Spr10-CH 7 - CashandReceivables Spiceland,Chapter7 Cash...

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Cash and Receivables Spiceland, Chapter 7
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Cash and Cash Equivalents Balances in checking  accounts Currency  and coins Cash equivalents are short-term, highly liquid  investments that can be readily converted to cash. Money market funds Treasury bills Commercial paper Cash Items for deposit such as  checks and money orders  from customers
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Internal Control Procedures Cash Receipts Separate responsibilities for handling cash, recording cash transactions, and reconciling cash balances. Match the amount of cash received with the amount of cash deposited. Close supervision of cash-handling and cash-recording activities. Cash Disbursements Separate responsibilities for cash disbursement documents, check writing, check signing, check mailing, and record keeping. All disbursements, except petty cash, made by check.
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Credit sales require: maintaining a separate account receivable account for each customer. accounting for bad debts and sales returns that result from credit sales . Accounts Receivable Amounts due from customers for credit sales. Credit sales and the resulting accounts receivable  are recorded net of trade discounts, not at list price.
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increase sales encourage early  payment increase likelihood of  collections Cash discounts Cash Discounts
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2/10,n/30 Number of days discount is available Otherwise, net (or all) is due Credit period Discount percent Cash Discounts
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Cash Discounts Sales are recorded  at the   invoice  amounts. Sales discounts  are recorded if  payment is  received   within   the  discount period. Sales are recorded at  the   invoice amount  less the discount . Sales discounts  forfeited are recorded if payment is received   after  the discount  period.
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  On May 10, Eddy, Inc. sold $5,000 of merchandise to  a customer subject to a cash  discount of 1/10, n/30. Prepare the journal entry to record the sale if Eddy uses:   (a) the  gross  method; (b) the  net  method. Cash Discounts Cash Discounts
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Assume that on May 19, Eddy, Inc. received a check in full payment of the sale made on  May 10. Prepare the journal entry to record the cash receipt if Eddy uses (a) the  gross  method; (b) the  net  method.
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Spr10-CH 7 - CashandReceivables Spiceland,Chapter7 Cash...

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