Question 1

Using the code letters below, indicate how each of the items listed would be handled in preparing a bank reconciliation. Enter the appropriate code letter in the space to the left of each item.
-A cheque for $236 was correctly paid by the bank but was incorrectly entered in the cash payments journal for $263

Accepted Answer

The error in recording the cheque amount in the cash payments journal means the cash balance per books is less than it should be. Correcting this error involves adding the difference ($27) to the cash balance per books.

Question 2

K2 Limited received a notice with its bank statement that the bank had collected a note receivable for $8,000 plus $400 of interest. The bank had credited these amounts to K2's account less a collection fee of $10. K2 Ltd had already accrued the interest for this note on its books.
(a) How will these items affect K2's bank reconciliation?
(b) Prepare the journal entry that K2 Ltd will make to record this information on its books.

Accepted Answer

The answer of K2 Limited received a notice with its...

Question 3

The cash records of the Kilimanjaro Ltd show the following:
1. The 30 June bank reconciliation indicated that deposits in transit totalled $390. During July the general ledger account, Cash shows deposits of $9,700, but the bank statement indicates that only $9,540 in deposits were received during the month.
2. The 30 June bank reconciliation also reported outstanding cheques of $800. During the month of July, Kilimanjaro's books show that $11,170 of cheques were issued, yet the bank statement showed that $11,500 of cheques cleared the bank in July.
There were no bank debit or credit memoranda and no errors were made by either the bank or Kilimanjaro Ltd.
Answer the following questions:
(a) What were the outstanding deposits (deposits in transit) at 31 July?
(b) What were the outstanding cheques at 31 July?

Accepted Answer

The answer of The cash records of the Kilimanjaro Ltd...

Question 4

Siew Lan uses the allowance method to record bad debts expense. When accounts receivable is aged at the end of December, it is estimated that 2% of Siew Lan's accounts receivable will be uncollectable.
Accounts receivable at 31 December are $300,000 and the Allowance for doubtful debts has a credit balance of $5,000.
Required:
(a) Prepare the adjusting journal entry to record bad debts expense for the year ended 31 December.
(b) Determine the amount of the bad debts expense if the balance in the Allowance account is a debit of $500 instead of a credit of $5,000.

Accepted Answer

The answer of Siew Lan uses the allowance method to...

Question 5

Please complete the following statements:
-A basic principle of cash management is to delay payment of _____________.

Accepted Answer

The answer of Please complete the following statements:
-A basic principle...

Question 6

Please complete the following statements:
-One method of accounting for ________ debts involves estimating uncollectible accounts at the end of each period and recognising an _____________ account as a contra account.

Accepted Answer

The answer of Please complete the following statements:
-One method of...

Question 7

Please complete the following statements:
-A(n) ______________ note is a written promise to pay a specified amount on a defined date.

Accepted Answer

The answer of Please complete the following statements:
-A(n) ______________ note...

Question 8

Match the items below by choosing the appropriate code letter :
-A measure that computes the allowance for doubtful debts.

Accepted Answer

The aged accounts receivable method computes the allowance for doubtful debts by analyzing receivables based on their age, with older accounts often considered more likely to be uncollectible. This method helps businesses estimate the amount of receivables that may not be collected.

Question 9

Match the items below by choosing the appropriate code letter :
-Cheques which have been returned by the maker's bank for lack of funds.

Accepted Answer

NSF (Non-Sufficient Funds) cheques are those returned by the maker's bank due to insufficient funds in the account to cover the cheque amount.

Question 10

Match the items below by choosing the appropriate code letter :
-Cheques which have been paid by the depositor's bank.

Accepted Answer

Cancelled cheques are those which have been paid by the depositor's bank and are typically returned or digitally imaged to the account holder, indicating that the payment has been processed.

Question 11

Match the items below by choosing the appropriate code letter :
-A measure of the liquidity of receivables, calculated by dividing net credit sales by average net receivables.

Accepted Answer

The correct answer is C) Receivables turnover. This financial metric measures how efficiently a company collects its receivables by dividing net credit sales by average net receivables, thus indicating the liquidity of the receivables.

Question 12

Match the items below by choosing the appropriate code letter :
-Anything that a bank will accept for deposit.

Accepted Answer

The answer of Match the items below by choosing the...

Question 13

Match the items below by choosing the appropriate code letter :
-A basic principle of cash management.

Accepted Answer

Investing idle cash is a basic principle of cash management to ensure that cash is being used efficiently and not sitting idle without earning any return.

Question 14

Match the items below by choosing the appropriate code letter :
-A method of accounting for bad debts that involves expensing accounts receivable at the time they are determined to be uncollectible.

Accepted Answer

The Direct Write-off Method is used to account for bad debts by directly writing off specific accounts receivable that are deemed uncollectible. This method involves expensing the uncollectible accounts at the time they are identified as not recoverable.

Question 15

Match the items below by choosing the appropriate code letter :
-Document indicating the purpose of a petty cash expenditure.

Accepted Answer

A petty cash receipt is the document that indicates the purpose of a petty cash expenditure, serving as a record for small, incidental expenses that are paid out in cash.

Question 16

Match the items below by choosing the appropriate code letter :
-Issued cheques that have not been paid by the bank.

Accepted Answer

Outstanding cheques are cheques that have been written and recorded in the payer's accounting system but have not yet been paid by the bank. This means they have been issued but not cleared, affecting the bank account balance.

Question 17

Match the items below by choosing the appropriate code letter :
-Highly liquid investments.

Accepted Answer

Cash equivalents are highly liquid investments that can be easily converted into cash.

Question 18

Comparative analysis problem: Computershare's financial statements can be accessed via the investor relations link on the website www.computershare.com.au. Data3's financial statements can be accessed via the investor relations link on the website www.data3.com.au.
Required:
(a) Based on the information contained in the most recent financial statements, calculate the following ratios for each company:
(1) accounts receivable turnover ratio
(2) average collection period for receivables.
(b) What conclusions concerning the management of accounts receivable can be drawn from these data?

Accepted Answer

The answer of Comparative analysis problem: Computershare's financial statements can...

Question 19

Interpreting financial statements - a global focus: NAB saw its share price fall by more than 12% after it announced provisions for a potential loss of $830 million on debt-related investments due to the global credit crisis and fall in the US housing market. The $830 million was in addition to the $181 million NAB had already provided for to cover risky investments. NAB chief executive John Stewart said that the losses were likely due to rapidly increasing mortgage defaults, stating, 'Unfortunately the behaviour of the housing market in the US leads us to believe that the worst case scenario may not be too far away from the most likely scenario'. Numbers indicating US home sales have fallen to a 10-year low and Ford booking a record loss of $US9.1 billion in its latest quarterly results sparked a steep decline on the US share market.
Required:
(a) Viewing the most recent annual report available on its website (www.nab.com.au), identify how NAB determines impaired receivables.
(b) Compare NAB's policy with Barclays'. (You can access Barclays' most recent annual report via www.barclays.com.)

Accepted Answer

The answer of Interpreting financial statements - a global focus:...

Question 20

Exploring the web: To learn more about factoring from the website of a business that provides factoring services.
Address: www.tradedebtorfinance.com.au
Steps: Go to the website and answer the following questions.
Required:
(a) What are some of the benefits of factoring?
(b) What is the range of the percentages of the typical discount rate?
(c) If a business factors its receivables, what percentage of the value of the receivables can it expect to receive from the factor in the form of cash, and how quickly will it receive the cash?

Accepted Answer

The answer of Exploring the web: To learn more about...

Quiz 7: Reporting and Analysing Cash and Receivables

Please complete the following statements: -A basic principle of cash management is to delay payment of _____________.

Please complete the following statements: -One method of accounting for debts involves estimating uncollectible accounts at the end of each period and recognising an _____ account as a contra account.

Please complete the following statements: -A(n) ______________ note is a written promise to pay a specified amount on a defined date.

Match the items below by choosing the appropriate code letter : -A measure that computes the allowance for doubtful debts.

Match the items below by choosing the appropriate code letter : -Cheques which have been returned by the maker's bank for lack of funds.

Match the items below by choosing the appropriate code letter : -Cheques which have been paid by the depositor's bank.

Match the items below by choosing the appropriate code letter : -A measure of the liquidity of receivables, calculated by dividing net credit sales by average net receivables.

Match the items below by choosing the appropriate code letter : -Anything that a bank will accept for deposit.

Match the items below by choosing the appropriate code letter : -A basic principle of cash management.

Match the items below by choosing the appropriate code letter : -A method of accounting for bad debts that involves expensing accounts receivable at the time they are determined to be uncollectible.

Match the items below by choosing the appropriate code letter : -Document indicating the purpose of a petty cash expenditure.

Match the items below by choosing the appropriate code letter : -Issued cheques that have not been paid by the bank.

Match the items below by choosing the appropriate code letter : -Highly liquid investments.