Question 1

On April 7, Wilhelm, Inc. sold goods for $50,000 and accepted a 10%, 60-day note. On April 22, the company discounted the note at 13%.
Required:
Compute the amount of interest revenue and the loss on sale of the note.

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Question 2

What is the difference between Receivables, Trade Receivables, and Nontrade Receivables?

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Question 3

What is a bank reconciliation and what is its importance?

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Question 4

On September 1, 2013, Geco Co. sold $40,000 of goods and accepted a one-year, 12% note.
Required: 
a.If no reversing entries were made after December 31, 2013, and adjusting entries were made, record the collection of the note on September 1, 2014.
b.Assume instead that a noninterest-bearing note for $44,800 for the same goods was issued. What balance sheet accounts and amounts should be disclosed on December 31, 2013?

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Question 5

In certain circumstances a company may find it necessary to accelerate the cash inflows potentially generated from its accounts receivable. This can be accomplished through pledging, assigning, or factoring the accounts receivable.
Required:
Explain each of these arrangements. Include in your discussion an explanation of each agreement, who retains the risks and benefits of ownership, whether or not the agreement is formally recorded in the company's accounting records, and how the agreement is disclosed in the company's financial statements.

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Question 6

Bailey's Manufacturing Company is looking at changing their method of reporting bad debts expense. In past years the company has been able to use the direct write off method but have experienced significant growth in recent years. The accountants have prepared the following aging schedule based upon their current accounts receivable volume. 
Required:
1) Using the above information compute the estimated amount of uncollectible receivables.
2) Prepare the journal entry to record the estimated uncollectibles.
3) Instead of the aging method compute the estimated bad debts to be:
a) 2.5% of net credit sales.
b) 3.5% of gross accounts receivable

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Question 7

Max Corp. sold goods for $36,000 on July 17, 2014, and accepted a 12%, 90-day note. On August 1, the note was discounted at 15%.
Required: 
a.Compute the proceeds.
b.If the maker dishonored the note at maturity, prepare an entry (or entries) for Max Corp. assuming $75 of bank protest fees.

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Question 8

Gazoo Co. sold goods with a list price of $45,000 (gross billings) on terms of 2/10, n/30 on December 14, 2014. Accounts receivable and sales were recorded using the net method. By December 23, Gazoo had collected on $25,000 (gross billings) of these receivables. On January 2, additional collections were made on sales of $5,000 (gross billings) and sales returns and allowances of $3,000 (gross billings) were granted by Gazoo. On January 15, 2015, all remaining balances were collected.
Required:
Prepare journal entries for the following:
a.Collections received by December 23, net method of accounting for sales discounts.
b.Any required adjustment, December 31, net method.
c.Sales returns and allowances granted on January 2, net method.
d.Collections received on January 15, net method.

Accepted Answer

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Question 9

On November 1, 2014, Yellow Grove Co. sold $45,000 of goods and accepted a note bearing 8% interest. The note was due in one year.
Required: 
a.Prepare a reversing entry for January 1, 2015.
b.Record the collection of the note on October 31, 2015.

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Question 10

Zeus Inc. recorded credit sales of $1,750,000 during 2015. At December 31, 2015, the company had a $250,000 debit balance in Accounts Receivable and a $13,000 credit balance in Allowance for Doubtful Accounts.
Required: 
a.Prepare the necessary adjusting journal entry at December 31 to record the estimated bad debt expense, assuming that bad debts are estimated at 3% of credit sales.
b.Prepare the necessary adjusting journal entry at December 31 to record the estimated bad debt expense, assuming that bad debts are estimated at 8% of outstanding accounts receivable.
c.Assume that a customer whose $3,300 account had been written off earlier in the year now pays the balance owed in full. Prepare the journal entry, or entries, to record the collection of this customer's account.

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Question 11

What two attributes do notes receivables have that account receivables do not?

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Question 12

Stacie, Inc. sold goods for $76,000 with terms of 2/10, n/30 on May 1.
Required:
Prepare journal entries for the following:
a.The sale, assuming the gross price method is used.
b.The sale, assuming the net price method is used.
c.Receipt of payment, assuming collection is made on May 31 and the net price method is used.
d.Receipt of payment, assuming collection is made on May 9 and the gross price is used.

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Question 13

Angler Fish Co. factored $540,000 of its accounts receivable to Gause Finance Co. Gause Finance advanced 85% of the factored receivables and charged a 10% commission on the gross amount of the receivables. All conditions for a sale have been met.
Required:
Prepare the journal entries necessary to record the following:
a.The sale of the receivables.
b.Sales Returns and Allowances of $2,200 on a factored account.
c.The conclusion of the sale agreement.

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Question 14

On January 1, 2014, Jonas Company established a petty cash fund of $500. By March 31, 2014, when the fund was replenished, the following petty cash vouchers had been issued: January 26, postage, $48; February 16, postage, $52; February 6, airport limousine fares, $24; January 18, office supplies, $67; March 8, postage, $38; March 4, local express delivery charges on purchases, $65. There was $209 in coins and currency left in petty cash before replenishment.
Required: 
a.Prepare the journal entries to record the transactions relating to Jonas Company's petty cash fund for the first quarter of 2014.
b.On April 1, the size of the petty cash fund was decreased to $425. What journal entry (if any) is necessary to record this action?

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Question 15

What two types of financing agreements are available to companies who wish to obtain cash from their accounts receivables? Why is it important to note whether or not the receivables are transferred with or without recourse?

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Question 16

On December 1, the Harrison Company sold $345,000 of its accounts receivable to Happy Finance Company for 85% of their value. A 10% commission on the gross value of the factored accounts was charged, and the factoring was without recourse.
Required: 
a.Prepare the journal entry to record the factoring.
b.Briefly discuss how the factored accounts are disclosed in the financial statements.

Accepted Answer

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Question 17

During 2015, Davidson's first year of operations, the following transactions occurred: 
•Credit sales of $2,000,000.
•Collections on account of $1,700,000.
•Accounts receivable written off during the year, $5,000.
•Estimated uncollectible accounts, $8,000.
•Accepted a $10,000, one-year, 12% note receivable on June 30.
Required:
Prepare the receivables portion of Davidson's first year operation's balance sheet as of December 31, 2015.

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Question 18

Moose, Inc. established a $250 petty cash fund three months ago. Today, April 21, the petty cash custodian has $198 in cash and receipts for the following: office supplies $12, equipment repairs $25, postage $7, and parking fees $13.
Required:
Prepare a compound journal entry to replenish the fund and reduce its size to $200.

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Question 19

A student in the accounting principles course comes to you, an upper-division accounting major, for an explanation of the difference between the gross price and net price methods of recording credit sales. The principles student wants to know why, if there is no difference in net income, a company would prefer one method over the other.
Required:
Explain the basics of each method, how each method is reported on the income statement, and the advantages and disadvantages of each method.

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Question 20

When a company extends credit to its customers, the company realizes it will not likely collect all of the related accounts receivable. As some accounts may prove to be uncollectible, a company must estimate its bad debt expense.
Required: 
a.What is the purpose of estimating bad debt expense?
b.There are two relationships that can be used to estimate the bad debt expense for a company. Describe the two major relationships that can be used to estimate bad debts expense and the financial statement orientation of each.

Accepted Answer

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Quiz 6: Cash and Receivables

On April 7, Wilhelm, Inc. sold goods for $50,000 and accepted a 10%, 60-day note. On April 22, the company discounted the note at 13%. Required: Compute the amount of interest revenue and the loss on sale of the note.

What is the difference between Receivables, Trade Receivables, and Nontrade Receivables?

What is a bank reconciliation and what is its importance?

Max Corp. sold goods for $36,000 on July 17, 2014, and accepted a 12%, 90-day note. On August 1, the note was discounted at 15%. Required: a.Compute the proceeds. b.If the maker dishonored the note at maturity, prepare an entry (or entries) for Max Corp. assuming $75 of bank protest fees.

On November 1, 2014, Yellow Grove Co. sold $45,000 of goods and accepted a note bearing 8% interest. The note was due in one year. Required: a.Prepare a reversing entry for January 1, 2015. b.Record the collection of the note on October 31, 2015.

What two attributes do notes receivables have that account receivables do not?

What two types of financing agreements are available to companies who wish to obtain cash from their accounts receivables? Why is it important to note whether or not the receivables are transferred with or without recourse?