Ch05 - Chapter 5 Short-Term Investments and Receivables...

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Unformatted text preview: Chapter 5 Short-Term Investments and Receivables Short Exercises (5 min.) S 5-1 1. A trading investment is always a current asset because the investor intends to sell the trading investment in the very near future days, weeks, or only a few months. A current asset is to be sold within one year or within the companys operating cycle if longer than a year. 2. Trading investments are reported at their current market value. (10 min.) S 5-2 BALANCE SHEET Current assets: Short-term trading investments, at market value... $84,000 INCOME STATEMENT Other revenue and gains (losses): Unrealized gain on investment.... $ 4,000* _____ *$84,000 $80,000 = $4,000 Chapter 5 Short-Term Investments and Receivables 281 (10 min.) S 5-3 Unrealized Loss on Investment ($104,000 $98,000) 6,000 Short-Term Investment.. 6,000 Adjusted investment to market value. BALANCE SHEET Current assets: Short-term trading investment, at market value $98,000 INCOME STATEMENT Other revenue (loss): Unrealized (loss) on investment $ (6,000) (5 min.) S 5-4 Roose, the accountant, should not handle the companys cash. With cash-handling duties, the accountant can steal cash and hide the theft by writing off a customers account receivable as uncollectible. Financial Accounting 7/e Solutions Manual 282 (5 min.) S 5-5 1. Uncollectible-Account Expense ($900,000 .02).. 18,000 Allowance for Uncollectible Accounts 18,000 2. Balance sheet Accounts receivable $80,000 Less Allowance for uncollectible accounts.. (18,000 ) Accounts receivable, net $62,000 (5-10 min.) S 5-6 1. Accounts Receivable 1,000,000 Sales Revenue.. 1,000,000 2. Cash.. 880,000 Accounts Receivable.. 880,000 3. Allowance for Uncollectible Accounts. 16,000 Accounts Receivable... 16,000 4. Uncollectible-Account Expense ($1,000,000 .015). 15,000 Allowance for Uncollectible Accounts 15,000 Chapter 5 Short-Term Investments and Receivables 283 (10 min.) S 5-7 1. Accounts Receivable Beg. bal. 80,000 Net credit sales 1,000,000 Collections 880,000 Write-offs 16,000 End. bal. 184,000 Amount customers owe the company 2. Allowance for Uncollectible Accounts Beg. bal. 18,000 Write-offs 16,000 Uncollectible- account expense 15,000 End. bal. 17,000 Amount the company expects not to collect 3....
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Ch05 - Chapter 5 Short-Term Investments and Receivables...

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