ACCT 335 Chapter 7 Pre-Assigned Problems Suggested Solutions

Save this PDF as:
 WORD  PNG  TXT  JPG

Size: px
Start display at page:

Download "ACCT 335 Chapter 7 Pre-Assigned Problems Suggested Solutions"

Transcription

1 ACCT 335 Chapter 7 Pre-Assigned Problems Suggested Solutions PROBLEM 7-2 (a) Sales $1,980,000 Sales discounts 4,400 Sales returns and allowances 60,000 Net sales 1,915,600 Percentage 1 1/2% Bad debt expense $ 28,734 (b) Accounts receivable $1,790,000 Amounts estimated to be uncollectible (160,000) Net realizable value $1,630,000 (c) Allowance for doubtful accounts 1/1/10 $37,000 Establishment of accounts written off in prior years (recovery) 18,000 Customer accounts written off in 2010 (36,000) Bad debt expense for 2010 ($3,200,000 X 4.5%) 144,000 Allowance for doubtful accounts 12/31/10 $163,000 (d) Bad debt expense for 2010 $92,000 Customer accounts written off as uncollectible during 2010 (24,000) Allowance for doubtful accounts balance 12/31/10 $68,000 Accounts receivable, net of allowance for doubtful accounts $ 950,000 Allowance for doubtful accounts balance 12/31/10 68,000 Accounts receivable, before deducting allowance for doubtful accounts $1,018,000 (e) Accounts receivable $610,000 Percentage 7% Allowance for doubtful accounts (ending bal.) 42,700 Allowance for doubtful accounts (debit bal.) 34,000 Bad debt expense $ 76,700

2 PROBLEM Cash 137,200 Sales Discounts 800 Accounts Receivable 138, Accounts Receivable 6,700 Allowance for Doubtful Accounts 6,700 Cash 6,700 Accounts Receivable 6, Allowance for Doubtful Accounts 19,500 Accounts Receivable 19, Bad Debt Expense 16,500 Allowance for Doubtful Accounts 16,500 ($17,300 + $6,700 $19,500 = $4,500; $21,000 $4,500 = $16,500) PROBLEM 7-10 Part I (a) Cash 250,000 Accounts Receivable 215,000 Sales 465,000 Note Receivable 50,000 Accounts Receivable 50,000 Cash 160,000 Accounts Receivable 160,000 12/31 Interest Receivable 2,750 Interest Revenue 2,750 ($50,000 X 11% X 6/12)

3 (b) Current Ratio Dec. 31, 2010 = Current Assets Current Liabilities = ($15,000+$45,000+$2,750+$50,00 0+$80,000) $70,000+$16,000 = Current Ratio Dec. 31, 2009 = $20,000+$40,000+$85,000 $65,000+$15,000 = Accounts Receivable Turnover = Credit Sales Average Receivables = $215,000 ($45,000 + $40,000)/2 = 5.06 times (or about 72 days) Current Ratio of in 2010 is much higher than last year at Accounts Receivable turnover of 5.06 times is slightly higher than last year s While the current ratio is considerably higher, Logo is collecting receivables at close to the same pace, showing a slight improvement. Part 2 (c) Cash 50,904 Loss on Sale of Note Receivable 1,846 Note Receivable 50,000 Interest Receivable 2,750 ($50,000 X 11% X 6/12) = $2,750 ($50,000 + $2,750) X 3.5% = $1,846 $52,750 - $1,846 = $50,904 (d) Cash 36,000 Due from Factor 2,400 Loss on Sale of Accounts Receivable 5,600 Accounts Receivable 40,000 Recourse Liability 4,000 (e) Current Ratio = Current Assets Current Liabilities = $15,000+$50,904+$36,000 +$5,000+$80,000+$2,400 $70,000+$16,000+$4,000 = $189,400 $90,000 = 2.1

4 Accounts Receivable Turnover = Credit Sales Average Receivables = $215,000 ($5,000 + $40,000)/2 = 9.56 times (or about 38 days) Logo has been able to speed up collection of receivables by transferring the note to the bank and selling accounts receivable to First Factors and has improved the current ratio from to 2.1. (f) With a secured borrowing, the receivables stay on Logo s books and Logo records a Note Payable. This would reduce the current ratio and leave the receivable turnover ratio at approximately the same level as in Part I.

5 PROBLEM 7-17 Calculation of Cash Balance per Books General Chequing Account Cash balance, June 1, 2010 $30, Receipts for June: Deposit on 6/12 $1, Deposit on 6/23 1, Deposit on 6/28 4, Deposit in transit 4, , Cash available 41, Deduct disbursements per cheque register 11, Cash balance June 30, 2010 $30, Quartz Industries Ltd. Bank Reconciliation General Chequing Account June 30, 2010 Balance per bank statement June 30, 2010 $28, Add: Deposit in transit (June receipts not deposited by June 30) 4, , Deduct: Outstanding cheques #6139 $ # # # # , Correct cash balance $30, Balance per books, June 30, 2010 $30, Deduct: Bank charge not yet recorded in books Correct cash balance $30,162.45

6 WA 7-3 Note: This content is not examinable in ACCT 335 The controller of Arkin Corp. cannot justify the manner in which the company has accounted for the transaction in terms of sound financial accounting principles. The sale of shares appears to have been made March 1 and the company s yearend is March 31, To account for this note receivable, the company must address the following issues: Is the company a party to the contract at March 31? Yes, the deal appears to have been completed at March 1 and the company has a signed note receivable as proof. The loan receivable must be measured at its fair value initially March 1. In order to measure the loan receivable at fair value, the company must present value the expected future cash flows using a market interest rate that is appropriate for loans with a similar level of credit risk. This issue is discussed in further detail below. At each reporting date, March 31, the company will measure the loan receivable at amortized cost plus accrued interest; and At each reporting period, the company will have to test whether or not the loan receivable has been impaired and if so, an impairment loss is recognized. At March 1, the fair value of the note receivable must be determined. The note is repayable over 10 years with an annual payment of $400,000 on March 1. In looking at the market for similar credit risk investments, assume that an appropriate rate of interest would be 8%. Using the interest rate of 8%, the present value of the annuity of $400,000 for ten periods is equal to $2,684,032 ($400,000 X ). In this case, a loss of $315,968 must be recognized. There is a question about how the transaction fees should be reported. Are the transaction fees a cost of the disposal which increases the loss on disposal? Or are the transaction fees related to preparing the note receivable? In this case, to show as a possible solution, the full amount of the transaction fees was allocated to the note receivable. In addition, under IFRS, the transaction fees of $20,000 are also recorded as part of the receivable as illustrated by the following journal entry to be recorded March 1: Note Receivable 2,704,032 Loss on Disposal of Hi-Tek Shares 315,968 Investment in Hi-Tek Shares 3,000,000 Cash 20,000

7 On March 31, 2011, the company must record interest income for the period of one month. Under IFRS, the effective interest rate method must be used and the effective interest rate will have to be recalculated given that the present value is now $2,704,032. Based on this present value, and 10 annual payments of $400,000 each, the effective interest rate is 7.83%. Using this effective interest rate, the accrued interest for one month is: 2,704,032 X 7.83% X 1/12 = 17,643 Theoretically, the loan receivable should be tested for impairment at March 31. However, since the loan is only one month old, it is assumed that there is no impairment of value. Calculation of revised net income: Net income before net gain (5,200, ,000) 4,514,000 Loss on disposal assume a capital loss and no immediate tax benefit (315,968) Accrued interest income net of tax 17,643 (1-.3) 12,351 Revised net income 4,210,383 This amount is less than the net income reported in prior years of $4.8 million. Under private entity GAAP, there are two differences as follows: Transaction fees may be expensed and are not required to be capitalized The company may use a straight-line amortization method for the interest rather than the effective interest rate. Using the interest rate of 8%, the present value of the annuity of $400,000 for ten periods is equal to $2,684,032 ($400,000 X ). In this case, a loss of $315,968 must be recognized. The journal entry to record this on March 1 is: Note Receivable 2,684,032 Transaction costs 20,000 Loss on Disposal of Hi-Tek Shares 315,968 Investment in Hi-Tek Shares 3,000,000 Ca`sh 20,000

8 Using the straight-line method for the amortization of the interest, the total interest income reported over the total ten years will be: 10 X $400,000 2,684,032 = $1,315,968. The annual interest income to be recorded will be: $1,315,968/10 = $131,597. And the one month accrued interest income will be: $131,597 X 1/12 = $10,966. Calculation of revised net income: Net income before net gain (5,200, ,000) 4,514,000 Loss on disposal assume a capital loss and no immediate tax benefit (315,968) Transaction fees expensed net of tax (20,000 X (1-30%)) (14,000) Accrued interest income net of tax at 30%: 10,966 X (1-30%) 7,676 Revised net income 4,191,708 This amount is less than the net income reported in prior years of $4.8 million. IC 7-1 FRITZ S FURNITURE Overview: - Business down due to economic downturn. - Cash crunch and therefore plans to go to bank bank will assess creditworthiness and will lend based on value of inventory and receivables. The higher the inventory and receivables, the higher the loan. - As bookkeeper, you will want to provide Franklyn with the impact of choices in the financial statements. Franklyn will want to put his best foot forward to the bank to maximize his chances of getting the loan. - GAAP likely a constraint since bank will want information that is useful and relevant. The entity would generally use PE GAAP (although they have the option to choose IFRS when first adopted if that is more appropriate).

9 Analysis and Recommendations: Issue: Recognition of revenues under new sales promotion Recognize revenues when shipped - Possession and legal title pass at time of delivery therefore, risks and rewards pass. - Measurable = selling price of the inventory. - May consider discounting selling price and recognizing part of selling price as income from financing. - Other. Recognize revenues/income later - Since no cash down, no real risk to the customer. They do not have a vested interest in the merchandise. Is this a real sale? - Collectibility may be an issue since a credit check will be done a year before the customer actually starts to pay higher risk of default. - Other. In conclusion, it would seem more prudent to not recognize a sale until the revenue is earned. As an alternative, the sale might be recognized using the instalment sales method such that the sale is recognized but only as an instalment sale with profits being deferred. Discussion should be had with the bank to determine whether the instalment sale could be used as collateral for the loan. Issue: Transfer of receivables Present as a sale/disposition - FI is an arm s length party and will take legal title to the receivables therefore, a bona fide sale. - FI has the right to pledge or sell the assets and there is no repurchase agreement. This supports the fact that control has been surrendered to FI. - NB. if the credit cards are sold, the company might have to pay down some existing debt, since the debt is currently capped based on a % of credit card receivables outstanding (or may not be eligible for new financing from the bank since it is capped at 70% of credit card receivables). - Other. Present as financing - FF will retain possession of the receivables as well as service them. Therefore, the assets are not isolated from FF and control has not been surrendered. - May have recourse and therefore still has risks of ownership. - Other.

10 It would appear that this should be reported as a financing, i.e., as debt. The AR would be left on the books. The additional debt might affect the company s ability to obtain the financing from the bank. Note that this is an area of significant complexity and standard setters are currently looking to revise the standards.

Cash in bank checking account $22,500 U.S. treasury bills 5,000 Cash on hand 1,350 Undeposited customer checks 1,840 Total $30,690 Requirement 2

Cash in bank checking account $22,500 U.S. treasury bills 5,000 Cash on hand 1,350 Undeposited customer checks 1,840 Total $30,690 Requirement 2 Chapter 7 Solutions EXERCISES Exercise 7 2 Cash and cash equivalents includes: Cash in bank checking account $22,500 U.S. treasury bills 5,000 Cash on hand 1,350 Undeposited customer checks 1,840 Total

More information

Unit 6 Receivables. Receivables - Claims resulting from credit sales to customers and others goods or services for money,.

Unit 6 Receivables. Receivables - Claims resulting from credit sales to customers and others goods or services for money,. Unit 6 Receivables 7-1 Receivables - Claims resulting from credit sales to customers and others goods or services for money,. Oral promises of the purchaser to pay for goods and services sold (credit sale;

More information

Chapter 07 - Accounts and Notes Receivable. Chapter Outline

Chapter 07 - Accounts and Notes Receivable. Chapter Outline Chapter 07 - Accounts and Receivable I. Accounts Receivable A receivable is an amount due from another party. Accounts Receivable are amounts due from customers for credit sales. A. Recognizing Accounts

More information

ACCOUNT DEBIT CREDIT Accounts receivable 10,000 Sales 10,000 To record the sale of merchandise to Sophie Company

ACCOUNT DEBIT CREDIT Accounts receivable 10,000 Sales 10,000 To record the sale of merchandise to Sophie Company CURRENT RECEIVABLES Receivables are the amount owed to the organization by its customers and/or others. Current receivables will be collected within one year or the current operating cycle which ever is

More information

Notes. 351 Spring 2011. Accounting. Uncollectible Accounts. Matching. Direct Write-Off Method

Notes. 351 Spring 2011. Accounting. Uncollectible Accounts. Matching. Direct Write-Off Method Notes Chapter 7 ccounting 351 Spring 2011 California State University, Northridge 1 Uncollectible ccounts Direct Write-Off Method Bad Debt Expense 1,000 ccounts Receivable 1,000 Matching llowance Method

More information

Chapter 7: Cash & Receivables L7 (pg 399 436)

Chapter 7: Cash & Receivables L7 (pg 399 436) Chapter 7: Cash & Receivables L7 (pg 399 436) UNDERSTANDING CASH AND ACCOUNTS RECEIVABLE How Do Companies Manage and Control Cash? Cash flow budgets help anticipate cash needs and minimize borrowing requirements

More information

Investments Advance to subsidiary company 81,000

Investments Advance to subsidiary company 81,000 EXERCISE 7-3 (10 15 minutes) Current assets Accounts receivable Customers Accounts (of which accounts in the amount of $40,000 have been pledged as security for a bank loan) $79,000 Installment accounts

More information

Reporting and Analyzing Cash Flows QUESTIONS

Reporting and Analyzing Cash Flows QUESTIONS Chapter 12 Reporting and Analyzing Cash Flows QUESTIONS 1. The purpose of the cash flow statement is to report all major cash receipts (inflows) and cash payments (outflows) during a period. It helps users

More information

Sample Test Questions CHAPTER 7 CASH AND RECEIVABLES Answer No. Description MULTIPLE CHOICE Conceptual d 1. Identification of cash items. b 2. Identification of cash items. d 3. Classification of travel

More information

Walk Through Balance Sheet. Chapter 7. Learning Objectives. Learning Objectives 1, 2. Learning Objectives 1, 2. Cash and Receivables.

Walk Through Balance Sheet. Chapter 7. Learning Objectives. Learning Objectives 1, 2. Learning Objectives 1, 2. Cash and Receivables. Chapter 7 Walk Through Balance Sheet Cash and Receivables Chapters 1 6 Accounting cycle: JE, AJE, financial stmts Conceptual framework, GAAP, revenue Time value of money concepts Remaining chapters (ACTG

More information

9. Short-Term Liquidity Analysis. Operating Cash Conversion Cycle

9. Short-Term Liquidity Analysis. Operating Cash Conversion Cycle 9. Short-Term Liquidity Analysis. Operating Cash Conversion Cycle 9.1 Current Assets and 9.1.1 Cash A firm should maintain as little cash as possible, because cash is a nonproductive asset. It earns no

More information

Intermediate Accounting

Intermediate Accounting Intermediate Accounting Thomas H. Beechy Schulich School of Business, York University Joan E. D. Conrod Faculty of Management, Dalhousie University PowerPoint slides by: Bruce W. MacLean, Faculty of Management,

More information

Pivotal Issues When Managing. Chapter 7. Cash and Receivables. Skyline College Lecture Notes. Cash Considerations. Cash Requirements.

Pivotal Issues When Managing. Chapter 7. Cash and Receivables. Skyline College Lecture Notes. Cash Considerations. Cash Requirements. Chapter 7 Cash and Receivables Skyline College Lecture Notes Pivotal Issues When Managing Cash and Receivables 1. Cash needs 2. Credit policies 3. Level of accounts receivable 4. Financing receivables

More information

ILLUSTRATION 7-1 METHODS OF ESTIMATING THE YEAR-END ADJUSTING ENTRY FOR BAD DEBTS

ILLUSTRATION 7-1 METHODS OF ESTIMATING THE YEAR-END ADJUSTING ENTRY FOR BAD DEBTS ILLUSTRATION 7-1 METHODS OF ESTIMATING THE YEAR-END ADJUSTING ENTRY FOR BAD DEBTS (A) Percentage-of-Sales (Income Statement Approach) Year-end adjusting entry for = Percentage Credit sales bad debts (B)

More information

CHAPTER 8 WHEN REVENUE IS RECOGNIZED RECOGNIZED HOW REVENUE IS REVENUE CYCLE: SALES, RECEIVABLES, AND CASH

CHAPTER 8 WHEN REVENUE IS RECOGNIZED RECOGNIZED HOW REVENUE IS REVENUE CYCLE: SALES, RECEIVABLES, AND CASH CHAPTER 8 REVENUE CYCLE: SALES, RECEIVABLES, AND CASH 1 WHEN REVENUE IS RECOGNIZED Revenue should be recognized when two criteria are met: The promised work has been substantially completed Cash, or a

More information

To find the amount of gross sales, start by determining credit sales. We can do this with the accounts receivable T-account below.

To find the amount of gross sales, start by determining credit sales. We can do this with the accounts receivable T-account below. E8-1. Analyzing accounts receivable (AICPA adapted) To find the amount of gross sales, start by determining credit sales. We can do this with the accounts receivable T-account below. Accounts Receivable

More information

Financial Reporting and Analysis Chapter 8 Solutions Receivables. Exercises

Financial Reporting and Analysis Chapter 8 Solutions Receivables. Exercises Exercises E8-1. Account analysis (AICPA adapted) Financial Reporting and Analysis Chapter 8 Solutions Receivables Exercises To find the amount of gross sales, start by determining credit sales. We can

More information

BUS312A/612A Financial Reporting I. Homework 10.6.2014 & 10.8.2014 Receivables Chapter 7

BUS312A/612A Financial Reporting I. Homework 10.6.2014 & 10.8.2014 Receivables Chapter 7 BUS312A/612A Financial Reporting I Homework 10.6.2014 & 10.8.2014 Receivables Chapter 7 Chapter 7- You should be able to: Identify elements of cash Identify the types of receivables Explain accounting

More information

Assuming office supplies are charged to the Office Supplies inventory account when purchased:

Assuming office supplies are charged to the Office Supplies inventory account when purchased: Adjusting Entries Prepaid Expenses Second Bullet Example - Assuming office supplies are charged to the Office Supplies inventory account when purchased: Office supplies expense 7,800 Office supplies 7,800

More information

Exam 3 Review. FV = PV (1 + i) n. Format. What to Bring/Remember. Time Value of Money. Solving for Other Variables Example. Solving for Other Values

Exam 3 Review. FV = PV (1 + i) n. Format. What to Bring/Remember. Time Value of Money. Solving for Other Variables Example. Solving for Other Values Format Exam 3 Review http://fates.cns.muskingum.edu/~ plaube/acct301/default.htm 15 questions Multiple choice (12) Essay (2) Problem (1) What to Bring/Remember What to bring Calculator I ll bring scrap

More information

128 SU 3: Financial Accounting I

128 SU 3: Financial Accounting I 128 SU 3: Financial Accounting I 3.5 FINANCIAL ASSETS AND LIABILITIES Definitions 1. Financial assets include cash, equity instruments of other entities (e.g., preference shares), contract rights to receive

More information

PROFESSOR S NAME ACC 255 FALL 2011 COVER SHEET FOR COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5-8)

PROFESSOR S NAME ACC 255 FALL 2011 COVER SHEET FOR COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5-8) COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5-8) Page 137 NAME ANSWER KEY PROFESSOR S NAME SECTION SCORE ACC 255 FALL 2011 COVER SHEET FOR COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5-8) INSTRUCTIONS: COMPLETE ALL

More information

BUS312A/612A Financial Reporting I. Homework 10.6.2014 & 10.8.2014 Receivables Chapter 7

BUS312A/612A Financial Reporting I. Homework 10.6.2014 & 10.8.2014 Receivables Chapter 7 BUS312A/612A Financial Reporting I Homework 10.6.2014 & 10.8.2014 Receivables Chapter 7 Chapter 7- You should be able to: Identify elements of cash Identify the types of receivables Explain accounting

More information

CHAPTER 18. Receivables CONTENTS

CHAPTER 18. Receivables CONTENTS CHAPTER 18 Receivables CONTENTS Demonstration problem 18.1 Doubtful debts net credit sales and ageing methods 18.2 Discounting and default of a bill receivable 18.3 Ageing of accounts receivable and adjustment

More information

1. $45000 2. $108000 3. $63000 4. $135000

1. $45000 2. $108000 3. $63000 4. $135000 For the last several years Monte Cristo Corp. has operated with a gross profit rate of 30%. On January 1 of the current year, the company had on hand inventory with a cost of $150,000. Purchases of merchandise

More information

GBA 521 Midterm Review Dr. Markelevich

GBA 521 Midterm Review Dr. Markelevich GBA 521 Midterm Review Dr. Markelevich Multiple Choice (3 points for each question) Identify the letter of the choice that best completes the statement or answers the question. Wynn Corp. Wynn Corp. reported

More information

CHAPTER 7 ACCOUNTING FOR RECEIVABLES

CHAPTER 7 ACCOUNTING FOR RECEIVABLES CHAPTER 7 ACCOUNTING FOR RECEIVABLES Key Terms and Concepts to Know Accounts Receivable: Result from sales on account (credit sales), not cash sales. May also result from credit card sales if there is

More information

18 BUSINESS ACCOUNTING STANDARD FINANCIAL ASSETS AND FINANCIAL LIABILITIES I. GENERAL PROVISIONS

18 BUSINESS ACCOUNTING STANDARD FINANCIAL ASSETS AND FINANCIAL LIABILITIES I. GENERAL PROVISIONS APPROVED by Resolution No. 11 of 27 October 2004 of the Standards Board of the Public Establishment the Institute of Accounting of the Republic of Lithuania 18 BUSINESS ACCOUNTING STANDARD FINANCIAL ASSETS

More information

ROMANO BROTHERS AND COMPANY

ROMANO BROTHERS AND COMPANY STATEMENT OF FINANCIAL CONDITION INDEPENDENT AUDITORS REPORT To the Stockholders of Romano Brothers and Company: We have audited the accompanying statement of financial condition of Romano Brothers and

More information

Accounting 303 Exam 3, Chapters 7-9 Fall 2011 Section Row

Accounting 303 Exam 3, Chapters 7-9 Fall 2011 Section Row Accounting 303 Name Exam 3, Chapters 7-9 Fall 2011 Section Row I. Multiple Choice Questions. (2 points each, 34 points in total) Read each question carefully and indicate your answer by circling the letter

More information

CHAPTER 9 ACCOUNTING FOR RECEIVABLES

CHAPTER 9 ACCOUNTING FOR RECEIVABLES CHAPTER 9 ACCOUNTING FOR RECEIVABLES LEARNING OBJECTIVES 1. IDENTIFY THE DIFFERENT TYPES OF RECEIVABLES. 2. EXPLAIN HOW COMPANIES RECOGNIZE ACCOUNTS RECEIVABLE. 3. DISTINGUISH BETWEEN THE METHODS AND BASES

More information

Adjustment for Loss from Uncollectible Accounts (accrued expense)

Adjustment for Loss from Uncollectible Accounts (accrued expense) Adjustment for Loss from Uncollectible Accounts (accrued expense) Objective Explain and illustrate the allowance method of accounting for uncollectible accounts receivable. Cite the advantages and disadvantages

More information

Chapter 9. Accounting for Receivables. McGraw-Hill/Irwin

Chapter 9. Accounting for Receivables. McGraw-Hill/Irwin Chapter 9 Accounting for Receivables Conceptual Learning Objectives C1: Describe accounts receivable and how they occur and are recorded C2: Describe a note receivable and the computation of its maturity

More information

Solution. Term: Fall Year: Time Period Start time: 9:00 am End time: 11:30 am

Solution. Term: Fall Year: Time Period Start time: 9:00 am End time: 11:30 am Solution Term: Fall Year: 2011 Student Name Student ID Number Date of Exam Thursday, December 15, 2011 Time Period Start time: 9:00 am End time: 11:30 am Duration of Exam 2.5 hours Number of Exam Pages

More information

FINANCIAL MANAGEMENT

FINANCIAL MANAGEMENT 100 Arbor Drive, Suite 108 Christiansburg, VA 24073 Voice: 540-381-9333 FAX: 540-381-8319 www.becpas.com Providing Professional Business Advisory & Consulting Services Douglas L. Johnston, II djohnston@becpas.com

More information

Current assets. assets that are expected to be converted into cash within one year or within the operating cycle of an entity

Current assets. assets that are expected to be converted into cash within one year or within the operating cycle of an entity CHAPTER 7 Current assets assets that are expected to be converted into cash within one year or within the operating cycle of an entity Chapter 7 Mugan-Akman 2007 2-40 Current Asset Section of a Balance

More information

Financial Accounting. John J. Wild. Sixth Edition. McGraw-Hill/Irwin. Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

Financial Accounting. John J. Wild. Sixth Edition. McGraw-Hill/Irwin. Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Financial Accounting John J. Wild Sixth Edition McGraw-Hill/Irwin Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 07 Reporting and Analyzing Receivables Conceptual Learning

More information

Accounting 303 Exam 3, Chapters 7-9

Accounting 303 Exam 3, Chapters 7-9 Accounting 303 Exam 3, Chapters 7-9 Spring 2012 Name Row I. Multiple Choice Questions. (2 points each, 30 points in total) Read each question carefully and indicate your answer by circling the letter preceding

More information

Indiana Community Business Credit Corporation

Indiana Community Business Credit Corporation Indiana Community Business Credit Corporation Financial Statements Years Ended December 31, 2006 and 2005 Strength in numbers. Contents Independent Auditors Report 1 Financial Statements Balance Sheets

More information

Chapter 8 Accounting for Receivables

Chapter 8 Accounting for Receivables Chapter 8 Accounting for Receivables Accounts Receivable Accounts Receivables are current assets. They are usually expected to be collected within 30 days. Allowance Method and Bad Debt Expense 2 methods:

More information

Investments and advances... 313,669

Investments and advances... 313,669 Consolidated Financial Statements of the Company The consolidated balance sheet, statement of income, and statement of equity of the Company are as follows. Please note the Company s consolidated financial

More information

How should banks account for their investment in other real estate owned (OREO) property?

How should banks account for their investment in other real estate owned (OREO) property? TOPIC 5: OTHER ASSETS 5A. REAL ESTATE Question 1: (December 2008) How should banks account for their investment in other real estate owned (OREO) property? Detailed accounting guidance for OREO is provided

More information

Accounting Cheat Sheet

Accounting Cheat Sheet DIAGRAM OF TACCOUNTS Assets = Balance Sheet as of 12/31/20 Liabilit ies + = + Equity METHODS & ORGS Accrual basis Follows the matching principle and recognizes transactions as they occur (GAAP Method)

More information

BANK OVERDRAFTS IMPAIRMENT EVALUATION PROCESS CASH AND RECEIVABLES U.S. GAAP PERSPECTIVE

BANK OVERDRAFTS IMPAIRMENT EVALUATION PROCESS CASH AND RECEIVABLES U.S. GAAP PERSPECTIVE Chapter 7 Cash and Receivables 7 1 CHAPTER 7 CASH AND RECEIVABLES This IFRS Supplement provides expanded discussions of accounting guidance under International Financial Reporting Standards (IFRS) for

More information

Accounting 303 Exam 3, Chapters 7-9 Fall 2012 Section Row

Accounting 303 Exam 3, Chapters 7-9 Fall 2012 Section Row Accounting 303 Name Exam 3, Chapters 7-9 Fall 2012 Section Row I. Multiple Choice Questions. (2 points each, 34 points in total) Read each question carefully and indicate your answer by circling the letter

More information

Residual carrying amounts and expected useful lives are reviewed at each reporting date and adjusted if necessary.

Residual carrying amounts and expected useful lives are reviewed at each reporting date and adjusted if necessary. 87 Accounting Policies Intangible assets a) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of identifiable net assets and liabilities of the acquired company

More information

Chapter 8 Accounting for Receivables 高立翰

Chapter 8 Accounting for Receivables 高立翰 Chapter 8 Accounting for Receivables 高立翰 Study Objectives 1. Identify the different types of receivables. 2. Explain how companies recognize accounts receivable. 3. Distinguish between the methods and

More information

Analyzing Cash Flows. April 2013

Analyzing Cash Flows. April 2013 Analyzing Cash Flows April 2013 Overview Introductions Importance of cash flow in underwriting decisions Key attributes to calculating cash flow Where to obtain information to calculate cash flows Considerations

More information

CHAPTER 8. Accounting for Receivables 5, 6, 7, 8, 9, 10, 11, 12, 13 5, 6, 7, 8, 9 14, 15, 16, 17 18, 19, 20, 21, 22 10, 11, 12, 13 13, 14, 15

CHAPTER 8. Accounting for Receivables 5, 6, 7, 8, 9, 10, 11, 12, 13 5, 6, 7, 8, 9 14, 15, 16, 17 18, 19, 20, 21, 22 10, 11, 12, 13 13, 14, 15 CHAPTER 8 Accounting for Receivables ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Exercises Problems Set A Problems Set B 1. Record accounts receivable transactions. 1, 2,

More information

Understanding Basic Financial Statements

Understanding Basic Financial Statements Understanding Basic Financial Statements During the accounting cycle, the accounting system is used to track, organize and record the financial transactions of an organization. At the close of each period,

More information

2. The balance in a deferred revenue account represents an amount that is Earned Collected a. Yes Yes b. Yes No c. No Yes d. No No.

2. The balance in a deferred revenue account represents an amount that is Earned Collected a. Yes Yes b. Yes No c. No Yes d. No No. Multiple choice (36%, 2%each): 1. Failure to record the expired amount of prepaid rent expense would not a. understate expense. b. overstate net income. c. overstate owners' equity. d. understate liabilities.

More information

Indiana Community Business Credit Corporation

Indiana Community Business Credit Corporation Indiana Community Business Credit Corporation Financial Statements Years Ended December 31, 2004 and 2003 Strength in numbers. Contents Independent Auditors Report 1 Financial Statements Balance Sheets

More information

Chapter 8. Reporting and Analyzing Receivables

Chapter 8. Reporting and Analyzing Receivables Chapter 8 Reporting and Analyzing Receivables Study Objective 1 - Identify the Different Types of Receivables The term receivables refers to amounts due from individuals and companies. Receivables are

More information

Chapter 8. Receivables

Chapter 8. Receivables Chapter 8 Receivables Receivables mean amounts owed to the company by others. Accounts Receivable are receivables resulting from the company rendering services or selling products to the public. The company

More information

CHAPTER 7. Cash and Receivables. 1. Accounting for cash. 1, 2, 3, 4, 21 1 1, 2 1 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15 8, 9, 10, 11, 12

CHAPTER 7. Cash and Receivables. 1. Accounting for cash. 1, 2, 3, 4, 21 1 1, 2 1 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15 8, 9, 10, 11, 12 CHAPTER 7 Cash and Receivables ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis 1. Accounting for cash. 1, 2, 3, 4, 21 1 1, 2 1 2. Accounting

More information

RAPID REVIEW Chapter Content

RAPID REVIEW Chapter Content RAPID REVIEW BASIC ACCOUNTING EQUATION (Chapter 2) INVENTORY (Chapters 5 and 6) Basic Equation Assets Owner s Equity Expanded Owner s Owner s Assets Equation = Liabilities Capital Drawing Revenues Debit

More information

Section A: Questions On Fill In The Blanks

Section A: Questions On Fill In The Blanks Section A : 26 FILL IN THE BLANK Section B : 10 TRUE OR FALSE QUESTIONS Section C : 11 Multiple Choice Questions Section A: Questions Fill In The Blanks the right column please insert the items from which

More information

85.52 Investments. 85.52.10 July 1, 2003. About investments. Short-term investments. 85.52.20 June 1, 2003 85.52.10

85.52 Investments. 85.52.10 July 1, 2003. About investments. Short-term investments. 85.52.20 June 1, 2003 85.52.10 85.52.10 85.52 Investments 85.52.10 July 1, 2003 About investments Investments are made as authorized by law and/or contractual agreement. Investment purchase and sale transactions are to be reported for

More information

Plan and Track Your Finances

Plan and Track Your Finances Chapter 9 Plan and Track Your Finances 9.1 Finance Your Business 9.2 Pro Forma Financial Statements 9.3 Record Keeping for Businesses Ideas in Action Electronic Safekeeping Katelin Shea addressed the unmet

More information

Plan and Track Your Finances

Plan and Track Your Finances Plan and Track Your Finances 9.1 Financing Your Business 9.2 Pro Forma Financial Statements 9.3 Recordkeeping for Businesses Lesson 9.1 Financing Your Business Goals Estimate your startup costs and personal

More information

1. Analyze the following T-account in the ledger of Moxy Pool Supply Company

1. Analyze the following T-account in the ledger of Moxy Pool Supply Company Name: Date: 1. Analyze the following T-account in the ledger of Moxy Pool Supply Company Mdse. Inventory 5,000 400 If $5,000 in the Inventory account represents merchandise purchased from a supplier, we

More information

CHAPTER 7 Cash and Receivables

CHAPTER 7 Cash and Receivables CHAPTER 7 Cash and Receivables 7-1 LECTURE OUTLINE Chapter 7, the first of six asset chapters, covers cash, accounts receivable, and notes receivable. Temporary investments (marketable securities) are

More information

Chapter 1. Introduction to Accounting and Business

Chapter 1. Introduction to Accounting and Business 1 Chapter 1 Introduction to Accounting and Business Learning Objective 1 Describe the nature of a business, the role of accounting, and ethics in business. Nature of Business and Accounting A business

More information

Loan Impairment Examples S10c.docx as of 9/9/10 Page 1

Loan Impairment Examples S10c.docx as of 9/9/10 Page 1 Impairment of Notes Receivables US GAAP requires entities to assess whether financial assets are impaired and recognize the impairment. If a note receivable is impaired, the loss is measured by the creditor

More information

NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS

NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS Condensed Interim Consolidated Financial Statements of THE BRICK LTD. For the three months ended March 31, 2013 NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS Under National Instrument 51-102,

More information

Principles of Financial Accounting ACC-101-TE. TECEP Test Description

Principles of Financial Accounting ACC-101-TE. TECEP Test Description Principles of Financial Accounting ACC-101-TE TECEP Test Description This TECEP is an introduction to the field of financial accounting. It covers the accounting cycle, merchandising concerns, and financial

More information

SAMPLE MANUFACTURING COMPANY LIMITED CONSOLIDATED FINANCIAL STATEMENTS. Year ended December 31, 2011

SAMPLE MANUFACTURING COMPANY LIMITED CONSOLIDATED FINANCIAL STATEMENTS. Year ended December 31, 2011 SAMPLE MANUFACTURING COMPANY LIMITED CONSOLIDATED FINANCIAL STATEMENTS Year ended SAMPLE MANUFACTURING COMPANY LIMITED CONSOLIDATED FINANCIAL STATEMENTS For the year ended The information contained in

More information

Financial Reporting & Analysis Chapter 17 Solutions Statement of Cash Flows Exercises

Financial Reporting & Analysis Chapter 17 Solutions Statement of Cash Flows Exercises Financial Reporting & Analysis Chapter 17 Solutions Statement of Cash Flows Exercises Exercises E17-1. Determining cash flows from operations Using the indirect method, cash flow from operations is computed

More information

Advanced Placement (AP) Accounting

Advanced Placement (AP) Accounting Advanced Placement (AP) Accounting The Advanced Placement (AP) Accounting Course is a full academic year course. The course is based on high school teachers having 120 contact hours with students from

More information

CH 23 STATEMENT OF CASH FLOWS SELF-STUDY QUESTIONS

CH 23 STATEMENT OF CASH FLOWS SELF-STUDY QUESTIONS C H 2 3, P a g e 1 CH 23 STATEMENT OF CASH FLOWS SELF-STUDY QUESTIONS (note from Dr. N: I have deleted questions for you to omit, but did not renumber the remaining questions) 1. The primary purpose of

More information

Consolidated Statements of Profit or Loss Ricoh Company, Ltd. and Consolidated Subsidiaries For the Years Ended March 31, 2014 and 2015

Consolidated Statements of Profit or Loss Ricoh Company, Ltd. and Consolidated Subsidiaries For the Years Ended March 31, 2014 and 2015 Consolidated Statements of Profit or Loss Sales: Products 1,041,794 1,071,446 8,928,717 Post sales and rentals 1,064,555 1,068,678 8,905,650 Other revenue 89,347 91,818 765,150 Total sales 2,195,696 2,231,942

More information

BUS512M. Module 5. Cash and Accounts Receivable BE6-1, E6-4, E6-5, P6-2

BUS512M. Module 5. Cash and Accounts Receivable BE6-1, E6-4, E6-5, P6-2 BUS512M Module 5 Cash and Accounts Receivable BE6-1, E6-4, E6-5, P6-2 Current Asset Classification A current asset is defined as any asset that is intended to be converted into cash within one year or

More information

Accounts Payable are the total amounts your business owes its suppliers for goods and services purchased.

Accounts Payable are the total amounts your business owes its suppliers for goods and services purchased. Accounts Payable are the total amounts your business owes its suppliers for goods and services purchased. Accounts Receivable are the total amounts customers owe your business for goods or services sold

More information

Acal plc. Accounting policies March 2006

Acal plc. Accounting policies March 2006 Acal plc Accounting policies March 2006 Basis of preparation The consolidated financial statements of Acal plc and all its subsidiaries have been prepared in accordance with International Financial Reporting

More information

2/10, n/30. Chapter 7 16/10/2012. Read as: Two ten, net thirty. Accounting for Sales Revenue. Credit Card Sales to Consumers

2/10, n/30. Chapter 7 16/10/2012. Read as: Two ten, net thirty. Accounting for Sales Revenue. Credit Card Sales to Consumers Accounting for Sales Revenue Chapter 7 Reporting and Interpreting Sales Revenue, Receivables and Cash Copyright 2009 McGraw-Hill Ryerson Limited. All rights reserved. The revenue principle requires that

More information

Chapter 7 Cash and Receivables

Chapter 7 Cash and Receivables 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

More information

Accounting 303 Exam 1, Chapters 1 3 & 5 Fall 2011 Section Row

Accounting 303 Exam 1, Chapters 1 3 & 5 Fall 2011 Section Row 1 Accounting 303 Name Exam 1, Chapters 1 3 & 5 Fall 2011 Section Row I. Multiple Choice Questions. (2 points each, 52 points in total) Read each question carefully and indicate your answer by circling

More information

Consolidated Financial Summary For the third quarter of the fiscal year ending March 31, 2009

Consolidated Financial Summary For the third quarter of the fiscal year ending March 31, 2009 Monex Group, Inc. Consolidated Financial Summary under Japanese GAAP for the third quarter of the fiscal year ending March 31, 2009 (April 1, 2008-December 31, 2008) This is an English translation of Japanese

More information

Learning Objectives: Quick answer key: Question # Multiple Choice True/False. 14.1 Describe the important of accounting and financial information.

Learning Objectives: Quick answer key: Question # Multiple Choice True/False. 14.1 Describe the important of accounting and financial information. 0 Learning Objectives: 14.1 Describe the important of accounting and financial information. 14.2 Differentiate between managerial and financial accounting. 14.3 Identify the six steps of the accounting

More information

Accounting 1010 Sample Exam 3 Chapters 7, 8, and 9

Accounting 1010 Sample Exam 3 Chapters 7, 8, and 9 Accounting 1010 Sample Exam 3 Chapters 7, 8, and 9 Name Multiple Choice: Circle the letter corresponding to the best answer for each question. Only circle one answer per question. Problems: Show ALL work

More information

www.cebu-cpar.com Based on the above and the result of your audit, determine the adjusted balance of following:

www.cebu-cpar.com Based on the above and the result of your audit, determine the adjusted balance of following: CEBU CPAR CENTER, INC. AUDIT OF RECEIVABLES PROBLEM NO. 1 Your audit disclosed that on December 31, 2006, the accounts receivable control account of Alilem Company had a balance of P2,865,000. An analysis

More information

Review of the Accounting Process THE BASIC MODEL

Review of the Accounting Process THE BASIC MODEL THE BASIC MODEL The accounting information system is designed to collect and organize data into information that is useful for stakeholders. The Accounting Equation The basic accounting equation is what

More information

Financial Accounting Study Guide Fall 2013 CH1 & 2 PART VI RATIOS

Financial Accounting Study Guide Fall 2013 CH1 & 2 PART VI RATIOS Financial Accounting Study Guide Fall 2013 CH1 & 2 PART VI RATIOS Name: Selected information from the financial statements of Miller Company for the year ended December 31, 2012, appears below: 2012 Current

More information

University of Waterloo Final Examination. Term: Fall Year: 2005. Core Concepts of Accounting Information

University of Waterloo Final Examination. Term: Fall Year: 2005. Core Concepts of Accounting Information University of Waterloo Final Examination Term: Fall Year: 2005 Student Name Solution UW Student ID Number Course Abbreviation and Number AFM 101 Course Title Core Concepts of Accounting Information Section(s)

More information

Consolidated Statement of Profit or Loss

Consolidated Statement of Profit or Loss Consolidated Statement of Profit or Loss Sales: Products 864,699 1,041,794 $ 10,114,505 Post sales and rentals 941,610 1,064,555 10,335,485 Other revenue 79,686 89,347 867,447 Total sales 1,885,995 2,195,696

More information

Chapter 10. Learning Objectives. Receivables. Receivables. Horngren, Best, Fraser, Willett: Accounting 6e 2010 Pearson Australia

Chapter 10. Learning Objectives. Receivables. Receivables. Horngren, Best, Fraser, Willett: Accounting 6e 2010 Pearson Australia PowerPoint to accompany Chapter 10 Receivables Learning Objectives 1. Design internal controls for receivables 2. Use the allowance method to account for bad debts 3. Use the direct write-off method to

More information

Introductory Financial Accounting Course Outline

Introductory Financial Accounting Course Outline Aboriginal Financial Officers Association of Alberta Introductory Financial Accounting Course Outline ACCT 210: INTRODUCTORY FINANCIAL ACCOUNTING I... 1 ACCT 240: INTRODUCTORY FINANCIAL ACCOUNTING II...

More information

Sample Test for entrance into Acct 3110 and Acct 3310

Sample Test for entrance into Acct 3110 and Acct 3310 Sample Test for entrance into Acct 3110 and Acct 3310 1. Which of the following financial statements could properly have the following in the date line: For the Year Ended December 31, 2010"? a. Balance

More information

International Accounting Standard 39 Financial Instruments: Recognition and Measurement

International Accounting Standard 39 Financial Instruments: Recognition and Measurement EC staff consolidated version as of 18 February 2011 FOR INFORMATION PURPOSES ONLY International Accounting Standard 39 Financial Instruments: Recognition and Measurement Objective 1 The objective of this

More information

(a) Accounts Receivable... 23,000 Sales Revenue... 23,000. (b) Sales Returns and Allowances... 2,400 Accounts Receivable... 2,400

(a) Accounts Receivable... 23,000 Sales Revenue... 23,000. (b) Sales Returns and Allowances... 2,400 Accounts Receivable... 2,400 BRIEF EXERCISE 8-1 (a) Other receivables. (b) Notes receivable. (c) Accounts receivable. BRIEF EXERCISE 8-2 (a) Accounts Receivable... 23,000 Sales Revenue... 23,000 (b) Sales Returns and Allowances...

More information

Accounting 303 Exam 3, Chapters 7-9 Fall 2013 Section Row

Accounting 303 Exam 3, Chapters 7-9 Fall 2013 Section Row Accounting 303 Name Exam 3, Chapters 7-9 Fall 2013 Section Row I. Multiple Choice Questions. (2 points each, 28 points in total) Read each question carefully and indicate your answer by circling the letter

More information

Investments and advances... 344,499

Investments and advances... 344,499 Consolidated Financial Statements of the Company The consolidated balance sheet, statement of income, and statement of equity of the Company are as follows. Please note the Company s consolidated financial

More information

DTS CORPORATION and Consolidated Subsidiaries. Unaudited Quarterly Consolidated Financial Statements for the Three Months Ended June 30, 2008

DTS CORPORATION and Consolidated Subsidiaries. Unaudited Quarterly Consolidated Financial Statements for the Three Months Ended June 30, 2008 DTS CORPORATION and Consolidated Subsidiaries Unaudited Quarterly Consolidated Financial Statements for the Three Months Ended June 30, 2008 DTS CORPORATION and Consolidated Subsidiaries Quarterly Consolidated

More information

Chapter 18 Working Capital Management

Chapter 18 Working Capital Management Chapter 18 Working Capital Management Slide Contents Learning Objectives Principles Used in This Chapter 1. Working Capital Management and the Risk- Return Tradeoff 2. Working Capital Policy 3. Operating

More information

HARMONIC DRIVE SYSTEMS INC. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2013

HARMONIC DRIVE SYSTEMS INC. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2013 HARMONIC DRIVE SYSTEMS INC. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2013 HARMONIC DRIVE SYSTEMS INC. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS

More information

Financial Accounting (Sole Proprietorship)

Financial Accounting (Sole Proprietorship) Financial Accounting (Sole Proprietorship) This course covers the topics shown below. Students navigate learning paths based on their level of readiness. Institutional users may customize the scope and

More information

Financial Accounting: Assets FA 2 Module 6. Handouts. Current financial assets And current liabilities. Presented by: Laura Dallas, CGA

Financial Accounting: Assets FA 2 Module 6. Handouts. Current financial assets And current liabilities. Presented by: Laura Dallas, CGA Accounting: Assets FA 2 Module 6 Handouts Current financial assets And current liabilities Presented by: Laura Dallas, CGA Note: this information is prepared from the best information I have available

More information

ACCOUNTING 105 CONCEPTS REVIEW

ACCOUNTING 105 CONCEPTS REVIEW ACCOUNTING 105 CONCEPTS REVIEW A note from the tutors: This handout is designed to help you review important information as you study for your cumulative final exam. While it does cover many important

More information

Profit (loss) for the period = Revenues - Expenses

Profit (loss) for the period = Revenues - Expenses ADDITIONAL NOTES FOR TEI MBA (CHAPTER ) THE PROFIT and LOSS ACCOUNT (INCOME STATEMENT) Measures and reports the profit or loss generated during a period. Profit (loss) for the period = Revenues - Expenses

More information