management must document the companys internal controls and assess their adequacy. The
auditors must provide an opinion on managements assessment. The Public Company Accounting
Oversight Boards Auditing Standard No. 2 further requires the auditor to express its own opinion on
whether the company has maintained effective internal control over financial reporting
Question 7-4
A compensating balance is an amount of cash a depositor (debtor) must leave on deposit in an
account at a bank (creditor) as security for a loan or a commitment to lend. The classification and
disclosure of a compensating balance depends on the nature of the restriction and the classification
of the related debt. If the restriction is legally binding, then the cash will be classified as either
current or noncurrent depending on the classification of the related debt. In either case, note
disclosure is appropriate. If the compensating balance arrangement is informal and no contractual
agreement restricts the use of cash, note disclosure of the arrangement including amounts involved is
appropriate. The compensating balance can be included in the cash and cash equivalents category of
current assets.
Question 7-5
Trade discounts are reductions below a list price and are used to establish a final price for a
transaction. The reduced price is the starting point for initial valuation of the transaction. A cash
discount is a reduction, not in the selling price of a good or service, but in the amount to be paid by a
credit customer if the receivable is paid within a specified period of time.
Question 7-6
The gross method of accounting for cash discounts considers discounts not taken as part of
sales revenue. The net method considers discounts not taken as interest revenue, because they are
viewed as compensation to the seller for allowing the buyer to defer payment.
Solutions Manual, Vol.1, Chapter 7
The McGraw-Hill Companies, Inc., 2007

7-1
Find more slides, ebooks, solution manual and testbank on www.downloadslide.com
Answers to Questions (continued)

Question 7-7
When returns are material and a company can make reasonable estimates of future returns, an
allowance for sales returns is established. At a financial reporting date, this provides an estimate of
the amount of future returns for prior sales, and involves a debit to sales returns and a credit to
allowance for sales returns for the estimated amount. Allowance for sales returns is a contra account
to accounts receivable. When returns actually occur in the future reporting period, the allowance for
sales returns is debited.
Question 7-8
Even when specific customer accounts havent been proven uncollectible by the end of the
reporting period, bad debt expense properly should be matched with sales revenue on the income
statement for that period. Likewise, since its not expected that all accounts receivable will be
collected, the balance sheet should report only the expected net realizable value of that asset. So, to
record the bad debt expense and the related reduction of accounts receivable when the amount hasnt
been determined, an estimate is needed. In an adjusting entry, we record bad debt expense and
reduce accounts receivable for an estimate of the amount that eventually will prove uncollectible.
If uncollectible accounts are immaterial or not anticipated, or its not possible to reliably
estimate uncollectible accounts, an allowance for uncollectible accounts is not appropriate. In these
few cases, any bad debts that do arise simply are written off as bad debt expense.
Question 7-9
The income statement approach to estimating bad debts determines bad debt expense directly
by relating uncollectible amounts to credit sales. The balance sheet approach to estimating future
bad debts indirectly determines bad debt expense by estimating the net realizable value for accounts
receivable that exist at the end of the period. In other words, the allowance for uncollectible
accounts at the end of the period is estimated and then bad debt expense is determined by adjusting
the allowance account to reflect net realizable value.
Question 7-10
The assignment of all accounts receivable in general as collateral for debt requires no special
accounting treatment other than note disclosure of the agreement.
Question 7-11
Accounts receivable factored without recourse are accounted for as the sale of an asset. The
difference between the book value and the proceeds received is recognized as a gain or a loss. The
accounting treatment of receivables factored with recourse depends on whether certain criteria are
met. If the criteria are met, the factoring is accounted for as a sale. If they are not met, the factoring
is accounted for as a loan. In addition, note disclosure may be required.

7-2
Intermediate Accounting, 4/e
Answers to Questions (concluded)

Question 7-12
When a note is discounted, a financial institution, usually a bank, accepts the note and gives the
seller cash equal to the maturity value of the note reduced by a discount. The discount is computed
by applying a discount rate to the maturity value and represents the financing fee the bank charges
for the transaction.
The four-step process used to account for a discounted note receivable is as follows:
1. Accrue any interest revenue earned since the last payment date (or date of the note).
2. Compute the maturity value.
3. Subtract the discount the bank requires (discount rate times maturity value times the length
of time from date of discounting to maturity date) from the maturity value to compute the
proceeds to be received from the bank (maturity value less discount).
4. Compute the difference between the proceeds and the book value of the note and related
interest receivable. The treatment of the difference will depend on whether the discounting
is accounted for as a sale or as a loan. If its a sale the difference is recorded as a loss or
gain on the sale; if its a loan the difference is viewed as interest expense or interest
revenue.
Question 7-13
A companys investment in receivables is influenced by several related variables, to include
the level of sales, the nature of the product or service, and credit and collection policies. The
receivables turnover and average collection period ratios are designed to monitor receivables.
Question 7-14
The items necessary to adjust the bank balance might include deposits outstanding (including
undeposited cash), outstanding checks, and any bank errors discovered during the reconciliation
process. The items necessary to adjust the book balance might include collections made by the bank
on the companys behalf, service and other charges made by the bank, NSF (nonsufficient funds)
check charges, and any company errors discovered during the reconciliation process.
Question 7-15
A petty cash fund is established by transferring a specified amount of cash from the companys
general checking account to an employee designated as the petty cash custodian. The fund is
replenished by writing a check to the petty cash custodian for the sum of the bills paid with petty
cash. The appropriate expense accounts are recorded from petty cash vouchers at the time the fund
is replenished.

7-3
BRIEF EXERCISES
Brief Exercise 7-1
The company could improve its internal control procedure for cash receipts by
segregating the duties of recordkeeping and the handling of cash. Jim Seymour,
responsible for recordkeeping, should not also be responsible for depositing customer
checks.
Brief Exercise 7-2

All of these items would be included as cash and cash equivalents except the U.S.
Treasury bills, which would be included in the current asset section of the balance
sheet as short-term investments.
Brief Exercise 7-3

Income before tax in 2007 will be reduced by $2,500, the amount of the cash
discounts.
$25,000 x 10 = $250,000 x 1% = $2,500
Brief Exercise 7-4

Income before tax in 2006 will be reduced by $2,500, the anticipated amount of
cash discounts.
$25,000 x 10 = $250,000 x 1% = $2,500

7-4
Brief Exercise 7-5

Estimated returns = $10,600,000 x 8% = $848,000
Less: Actual returns
(720,000)
Remaining estimated returns
$128,000
Sales returns .................................................................. 128,000

Allowance for sales returns ......................................
128,000
Inventory ......................................................................
Cost of goods sold ($128,000 x 60%) ...........................
76,800
76,800
Brief Exercise 7-6

(1) Bad debt expense = $1,500,000 x 2% = $30,000
(2) Allowance for uncollectible accounts:
Beginning balance
$25,000
Add: Bad debt expense
30,000
Deduct: Write-offs
(16,000)
Ending balance
$39,000

7-5
Brief Exercise 7-7

(1) Allowance for uncollectible accounts:
Beginning balance
$ 25,000
Deduct: Write-offs
(16,000)
Required allowance
(33,400)*
Bad debt expense
$24,400
(2) Required allowance = $334,000** x 10% = $33,400*
Accounts receivable:
Beginning balance
Add: Credit sales
Deduct: Cash collections
Write-offs
Ending balance
$ 300,000
1,500,000
(1,450,000)
(16,000)
$ 334,000**
Brief Exercise 7-8

Allowance for uncollectible accounts:
Beginning balance
Deduct: Required allowance
Write-offs

7-6
$30,000
40,000
(38,000)
$32,000
Brief Exercise 7-9

Credit sales
Deduct: Cash collections
Write-offs
Year-end balance in A/R
Beginning balance in A/R
$8,200,000
(7,950,000)
(32,000)*
(2,000,000)
$1,782,000
*Allowance for uncollectible accounts:

Beginning balance
$30,000
40,000
Deduct: Required allowance
(38,000)
Write-offs
$32,000
Brief Exercise 7-10

2006 interest revenue:
$20,000 x 6% x 1/12 = $100
2007 interest revenue:
$20,000 x 6% x 2/12 = $200

7-7
Brief Exercise 7-11

Assets decrease by $3,000:
Cash increases by $100,000 x 85% =
Receivable from factor increases by
([15% x $100,000] $3,000 fee)
Accounts receivable decrease
Net decrease in assets
$ 85,000
12,000
(100,000)
$ (3,000)
Liabilities would not change as a result of this transaction.

Income before income taxes decreases by $3,000, the amount of the factors fee.
($100,000 x 3%)
The journal entry to record the transaction is as follows:
Cash (85% x $100,000) .....................................................
Loss on sale of receivables (3% x $100,000).....................
Receivable from factor ([15% x $100,000] $3,000 fee) .....
Accounts receivable (balance sold)...............................
85,000
3,000
12,000
100,000
Brief Exercise 7-12

Logitech would account for the transfer as a secured borrowing. The receivables
would remain on the companys books and a liability is recorded for the amount
borrowed plus the banks fee.

7-8
Brief Exercise 7-13

$30,000
450
30,450
(406)
$30,044
Face amount
Interest to maturity ($30,000 x 6% x 3/12)
Maturity value
Discount ($30,450 x 8% x 2/12)
Cash proceeds
Brief Exercise 7-14

Receivables turnover =
$320,000 = 5.33
$60,000*
($50,000 + 70,000) 2 = $60,000*

Average collection
period
365 = 68 days
5.33

7-9
EXERCISES
Exercise 7-1
Requirement 1
Cash and cash equivalents includes:
a. Balance in checking account
Balance in savings account
b. Undeposited customer checks
c. Currency and coins on hand
f. U.S. treasury bills with 2-month maturity
Total
$13,500
22,100
5,200
580
15,000
$56,380
Requirement 2
d. The $400,000 savings account will be used for future plant expansion and
therefore should be classified as a noncurrent asset, either in other assets or
investments.
e. The $20,000 in the checking account is a compensating balance for a longterm loan and should be classified as a noncurrent asset, either in other
assets or investments.
f. The $20,000 in 7-month treasury bills should be classified as a current asset
along with other temporary investments.

7-10
Exercise 7-2
Requirement 1
Cash and cash equivalents includes:
Cash in bank checking account
U.S. treasury bills
Cash on hand
Undeposited customer checks
Total
$22,500
5,000
1,350
1,840
$30,690
Requirement 2
The $10,000 in 6-month treasury bills should be classified as a current asset
along with other temporary investments.

7-11
Exercise 7-3
Requirement 1
Sales price = 100 units x $600 = $60,000 x 70% = $42,000
November 17, 2006
Accounts receivable ......................................................
Sales revenue.............................................................
42,000
November 26, 2006

Cash (98% x $42,000).......................................................
Sales discounts (2% x $42,000) ........................................
Accounts receivable ..................................................
41,160
840
42,000
42,000
Requirement 2
November 17, 2006
Sales revenue.............................................................
42,000
December 15, 2006

Cash ..............................................................................
42,000

7-12
42,000
42,000
Exercise 7-3 (concluded)

Requirement 3
Requirement 1:
November 17, 2006
Sales revenue (98% x $42,000) .....................................
41,160
November 26, 2006

Cash ..............................................................................
41,160
41,160
41,160
Requirement 2:
November 17, 2006
Sales revenue (98% x $35,000) .....................................
December 15, 2006

Cash ..............................................................................
Interest revenue .........................................................
41,160
41,160
42,000
41,160
840

7-13
Exercise 7-4
Requirement 1
Sales price = 1,000 units x $50 = $50,000
July 15, 2006
Sales revenue.............................................................
50,000
July 23, 2006

Cash (98% x $50,000).......................................................
Sales discounts (2% x $50,000) ........................................
49,000
1,000
50,000
50,000
Requirement 2
July 15, 2006
Sales revenue.............................................................
50,000
Aug. 15, 2006

Cash ..............................................................................
50,000

7-14
50,000
50,000
Exercise 7-5
Requirement 1
July 15, 2006
Sales revenue (98% x $50,000) .....................................
49,000
July 23, 2006

Cash ..............................................................................
49,000
49,000
49,000
Requirement 2
July 15, 2006
Sales revenue (98% x $50,000) .....................................
August 15, 2006

Cash ..............................................................................
Interest revenue .........................................................
49,000
49,000
50,000
49,000
1,000

7-15
Exercise 7-6
Requirement 1
$67,500 (1.5% x $4,500,000)
Requirement 2
Allowance for uncollectible accounts
Balance, beginning of year
Add: Bad debt expense for 2006 (1.5% x $4,500,000)
Less: End-of-year balance
Accounts receivable written off
$42,000
67,500
(40,000)
$69,500
Requirement 3
$69,500 the amount of accounts receivable written off.

7-16
Exercise 7-7
Requirement 1
To record the write-off of receivables.
Allowance for uncollectible accounts ............................
21,000
21,000
To record the collection of a receivable previously written off.

Allowance for uncollectible accounts ........................
1,200
Cash ..............................................................................
1,200
1,200
1,200

Deduct: Receivables written off
Add: Collection of receivable previously written off
Balance, before adjusting entry for 2006 bad debts
$32,000
(21,000)
1,200
12,200
Required allowance: 10% x $625,000

Bad debt expense
(62,500)
$50,300
To record bad debt expense for the year.

Bad debt expense ..........................................................
50,300
50,300
Requirement 2
Current assets:
Accounts receivable, net of $62,500 in allowance
for uncollectible accounts
$562,500
7-17
Exercise 7-8
Using the direct write-off method, bad debt expense is equal to actual write-offs.
Collections of previously written-off receivables are recorded as revenue.
Deduct: Receivables written off
Add: Collection of receivables previously written off
Less: End of year balance
Bad debt expense for the year 2006
$17,280
(17,100)
2,200
(22,410)
$20,030
Exercise 7-9
($ in millions)
Less: End of year balance
Write-offs during the year
$242
44
(166)
$120*
Accounts receivable analysis:

Balance, beginning of year ($5,196 + 242)
Add: Credit sales
Less:Write-offs*
Less: Balance end of year ($5,890 + 166)
Cash collections

7-18
$ 5,438
36,835
(120)
(6,056)
$36,097
Exercise 7-10
Requirement 1
June 30, 2006

Note receivable .............................................................
Sales revenue.............................................................
30,000
December 31, 2006

Interest receivable .........................................................
Interest revenue ($30,000 x 6% x 6/12) ...........................
900
March 31, 2007

Cash [$30,000 + ($30,000 x 6% x 9/12)] ...............................
Interest receivable (accrued at December 31) ..................
Note receivable .........................................................
30,000
900
31,350
450
900
30,000
Requirement 2
2006 income before income taxes would be understated by $900
2007 income before income taxes would be overstated by $900.

7-19
Exercise 7-11
Requirement 1
June 30, 2006
Note receivable (face amount) ..........................................
Discount on note receivable ($30,000 x 8% x 9/12) ........
Sales revenue (difference) ............................................
30,000
1,800
28,200
December 31, 2006

Discount on note receivable .........................................
1,200
March 31, 2007

Discount on note receivable .........................................
600
Cash .............................................................................
Note receivable (face amount) ......................................
Requirement 2
$ 1,800
$28,200
= 6.38%
12/
x
9
_______
= 8.51%
1,200
600
30,000
30,000
interest for 9 months

sales price
rate for 9 months
to annualize the rate
effective interest rate

7-20
Exercise 7-12
Requirement 1
Book value of stock
Plus gain on sale of stock
= Note receivable
Interest reported for the year
$16,000
6,000
$22,000
$ 2,200
=
Divided by value of note
10% rate
$ 22,000
Requirement 2
To record sale of stock in exchange for note receivable.
January 1, 2006
Note receivable .............................................................
Investments ...............................................................
Gain on sale of investments.......................................
22,000
16,000
6,000
To accrue interest on note receivable for twelve months.

December 31, 2006
Interest revenue ($22,000 x 10%)..................................
2,200
2,200
Exercise 7-13
1.
2.
3.
4.
a
a
a
a

7-21
Exercise 7-14
Cash (difference) ............................................................. 439,200
Finance charge expense (1.8% x $600,000) ....................... 10,800
Liability financing arrangement .............................
450,000
Exercise 7-15
Cash (90% x $60,000).......................................................
Loss on sale of receivables (2% x $60,000) ......................
Receivable from factor ([10% x $60,000] $1,200 fee) .......
54,000
1,200
4,800
60,000
Exercise 7-16
Cash (90% x $60,000).......................................................
Loss on sale of receivables ([2% x $60,000] + $3,000) .......
Receivable from factor ([10% x $60,000] $1,200 fee) ......
Recourse liability .....................................................

7-22
54,000
4,200
4,800
3,000
60,000
Exercise 7-17
Step 1: Accrue interest earned.
February 28, 2006
Interest revenue ($15,000 x 10% x 2/12) .........................
250
250
Step 2: Add interest to maturity to calculate maturity value.

Step 3: Deduct discount to calculate cash proceeds.
$15,000
750
15,750
(630)
$15,120
Face amount
Maturity value
Discount ($15,750 x 12% x 4/12)
Cash proceeds
Step 4: To record a loss for the difference between the cash proceeds and the
notes book value.
February 28, 2006
Cash (proceeds determined above) .......................................
Loss on sale of note receivable (difference) .....................
Interest receivable (accrued interest determined above).....
15,120
130
15,000
250
Exercise 7-18
1.
2.
d
c

7-23
Exercise 7-19
List A
c 1. Internal control
j
2. Trade discount
g 3. Cash equivalents
h 4. Allowance for uncollectibles
i
5. Cash discount
l
6. Balance sheet approach
d 7. Income statement approach
k 8. Net method
a 9. Compensating balance
m 10. Discounting
b 11. Gross method
e 12. Direct write-off method
f 13. Factoring

7-24
List B
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
Restriction on cash.
Cash discount not taken is sales revenue.
Includes separation of duties.
Bad debt expense a % of credit sales.
Recognizes bad debts as they occur.
Sale of receivables to a financial institution.
Include highly liquid investments.
Estimate of bad debts.
Reduction in amount paid by credit customer.
Reduction below list price.
Cash discount not taken is interest revenue.
Bad debt expense determined by estimating realizable
value.
m. Sale of note receivable to a financial institution.
Exercise 7-20
Requirement 1
March 17, 2006
1,700
March 30, 2006

Note receivable .............................................................
Cash ..........................................................................
20,000
1,700
20,000
Step 1: To accrue interest earned for two months on note receivable

May 30, 2006
233
233
Step 2: Add interest to maturity to calculate maturity value.

Step 3: Deduct discount to calculate cash proceeds.
$20,000
1,400
21,400
(1,427)
$19,973
Face amount
Interest to maturity ($20,000 x 7%)
Maturity value
Discount ($21,400 x 8% x 10/12)
Cash proceeds

7-25
Exercise 7-20 (continued)

Step 4: To record a loss for the difference between the cash proceeds and the
notes book value.
May 30, 2006
Cash (proceeds determined above) ......................................
Interest receivable (from adjusting entry) .......................
19,973
260
233
20,000
June 30, 2006

Sales revenue.............................................................
12,000
July 8, 2006
Cash ($12,000 x 98%).......................................................
Sales discounts ($12,000 x 2%) ........................................
11,760
240
August 31, 2006

Notes receivable (face amount).........................................
Discount on note receivable ($6,000 x 8% x 6/12) ..........
Investments (book value)..............................................
Gain on sale of investments (difference) ......................
December 31, 2006

Bad debt expense ($700,000 x 2%) ...................................
7-26
12,000
12,000
6,000
240
5,000
760
14,000
14,000
Exercise 7-20 (concluded)

Requirement 2
To accrue interest earned on note receivable.
December 31, 2006
Discount on note receivable ..........................................
Interest revenue ($6,000 x 8% x 4/12).............................
160
160
Exercise 7-21
Second quarter:
Average collection
period
Third quarter:
Average collection
period
5,398 = 3.15
1,714
91 = 29 days
3.15
5,620 = 3.14
1,790
91 = 29 days
3.14

7-27
Exercise 7-22
Average collection period
= 365 Accounts receivable turnover = 50 days
Accounts receivable turnover
= 365 50 = 7.3
Average accounts receivable
= ($400,000 + 300,000) 2 = $350,000
Accounts receivable turnover

7.3
= Net sales Average accounts receivable

= Net sales $350,000
Net sales = 7.3 x $350,000
= $2,555,000
Exercise 7-23
1. c. The allowance method records bad debt expense systematically as a percentage
of either sales or the level of accounts receivable. The latter calculation
considers the amount already existing in the allowance account. The credit is to
a contra asset or allowance account. As accounts receivable are written off,
they are charged to the allowance account.
2. d. If a company uses the allowance method, the write-off of a receivable has no
effect on total assets. The journal entry involves a debit to the allowance
account and a credit to accounts receivable. The net effect is that the asset
section is both debited and credited for the same amount. Thus, there will be no
effect on either total assets or net income.
3. c. The entry is to debit bad debt expense and credit the allowance account. Net
credit sales were $1,500,000 ($1,800,000 - $125,000 of discounts - $175,000 of
returns). Thus, the expected bad debt expense is $22,500 (1.5% x $1,500,000).
This amount is recorded regardless of the balance remaining in the allowance
account from previous periods. The net effect is that the allowance account is
increased by $22,500.

7-28
Exercise 7-24
To establish the petty cash fund.
October 2, 2006
Petty Cash ........................................................
Cash (checking account)...............................
200
200
To replenish the petty cash fund.

October 31, 2006
Office supplies expense....................................
Entertainment expense .....................................
Postage expense ...............................................
Miscellaneous expense.....................................
Cash (checking account)...............................
76
48
20
19
163
Exercise 7-25
Compute balance per bank statement:
Balance per books
Deduct: Deposits outstanding
Add: Checks outstanding
Deduct: Bank service charges
Balance per bank
Step 1:
Bank Balance to Corrected Balance
Balance per bank statement

Add: Deposits outstanding
Deduct: Checks outstanding
Corrected cash balance
Step 2:
$23,820
(2,340)
1,890
(38)
$23,332
$23,332
2,340
(1,890)
$23,782
Book Balance to Corrected Balance
Balance per books

Deduct: Service charges
$23,820
(38)
$23,782

7-29
Exercise 7-26
Requirement 1
Step 1: Bank Balance to Corrected Balance
Add: Bank error in recording check
$38,018
6,300
(8,420)
270
$36,168
Step 2: Book Balance to Corrected Balance

Balance per books
Add: Error in recording cash
receipt ($2,000 - 200)
Deduct:
Service charges
NSF checks
Automatic monthly loan payment
$38,918
1,800
(30)
(1,200)
(3,320)
$36,168
Requirement 2
To correct error in recording cash receipt from credit customer.
Cash .................................................................
Accounts receivable .....................................
1,800
1,800
To record credits to cash revealed by the bank reconciliation.

Miscellaneous expense (bank service charges).
Accounts receivable (NSF checks) ...................
Interest expense................................................
Note payable ....................................................
Cash .............................................................
30
1,200
320
3,000
4,550
Note: Each of the adjustments to the book balance required journal entries.
None of the adjustments to the bank balance require entries.
7-30
PROBLEMS
Problem 7-1
Requirement 1
Monthly bad debt expense accrual summary.
Bad debt expense (3% x $2,620,000) ................................
78,600
78,600
To record year 2006 accounts receivable write-offs.

68,000
68,000
Requirement 2
Bad debt expense .........................................................
Allowance for uncollectible accounts (below) .............
4,300
4,300
Year-end required allowance for uncollectible accounts:

Summary
Age Group
0-60 days
61-90 days
91-120 days
Over 120 days
Totals
Amount
$430,000
98,000
60,000
55,000
$643,000
Percent
Uncollectible
4%
15%
25%
40%
Estimated
Allowance
$17,200
14,700
15,000
22,000
$68,900

7-31
Problem 7-1 (concluded)

Beginning balance
Add: Monthly bad debt accruals
Deduct: Write-offs
Balance before year-end adjustment
Required allowance (determined above)
Required year-end increase in allowance
$54,000
78,600
(68,000)
64,600
68,900
$ 4,300
Requirement 3
Bad debt expense for 2006:
Monthly accruals
Year-end adjustment
Total
$78,600
4,300
$82,900
Balance sheet:
Current assets:
Accounts receivable, net of $68,900 in
allowance for uncollectible accounts

7-32
$574,100
Problem 7-2
Requirement 1
(a)
Balance, beginning of year ($580,640 + 6,590)
Add: Credit sales
Less: Cash collections
Less: Balance end of year ($504,944 + 5,042)
Accounts receivable written off during year
$ 587,230
2,158,755
(2,230,065)
(509,986)
$
5,934
(b)
Allowance for uncollectible accounts analysis:
Beginning balance
Less: Write-offs (from above)
Less: Year-end balance
Bad debt expense for the current year
$6,590
(5,934)
(5,042)
$4,386
(c)
$4,386 of bad debt expense divided by $2,158,755 in credit sales
equals .2% (.002).
Requirement 2
(a)
Current assets:
Receivables
Current year
Previous year
$509,986
$587,230
(b)
Bad debt expense would be equal to actual receivables written off
of $5,934.

7-33
Problem 7-3
Requirement 1
To record accounts receivable written off during the year 2006.
35,000
35,000
To record collection of account receivable previously written off.

3,000
Cash ..............................................................................
3,000
3,000
3,000
Requirement 2
(a)
December 31, 2006
Bad debt expense (3% x $1,750,000) ................................
52,500
52,500
(b)
December 31, 2006
Bad debt expense ..........................................................

7-34
36,700
36,700
Problem 7-3 (continued)

Beginning balance
Add: Credit sales
Less: Write-offs
Ending balance
$ 462,000
1,750,000
(35,000)
(1,830,000)
$ 347,000
$347,000 x 10% = $34,700 = Required allowance for uncollectible accounts

Beginning balance
Less: Write-offs
Balance before adjustment
Required allowance (determined above)
Bad debt expense adjustment
$30,000
3,000
(35,000)
(2,000) debit balance
34,700
$36,700
(c)
December 31, 2006
Bad debt expense ..........................................................
37,047
37,047
Required allowance:
Age Group
0-60 days
61-90 days
91-120 days
Over 120 days
Totals
Amount
$225,550
69,400
34,700
17,350
$347,000
Percent
uncollectible
4%
15%
25%
40%
Estimated
allowance
$ 9,022
10,410
8,675
6,940
$35,047

7-35

Beginning balance
Less: Write-offs
Balance before adjustment
Required allowance
Bad debt expense adjustment
Requirement 3
Accounts receivable
Year-end allowance
$30,000
3,000
(35,000)
(2,000) debit balance
35,047
$37,047
(a)
$347,000
[$(2,000) + 52,500]
= $296,500
(b)
$347,000
34,700
= $312,300
(c)
$347,000
35,047
= $311,953

7-36
Problem 7-4
Requirement 1
Total face value of notes = $300,000 + 150,000 + 200,000 =
Balance sheet carrying value =
Difference is the remaining discount on note 3
$650,000
645,000
$ 5,000
Note 3 is a 6-month note, with three months remaining. Therefore,

$5,000 represents one-half of the total discount of $10,000.
$10,000 $200,000 = 5% x 12/6 = 10% discount rate.
Requirement 2
Total accrued interest receivable
Less: Interest accrued on note 1:
$300,000 x 10% x 4/12 =
Interest accrued on note 2
$16,000
(10,000)
$ 6,000
$6,000 $150,000 = 4% x 12/6 = 8%

Requirement 3
Note 1
Note 2
Note 3 ($200,000 x 10% x 3/12)
Total interest revenue
$10,000
6,000
5,000
$21,000

7-37
Problem 7-5
Requirement 1
Alternative a:
To record the borrowing of $500,000 and signing of a note payable.
July 1, 2006
Cash .............................................................................. 500,000
Note payable .............................................................
500,000
Alternative b:
To record the transfer of receivables.
July 1, 2006
Cash ($550,000 x 98%) ..................................................... 539,000
Loss on transfer of receivables (2% x $550,000) ............... 11,000
550,000
Requirement 2
Alternative a:
July, 2006
Cash (80% x $780,000) ..................................................... 624,000
624,000
July 31, 2006
Interest expense ($500,000 x 12% x 1/12) ...........................
5,000
Note payable ................................................................. 500,000
Cash ..........................................................................
505,000

7-38

Alternative b:
The amount collected by the bank in excess of the receivables transferred is
remitted to Lonergan.
July 31, 2006
Cash [(80% x $780,000) - $550,000] ...................................
Requirement 3
Alternative a.
Alternative b.
74,000
74,000
Note disclosure is required for the assignment of accounts

receivable as collateral for the $500,000 note.
No disclosure is required since the transfer of receivables
was made without recourse.
Problem 7-6
Cash (90% x $800,000) ..................................................... 720,000
Loss on sale of receivables (4% x $800,000)..................... 32,000
Receivable from factor ([10% x $800,000] $32,000 fee) ... 48,000
800,000

7-39
Problem 7-7
Requirement 1
February 28, 2006
Note receivable .............................................................
Sales revenue.............................................................
March 31, 2006

Note receivable (face amount) ..........................................
Discount ($8,000 x 10%) ..............................................
Sales revenue (difference) ............................................
10,000
10,000
8,000
800
7,200
April 3, 2006
Sales revenue.............................................................
7,000
April 11, 2006

Cash (98% x $7,000) ........................................................
Sales discounts (2% x $7,000) ..........................................
$6,860
140
April 17, 2006

Sales returns ..................................................................
5,000
Inventory.......................................................................
Cost of goods sold .....................................................

7-40
7,000
7,000
5,000
3,200
3,200
Problem 7-7 (continued)

April 30, 2006
Cash (99% x $50,000) .......................................................
Loss on sale of receivables (1% x $50,000) ......................
49,500
500
50,000
To accrue interest on note receivable for four months.

June 30, 2006
Interest revenue ($10,000 x 10% x 4/12) .........................
333
333
To record discounting of note receivable.

June 30, 2006
Cash (proceeds determined below) ......................................
Interest receivable (from adjusting entry) .......................
$10,000
583
10,583
(317)
$10,266
10,266
67
333
10,000
Face amount
Maturity value
Discount ($10,583 x 12% x 3/12)
Cash proceeds
August 31, 2006 NO ENTRY REQUIRED

7-41

Requirement 2
To accrue nine months' interest on the Maddox Co. note receivable.
Discount .......................................................................
600
600
Requirement 3
Date
February 28
March 31
April 3
April 11
April 17
April 17
April 30
June 30
June 30
December 31
Total effect

7-42
Income
increase (decrease)
$10,000
7,200
7,000
(140)
(5,000)
3,200
(500)
333
(67)
600
$22,626
Problem 7-8
Note
Note Face
Value
Date of
Note
Interest
Rate
Date
Discounted
Discount
Rate
Proceeds
Received
$50,000
3-31-06
8%
6-30-06
10%
$50,350 (1)
50,000
3-31-06
8%
9-30-06
10%
51,675 (2)
50,000
3-31-06
8%
9-30-06
12%
51,410 (3)
80,000
6-30-06
6%
10-31-06
10%
81,027 (4)
80,000
6-30-06
6%
10-31-06
12%
80,752 (5)
80,000
6-30-06
6%
11-30-06
10%
81,713 (6)
(1)
$50,000
3,000
53,000
(2,650)
$50,350
Face amount
Maturity value
Discount ($53,000 x 10% x 6/12)
Cash proceeds
$50,000
3,000
53,000
(1,325)
$51,675
Face amount
Maturity value
Discount ($53,000 x 10% x 3/12)
Cash proceeds
(2)

7-43

(3)
$50,000
3,000
53,000
(1,590)
$51,410
Face amount
Maturity value
Discount ($53,000 x 12% x 3/12)
Cash proceeds
$80,000
2,400
82,400
(1,373)
$81,027
Face amount
Maturity value
Discount ($82,400 x 10% x 2/12)
Cash proceeds
$80,000
2,400
82,400
(1,648)
$80,752
Face amount
Maturity value
Discount ($82,400 x 12% x 2/12)
Cash proceeds
$80,000
2,400
82,400
(687)
$81,713
Face amount
Maturity value
Discount ($82,400 x 10% x 1/12)
Cash proceeds
(4)
(5)
(6)

7-44
Problem 7-9
Requirement 1
Computation of balance per books:
Error in recording rent check
Add: Automatic mortgage payment
Add: Bank service charges
Deduct: Deposit credit to companys
account in error
Add: NSF check charge
Balance per books
Step 1:
(875.00)
85.00
$13,542.87

Deduct:
Bank error - deposit incorrectly
credited to company account
Checks outstanding
Step 2:
$14,632.12
575.00
(1,320.25)
(18.00)
450.00
14.00
$14,632.12
575.00
(875.00)
(1,320.25)
$13,011.87
Balance per books

Add: Error in recording rent check
Deduct:
Automatic mortgage note payment
Service charges
NSF checks
$13,542.87
18.00
(450.00)
(14.00)
(85.00)
$13,011.87

7-45

Requirement 2
To correct error in recording cash disbursement for rent.
Cash .................................................................
Rent expense ................................................
18
18

Interest expense................................................
Mortgage note payable .....................................
Cash .............................................................
Requirement 3
Checking account balance
Petty cash
U.S. treasury bills
Total cash and cash equivalents
350
100
14
85
549
$13,011.87
200.00
5,000.00
$18,211.87
Problem 7-10
Requirement 1
Step 1:

Deduct:
Bank error - deposit incorrectly
credited to company account
Outstanding checks
Step 2:
$3,851
2,150 (1)
(1,300)
(831) (2)
$3,870

7-46
Balance per books

Deduct:
Error in recording check #411
Service charges
$4,422
(90)
(22)

Requirement 2
Advertising expense .........................................
Cash .............................................................
90
22
440
552

7-47
CASES
Judgment Case 7-1
Requirement 1
To account for the accounts receivable factored on April 1, 2006, Magrath should
decrease accounts receivable by the amount of accounts receivable factored, increase
cash by the amount received from the factor, and record a loss equal to the difference.
The loss should be reported in the income statement. Factoring of accounts receivable
without recourse is equivalent to a sale.
Requirement 2
Magrath should account for the collection of the accounts previously written off
as uncollectible as follows:
Increase both accounts receivable and the allowance for uncollectible accounts.
Increase cash and decrease accounts receivable.
Requirement 3
One approach estimates uncollectible accounts based on credit sales. This
approach focuses on income determination by attempting to match uncollectible
accounts expense with the revenues generated.
The other approach estimates uncollectible accounts based on the balance in
receivables or on an aging of receivables. The approach focuses on asset valuation by
attempting to report receivables at realizable value.

7-48
Communication Case 7-2

Suggested Grading Concepts and Grading Scheme:
Content (70%)
______ 40 Explains the difference between the allowance method and the
direct write-off method.
____ Direct write-off more objective.
____ Direct write-off has potential to violate the matching
principle.
______ 15 Even if uncollectibles are fairly stable, when significant
variations do occur, profit will be overstated in one period
and understated in another period.
______ 15 Even if uncollectibles remain constant, the direct write-off
method will result in an overstatement of accounts receivable
on the balance sheet.
_____
______ 70 points
Writing (30%)
______ 6 Terminology and tone appropriate to the audience of a
company president.
______ 12 Organization permits ease of understanding.
____ Introduction that states purpose.
____ Paragraphs that separate main points.
______ 12 English
____ Sentences grammatically clear and well organized,
concise.
____ Word selection.
____ Spelling.
____ Grammar and punctuation.
_____
______ 30 points

7-49
Judgment Case 7-3

Requirement 1
a. Hogan should account for the sales discounts at the date of sale using the net
method by recording accounts receivable and sales revenue at the amount of
sales less the sales discounts available.
Revenues should be recorded at the cash equivalent price at the date of sale.
Under the net method, the sale is recorded at an amount that represents the
cash equivalent price at the date of exchange (sale).
b. There is no effect on Hogans sales revenues when customers do not take the
sales discounts. Hogans net income is increased by the amount of interest
earned when customers do not take the sales discounts.
Requirement 2
Trade discounts are neither recorded in the accounts nor reported in the financial
statements. Therefore, the amount recorded as sales revenues and accounts receivable
is net of trade discounts and represents the cash equivalent price of the asset sold.
Requirement 3
To account for the accounts receivable factored on August 1, 2006, Hogan should
decrease accounts receivable by the amount of the accounts receivable factored,
increase cash by the amount received from the factor, and record a loss. Factoring of
accounts receivable without recourse is equivalent to a sale. The difference between
the cash received and the carrying amount of the receivables is a loss.
Requirement 4
Hogan should report the face amount of the interest-bearing notes receivable and
the related interest receivable for the period from October 1 through December 31 on
its balance sheet as current assets. Both assets are due on September 30, 2007, which
is less than one year from the date of the balance sheet.
Hogan should report interest revenue from the notes receivable on its income
statement for the year ended December 31, 2006. Interest revenue is equal to the
amount accrued on the notes receivable at the appropriate interest rate.
Interest revenue is realized with the passage of time. Accordingly, interest
revenue should be accounted for as an element of income over the life of the notes
receivable.

7-50
Ethics Case 7-4

Requirement 1
Required allowance
Revised allowance
Increase in income before taxes of proposed change
$180,000
135,000
$ 45,000
Requirement 2
Discussion should include these elements.
Ethical Dilemma:
You as the assistant controller have a responsibility to follow GAAP and make a
reasonably accurate estimate of the net realizable value of receivables. Is your
responsibility to fairly present Stanton Industries' financial statements to external
users greater than your obligation to improve the financial position of your employer?
Alternative actions and consequences include:
1. Refuse to comply with the controller's request to change the aging category of the
large account.
Positive consequences:
a. Preservation of your honesty and integrity.
b. Fair presentation of the net realizable value of receivables.
Negative consequences:
a. Possible loss of your job.
b. Lower net income for Stanton Industries.
c. A devalued stock price for Stanton Industries.
2. Comply with the controller's suggestion to report the allowance for uncollectible
accounts at $135,000.
Positive consequences:
a. Retention of your job.
b. A more favorable net income for Stanton Industries.
c. A more favorable position with unknowing creditors, financial analysts,
current investors, and future investors.
Negative consequences:
a. Endure guilt feelings.
b. A lack of trust in you by other managers and employees.
c. Possible litigation from investors and creditors.

7-51
Case 7-4 (concluded)

3. Report the controller's suggestion to a higher level of management, the audit
committee, or the auditors. If one of these parties corrects the controller and
compels fair reporting of the allowance account, the consequences would be the
same as in alternative 1 when you refuse to make the adjustment. Your job may
still be in jeopardy due to the fact that management may consider whistle blowing
as indicative of employee disloyalty. If the reportee parties agree with the
controller and report the incorrect amount of $135,000, the consequences will be
similar to those for the second alternative in 2, except that you run an even greater
risk of losing your job.
4. Refuse to comply with the controller's request and resign as assistant controller. If
you report the controller's suggestion to higher management, the audit committee,
or the auditor, the positive and negative considerations are the same as for
alternative 3. If you do not report the controller's request, then the consequences
are the same as for alternative 2. In either case your job is not an issue since you
have already resigned.

7-52
Judgment Case 7-5

1. A weakness is created by the fact that John need only submit a list of accounts and
amounts to be charged to replenish the petty cash fund. The supporting
documentation for the petty cash disbursements also should be submitted with
Johns list and reviewed by someone else. Surprise counts of the fund also should
be made to ensure that the fund is being maintained on an imprest basis, that is, to
ensure that cash and/or receipts equal $200 at all times.
2. The internal control system for disbursements does not contain sufficient
separation of duties. Dean Leiser approves the vouchers, signs the checks,
maintains the disbursement records, and reconciles the bank account. There should
be at least one other person involved in these activities to ensure accuracy and to
safeguard cash from expropriation.
3. The internal control system for receipts does not contain sufficient separation of
duties. Fran Jones has physical control of the deposits and also maintains the
subsidiary ledger for accounts receivable. These duties should be separated. In
addition, the company should require that customers pay their bills via check and
that cash not be used.

7-53
Real World Case 7-6

Requirement 1
2004
2003
($ in thousands)
Accounts receivable, net

Add: Allowances
Accounts receivable, gross
$19,804
696
$20,500
$22,712
977
$23,689
Requirement 2
($ in thousands)
The answers to this question require an analysis of both accounts receivable and
the allowance for uncollectible accounts for 2004. First of all, 2004 sales of $196,338
plus the decrease in receivables reported in the statement of cash flows indicates cash
received from customers of $199,246 ($196,338 + 2,908).
Analysis of accounts receivable
Beginning accounts receivable
Add: Credit sales
Less: Write-offs
Ending accounts receivable
($ in thousands)
$ 23,689
196,338
(199,246)
?
$ 20,500
Therefore, bad debt write-offs must have been $281.

($23,689 + 196,338 199,246 20,500 = $281)
Analysis of allowance for uncollectible accounts

Beginning allowance
Less: Write-offs
Ending allowance
$977
?
(281)
$696
Therefore, bad debt expense must have been $0, indicating that the allowance
account from prior years was sufficient to cover future anticipated write-offs on yearend accounts receivable.
($977 281 696 = $0)

7-54
Real World Case 7-7

Requirement 3
Answers will, of course, vary. The following were reported in the financial
statements for the year ended December 31, 2003 ($ in millions):
a. Net trade accounts receivable + Allowance for doubtful accounts = Gross
accounts receivable
$599.8 + 63.1 = $662.9
b. The statement of cash flows indicates bad debt expense (provision for
doubtful accounts) of $124.8
c. Beginning allowance for doubtful accounts + Bad debt expense - Bad debt
write-offs = Ending allowance for doubtful accounts
$49.5 + 124.8 - Write-offs = $63.1
Write-offs = $111.2
d. Beginning trade accounts receivable + Credit sales - Bad debt write-offs Cash collected = Ending trade accounts receivable
Beginning trade accounts receivable = $555.4 + 49.5 = $604.9
$604.9 + 6,804.6 111.2 Cash collections = $662.9
Cash collections = $6,635.4
Integrating Case 7-8

McLaughlin's underestimation of bad debts is treated as a change in accounting
estimate. Changes in estimates are accounted for prospectively. When a company
revises a previous estimate, prior financial statements are not restated. Instead, the
company merely incorporates the new estimate in any related accounting
determinations from then on. In this case, bad debt expense for 2007 will be higher
than it would have been had not the underestimation occurred. A disclosure note
should describe the effect of a change in estimate on income before extraordinary
items, net income, and related per-share amounts for 2007.

7-55
Analysis Case 7-9

Requirement 1
These methods can be described by one of two basic arrangements:
1. A secured borrowing, or
2. A sale of receivables.
When a company chooses between a borrowing and a sale, the critical element is
the extent to which it (the transferor) is willing to surrender control over the assets
transferred. Specifically, the transferor is determined to have surrendered control over
the receivables if and only if three sale conditions are met.
Secured borrowings usually take the form of an assignment of receivables. An
assignment of receivables is a promise by the borrower (the owner of the receivables)
that any failure to repay debt owed to the lender in accordance with the debt
agreement, will cause the proceeds from collecting the receivables to go directly
toward repayment of the debt. This arrangement is no different from the use of a
building as collateral for a mortgage loan. The assignor (borrower) assigns the
assignee (lender) the rights to specific receivables as collateral for a loan. A variation
of assigning specific receivables is when trade receivables in general rather than
specific receivables are pledged as collateral. The responsibility of collection of the
receivables remains solely with the company. This variation is referred to as a
pledging of accounts receivable.
Two popular arrangements used for the sale of receivables are factoring and
securitization. A factor is a financial institution that buys receivables for cash,
handles the billing and collection of the receivables, and charges a fee for this service.
Actually, credit cards like VISA and Mastercard are forms of factoring arrangements.
The seller relinquishes all rights to the future cash receipts in exchange for cash from
the buyer (the factor).
Another popular arrangement used to sell receivables is a securitization. In a
typical accounts receivable securitization, the company creates a Special Purpose
Entity (SPE), usually a trust or a subsidiary. The SPE buys a pool of trade
receivables, credit card receivables, or loans from the company, and then sells related
securities, for example bonds or commercial paper, that are backed (collateralized) by
the receivables.
Similar to accounts receivable, a note receivable can be used to obtain immediate
cash from a financial institution either by pledging the note as collateral for a loan or
by selling the note. The transfer of a note is referred to as discounting.

7-56

Requirement 2
In an assignment of specific receivables, usually the amount borrowed is less
than the amount of receivables assigned. The difference provides some protection for
the lender to allow for possible uncollectible accounts. Also, the assignee (transferee)
usually charges the assignor an up-front finance charge in addition to stated interest on
the collateralized loan. The borrower, assignor, records the loan liability, the finance
fee expense, and the cash borrowed.
No special accounting treatment is needed for an assignment of receivables in
general, and the arrangement is simply described in a disclosure note.
The specific accounting treatment for the sale of receivables using factoring and
securitization arrangements depends on the amount of risk the factor assumes, in
particular whether it buys the receivables without recourse or with recourse.
When a company sells accounts receivable without recourse, the buyer assumes
the risk of uncollectibility. This means the buyer has no recourse to the seller if
customers dont pay the receivables. In that case, the seller simply accounts for the
transaction as a sale of an asset. The buyer charges a fee for providing this service,
usually a percentage of the book value of receivables. Because the fee reduces the
proceeds the seller receives from selling the asset, the seller records a loss on sale of
assets. The typical factoring arrangement is made without recourse.
When a company sells accounts receivable with recourse, the seller retains the
risk of uncollectibility. In effect, the seller guarantees that the buyer will be paid even
if some receivables prove to be uncollectible. Even if receivables are sold with
recourse, as long as the three conditions for sale treatment are met, the transferor
would still account for the transfer as a sale. The only difference would be the
additional requirement that the transferor record the estimated fair value of the
recourse obligation as a liability. The recourse obligation is the estimated amount that
the transferor will have to pay the transferee as a reimbursement for uncollectible
receivables.

7-57
Research Case 7-10

Requirement 1
When a company sells accounts receivable without recourse, the buyer assumes
the risk of uncollectibility. This means the buyer has no recourse to the seller if
customers dont pay the receivables.
Requirement 3
The transferor is determined to have surrendered control over the receivables if
and only if all of the following conditions are met:
a. The transferred assets have been isolated from the transferor - put presumptively
beyond the reach of the transferor and its creditors, even in bankruptcy or other
receivership.
b. Each transferee has the right to pledge or exchange the assets it received.
c. The transferor does not maintain effective control over the transferred assets
through either (1) an agreement that the transferor repurchase or redeem them
before their maturity or (2) the ability to cause the transferee to return specific
assets.
Statement of Financial Accounting Standards No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities," provides the
authoritative guidance in this area. The above conditions can be found in paragraph 9
of the standard.
Requirement 4
Cash (90% x $400,000) ..................................................... 360,000
Loss on sale of receivables (4% x $400,000)..................... 16,000
Receivable from factor (10% x $400,000 16,000 fee)........ 24,000
400,000

7-58

Requirement 5
Paragraph 47 of SFAS 140 states lists the following conditions:
a. The assets to be repurchased or redeemed are the same or substantially the same
as those transferred.
b. The transferor is able to repurchase or redeem them on substantially the agreed
terms, even in the event of default by the transferee.
c. The agreement is to repurchase or redeem them before maturity, at a fixed or
determinable price.
d. The agreement is entered into concurrently with the transfer.

7-59
Analysis Case 7-11

Requirement 1
Sara Lee
Receivables turnover
19,566 = 10.3
1,893
Average collection
period
365
10.3
= 35 days
Tyson Foods
26,441
1,260
365
21
= 21
= 17 days
Tyson Foods collects its receivables, on average, 18 days faster than does Sara
Lee. Assuming similar customer credit policies, this indicates that Tyson does a better
job in managing its investment in receivables.
Requirement 2
The objective of this requirement is to motivate students to obtain hands-on
familiarity with actual annual reports and to apply the techniques learned in the
chapter. You may wish to provide students with multiple copies of the same annual
reports and compare responses. Another approach is to divide the class into teams
who evaluate reports from a group perspective.

7-60
Analysis Case 7-12

Requirement 1
Note 1 indicates that cash equivalents are investments in short-term, interestbearing instruments with maturities of three months or less at the date of purchase.
Requirement 2
($ in millions)
Net receivables
Add: Allowances
Gross receivables
2004
$3,027
151
$3,178
2003
$2,627
149
$2,776
Requirement 3
($ in millions)
Allowances:
Beginning of year
Add: Bad debt expense (provision for uncollectible
accounts - from statement of cash flows)
Less: Ending balance
Amount written off as uncollectible
$ 149
106
(151)
$104

7-61

Spiceland SM 7ech07

Încărcat de

Informații document

Titlu original

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

Spiceland SM 7ech07

Încărcat de

Drepturi de autor:

Formate disponibile

Find more slides, ebooks, solution manual and testbank on www.downloadslide.

Cash and Receivables

QUESTIONS FOR REVIEW OF KEY TOPICS

Solutions Manual, Vol.1, Chapter 7

The McGraw-Hill Companies, Inc., 2007

Find more slides, ebooks, solution manual and testbank on www.downloadslide.com

Answers to Questions (continued)

The McGraw-Hill Companies, Inc., 2007

Intermediate Accounting, 4/e

Find more slides, ebooks, solution manual and testbank on www.downloadslide.com

Answers to Questions (concluded)

Solutions Manual, Vol.1, Chapter 7

The McGraw-Hill Companies, Inc., 2007

Find more slides, ebooks, solution manual and testbank on www.downloadslide.com

Brief Exercise 7-2

Brief Exercise 7-3

Brief Exercise 7-4

The McGraw-Hill Companies, Inc., 2007

Intermediate Accounting, 4/e

Find more slides, ebooks, solution manual and testbank on www.downloadslide.com

Brief Exercise 7-5

Sales returns .................................................................. 128,000

Brief Exercise 7-6

Solutions Manual, Vol.1, Chapter 7

The McGraw-Hill Companies, Inc., 2007

Find more slides, ebooks, solution manual and testbank on www.downloadslide.com

Brief Exercise 7-7

Brief Exercise 7-8

The McGraw-Hill Companies, Inc., 2007

Intermediate Accounting, 4/e

Find more slides, ebooks, solution manual and testbank on www.downloadslide.com

Brief Exercise 7-9

*Allowance for uncollectible accounts:

Brief Exercise 7-10

Solutions Manual, Vol.1, Chapter 7

The McGraw-Hill Companies, Inc., 2007

Find more slides, ebooks, solution manual and testbank on www.downloadslide.com

Brief Exercise 7-11

Liabilities would not change as a result of this transaction.

Brief Exercise 7-12

The McGraw-Hill Companies, Inc., 2007

Intermediate Accounting, 4/e

Find more slides, ebooks, solution manual and testbank on www.downloadslide.com

Brief Exercise 7-13

Brief Exercise 7-14

($50,000 + 70,000) 2 = $60,000*

Solutions Manual, Vol.1, Chapter 7

The McGraw-Hill Companies, Inc., 2007

Find more slides, ebooks, solution manual and testbank on www.downloadslide.com

The McGraw-Hill Companies, Inc., 2007

Intermediate Accounting, 4/e

Find more slides, ebooks, solution manual and testbank on www.downloadslide.com

Solutions Manual, Vol.1, Chapter 7

The McGraw-Hill Companies, Inc., 2007

Find more slides, ebooks, solution manual and testbank on www.downloadslide.com

November 26, 2006

December 15, 2006

The McGraw-Hill Companies, Inc., 2007

Intermediate Accounting, 4/e

Find more slides, ebooks, solution manual and testbank on www.downloadslide.com

Exercise 7-3 (concluded)

November 26, 2006

December 15, 2006