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Exam 7: Cash and Receivables

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Question 31

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Accounts receivable are normally reported at the:

A) Present value of future cash receipts.
B) Current value plus accrued interest.
C) Expected amount to be received.
D) Current value less expected collection costs.

E) A) and C)
F) A) and B)

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Question 32

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Memorex Disks sells computer disk drives with right-of-return privileges. Returns are material and reasonably predictable. Memorex should:

A) Not record sales until the right to return has expired.
B) Record an allowance for sales returns in the year of the sale.
C) Debit sales returns in the period of the return.
D) Debit sales in the period of the return.

E) A) and B)
F) All of the above

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Question 33

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Is there any evidence in Winchester's disclosures above that are consistent with earnings management?

What kind of account is the provision for doubtful accounts in HP's financial statements?

On July 18, 2009, Philly Furniture Factory sold twenty reclining rockers to Dave's Discount Furniture for $8,000, subject to terms 2/10, n30. Philly uses the net method of accounting for sales discounts. Required: 1. Prepare the journal entry to record the sale. 2. Prepare the journal entry to record receipt of the payment, assuming the correct amount was received on July 26, 2009. 3. Prepare the journal entry to record receipt of the payment assuming the correct amount was received on August 15, 2009.

Collection of accounts receivable that previously have been written off results in an increase in cash and an increase in:

A summary of London Fashion's December 31, 2009, accounts receivable aging schedule is presented below along with the estimated percent uncollectible for each age group: The allowance for uncollectible accounts had a balance of $1,600 at January 1, 2009. During the year bad debts of $1,150 were written off. Required: Prepare all 2009 journal entries with respect to bad debts and the allowance for uncollectible accounts. $\begin{array}{lrr}\text { Age Group }& \text { Amount }& \%\\0-60 \text { days } & \$ 40,000 & .5 \\61-90 \text { days } & 15,000 & 1.5 \\91-120 \text { days } & 2,000 & 15.0 \\\text { over } 120 \text { days } & 800 & 80.0\end{array}$

On February 14, 2009, Prime Company sold 50 air conditioning units to L&P Heating and Cooling. The units list for $700 each but L&P was granted a 30% trade discount. All of Prime's sales are subject to terms 2/10, n30. Prime uses the net method of accounting for sales discounts. Required: 1. Prepare the journal entry to record the sale. 2. Prepare the journal entry to record receipt of the payment, assuming the correct amount was received on February 22, 2009. 3. Prepare the journal entry to record receipt of the payment, assuming the correct amount was received on March 10, 2009.

Explain the transactions that typically would affect the discount on notes receivable account.

How might a company with receivables like HP be able to manage earnings in applying generally accepted accounting principles?

The net method of accounting for cash discounts requires adjusting entries for discounts taken.

During Bricker Company's first year of operations, credit sales totaled $200,000 and collections on credit sales totaled $145,000. Bricker estimates that $1,000 of its ending accounts receivable balance will not be collected. By year-end, Bricker had written off $330 of specific accounts as uncollectible. Required: 1. Prepare all appropriate journal entries relative to uncollectible accounts and bad debt expense. 2. Show the year-end balance sheet presentation for accounts receivable.

Alliance Software began 2009 with accounts receivable of $115,000. All sales are made on credit. Sales and cash collections from customers for the year were $780,000 and $700,000, respectively. Cost of goods sold for the year was $450,000. What was Alliance's receivables turnover ratio for 2009?

From a financial accounting perspective, the main purposes of a system of internal control are to improve the accuracy and reliability of accounting information and to safeguard assets.

What is the balance in the allowance for sales returns account at the end of 2009?

Ireland Corporation obtained a $40,000 note receivable from a customer on June 30, 2009. The note, along with interest at 6%, is due on June 30, 2010. On September 30, 2009, Ireland discounted the note at Cloverdale bank. The bank's discount rate is 10%. What amount of cash did Ireland receive from Cloverdale Bank?

Long-term notes receivable issued for noncash assets at an unrealistically low interest rate will be:

At December 31, 2008, Gill Co reported accounts receivable of $216,000 and an allowance for uncollectible accounts of $8,400. During 2009, accounts receivable increased by $22,000 after a $7,800 write-off of bad debts. An analysis of Gill Co.'s December 31, 2009, accounts receivable suggests that the allowance for uncollectible accounts should be 3% of accounts receivable. Bad debt expense for 2009 would be:

Explain the reason that Halliburton indicates that its receivables include notes with varying interest rates totaling $12 million at December 31. What significance does this have to the reader?

Recognizing sales returns when they occur could result in an overstatement of income in the period of the related sale.