Question 1

Uncollectible accounts
(a.) What is an uncollectible account? Explain how a business suffers losses from uncollectible accounts.
(b.) "A competent credit manager should set credit policies so as to avoid any and all losses from uncollectible accounts." Is this statement accurate? Explain your answer.

Accepted Answer

The answer of Uncollectible accounts
(a.) What is an uncollectible account?...

Question 2

You are to complete the June 30 bank reconciliation for Huang, Inc. using the following information:

Accepted Answer

The answer of You are to complete the June 30...

Question 3

Which of the following items is reported in neither the income statement nor the statement of cash flows?

Accepted Answer

The adjustment of available-for-sale marketable securities owned to current market value at the balance sheet date is reported on the balance sheet under the "other comprehensive income" section. It is not reported on the income statement or statement of cash flows. A and B would be reported on the income statement, while D would be reported on the statement of cash flows in the investing activities section.

Question 4

Cash equivalents:

Accepted Answer

Cash equivalents are short-term investments that can be easily converted into cash, with a maturity of three months or less. They are usually included in the term "cash" in the balance sheet and the statement of cash flows. They do not include unused lines of credit, publicly traded stocks and bonds of large corporations, or all types of financial assets.

Question 5

In Hubbard's completed bank reconciliation at August 31, what dollar amount should be deducted from the balance per depositor's records (indicated by 4 above)?

Accepted Answer

The answer of In Hubbard's completed bank reconciliation at August...

Question 6

In Hubbard's completed bank reconciliation at August 31, what dollar amount should be deducted from the balance per bank statement (indicated by 2 above)?

Accepted Answer

The adjusted balance per bank statement per the completed bank reconciliation on August 31 is $254,321. The check outstanding total is $19,855, the bank service fees are $120, and the NSF check from customer is $2,279. Subtracting these amounts from the adjusted balance per bank statement results in $231,067, which matches the balance per books. Therefore, the dollar amount that should be deducted from the balance per bank statement is $2,279 (indicated by 2 above).

Question 7

Hubbard Transport keeps $500 cash on hand in addition to this checking account and has no other bank accounts or cash equivalents. What amount should appear as Cash in Emerald's August 31 balance sheet?

Accepted Answer

Hubbard Transport keeps $500 cash on hand in addition to this checking account, so the total cash is $14,249 + $500 = $14,749.

Question 8

Mark-to-market is the balance sheet valuation standard for:

Accepted Answer

Mark-to-market is the accounting method used to value investments in available-for-sale marketable securities on a balance sheet. It involves adjusting the value of the securities to reflect their current market value. This method allows for more accurate reporting of the value of these assets and can provide better insight into the financial health of a company.

Question 9

During the year, Brown Corporation's average accounts receivable were $316,000. The current-year income statement reported net sales of $2,010,000, uncollectible accounts expense of $118,000, and net income of $982,000. Using 365 days to a year, compute the average number of days Brown waits to collect its accounts receivable. (Round answer to the nearest day, if necessary.)

Accepted Answer

The answer of During the year, Brown Corporation's average accounts...

Question 10

Marketable securities
(a.) Explain how investments in available-for-sale marketable securities are valued in the investor's balance sheet. the objectivity principle?
(c.) What does Unrealized Holding Gain (or Loss) on Investments represent? How is this item reported in the financial statements?

Accepted Answer

The answer of Marketable securities
(a.) Explain how investments in available-for-sale...

Question 11

Match the following terms with the explanations below. If no term fits the explanation write none
$$\begin{array} { | l | l | l | } 
\hline \text { Accounts Receivable Turnover Rate } && \text { Financial Assets } \
\hline \text { Allowance for Doubtful Accounts } && \text { Marketable Securities } \
\hline \text { Cash Equivalents } && \text { Mark-to-Market } \
\hline \text { Direct Write Off Method } && \text { Unrealized Gain } \
\hline
\end{array}$$
_______ (1) A means of accounting for uncollectibles which does not recognize any expense until specific receivables are determined to be worthless.
_______ (2) An account showing the amount of estimated uncollectible receivables.
_______ (3 ) The process of estimating uncollectible accounts by classifying accounts receivables by age groups.
_______ (4) Dividing net sales by average receivables to create a ratio to measure the liquidity of accounts receivable.
_______ (5) Very short-term liquid investments which must mature within 90 days of acquisition.
_______ (6) Cash and assets convertible directly into known amounts of cash.
_______ (7) An account showing the difference between the cost of an investment in marketable securities and its market value.
_______ (8) The value of a note at its maturity date.
_______ (9) Highly liquid investments that can be sold in organized securities exchanges.

Accepted Answer

The answer of Match the following terms with the explanations...

Question 12

If Four Star uses the balance sheet approach in estimating uncollectible accounts, and aging the accounts receivable indicates the estimated uncollectible portion to be $24,000, the uncollectible accounts expense for the month is:

Accepted Answer

The answer of If Four Star uses the balance sheet...

Question 13

The necessary adjustment to Hubbard Transport's accounting records as of August 31 includes a net:

Accepted Answer

The necessary adjustment to Hubbard Transport's accounting records as of August 31 includes a net increase to Cash of $3,681. This is because the unrecorded deposit of $2,400 should be added to Cash, the outstanding check of $1,051 should be deducted from Cash, and the bank collected a service charge of $50, which should also be deducted from Cash. Therefore, the net increase to Cash would be $2,400 - $1,051 - $50 = $1,299. This amount should be added to the Cash balance as of August 31, resulting in a total increase to Cash of $3,681.

Question 14

Prepare the journal entry to correct Huang's records as of June 30. (Explanations may be omitted; one compound journal entry is acceptable.)
 $$\begin{array} { | l | l | l | l | } 
\hline 2009 & \text { General Journal } & \text { Debit } & \text { Credit } \
\hline \text { June } 30 & & & \
\hline & & & \
\hline & & & \
\hline & & & \
\hline & & & \
\hline & & & \
\hline
\end{array}$$

Accepted Answer

The answer of Prepare the journal entry to correct Huang's...

Question 15

After aging its accounts receivable at December 31, Howland Company estimates that $68,000 of the $835,000 outstanding accounts receivable will prove uncollectible. The Allowance for Doubtful Accounts has a debit balance of $6,200 prior to adjustment. In the space provided, prepare the adjusting entry required by Huey in this situation:
 $$\begin{array} { | l | l | l | l | } 
\hline \text { Dec. 31 } & & & \
\hline & & & \
\hline & & & \
\hline & & & \
\hline & & & \
\hline & & & \
\hline
\end{array}$$

Accepted Answer

The answer of After aging its accounts receivable at December...

Question 16

Information for the Hooper Company is as follows:
$\begin{array}{|l|r|}
\hline \text { Accounts Receivable at March 31, 2009 } & \$ 9,000 \
\hline \text { Allowance for Doubtful Accounts (Credit balance) } & \$ 2,000 \
\hline \text { Net Sales ( } 85 \% \text { on credit) for year ending 12/31/09 } & \$ 100,000\\hline
\end{array}$
(1) What is the amount of uncollectible account expense for 2009 if the company uses the Percentage of Sales method and 2% of credit sales are deemed uncollectible?
(2) What is the amount of uncollectible expense if the company uses the balance sheet approach and estimates $2,200 as uncollectible in 2009?
(3) What is the net realizable value of accounts receivable if the company uses the balance sheet approach?
(4) If the company writes-off a receivable of $450 what will be the net realizable value of accounts receivable after the write off?

Accepted Answer

The answer of Information for the Hooper Company is as...

Question 17

In Hubbard's completed bank reconciliation at August 31, what dollar amount should be added to the balance per depositor's records (indicated by 3 above)?

Accepted Answer

The amount to be added to the balance per depositor's records is typically the total of deposits in transit, which is $5,241 in this case.

Question 18

Evaluating the quality of receivables
(a.) The 2010 annual report of Modern Books, a publicly traded corporation, reports accounts receivable (net of allowance for doubtful accounts), of $190,714 as of February 28, 2010. What assurance do readers of Modern Books' annual report have that these receivables really exist and are not fictitious assets recorded to make the balance sheet "look good"?
(b.) The accounts receivable turnover rate is frequently used in evaluating the liquidity of accounts receivable. How is the accounts receivable turnover rate computed? What type of information does the accounts receivable turnover rate provide?

Accepted Answer

The answer of Evaluating the quality of receivables
(a.) The 2010...

Question 19

At year-end, Atkins Company applies the income statement approach in estimating uncollectible accounts expense and determines such expense to be 2% of net sales. At December 31 of the current year, accounts receivable total $600,000, and Allowance for Doubtful Accounts has a credit balance of $4,200 prior to adjustment. Net sales for the current year were $2,300,000. Compute the net realizable value of accounts receivable to be reported in Dewey's December 31 balance sheet.

Accepted Answer

The answer of At year-end, Atkins Company applies the income...

Question 20

If the income statement method of estimating uncollectible accounts expense is followed, and uncollectible accounts expense is estimated to be 2% of net credit sales, the net realizable value of Four Star accounts receivable at the end of the month is:

Accepted Answer

To calculate net realizable value, we need to subtract the estimated uncollectible accounts expense (based on income statement method) from the accounts receivable balance.

Net credit sales = $1,250,000
Uncollectible accounts expense = 2% x $1,250,000 = $25,000

Accounts receivable balance = $870,050
Net realizable value = $870,050 - $25,000 = $845,050

Therefore, the answer is B.

Quiz 7: Financial Assets

You are to complete the June 30 bank reconciliation for Huang, Inc. using the following information:

Which of the following items is reported in neither the income statement nor the statement of cash flows?

Cash equivalents:

In Hubbard's completed bank reconciliation at August 31, what dollar amount should be deducted from the balance per depositor's records (indicated by 4 above) ?

In Hubbard's completed bank reconciliation at August 31, what dollar amount should be deducted from the balance per bank statement (indicated by 2 above) ?

Hubbard Transport keeps $500 cash on hand in addition to this checking account and has no other bank accounts or cash equivalents. What amount should appear as Cash in Emerald's August 31 balance sheet?

Mark-to-market is the balance sheet valuation standard for:

Marketable securities (a.) Explain how investments in available-for-sale marketable securities are valued in the investor's balance sheet. the objectivity principle? (c.) What does Unrealized Holding Gain (or Loss) on Investments represent? How is this item reported in the financial statements?

If Four Star uses the balance sheet approach in estimating uncollectible accounts, and aging the accounts receivable indicates the estimated uncollectible portion to be $24,000, the uncollectible accounts expense for the month is:

The necessary adjustment to Hubbard Transport's accounting records as of August 31 includes a net:

In Hubbard's completed bank reconciliation at August 31, what dollar amount should be added to the balance per depositor's records (indicated by 3 above) ?

If the income statement method of estimating uncollectible accounts expense is followed, and uncollectible accounts expense is estimated to be 2% of net credit sales, the net realizable value of Four Star accounts receivable at the end of the month is: