Solutions Ch-7-Receivables

# Solutions Ch-7-Receivables - Exercise 7-1 Requirement 1...

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Exercise 7-1 Requirement 1 Cash and cash equivalents includes: a. Balance in checking account \$13,500 Balance in savings account 22,100 b. Undeposited customer checks 5,200 c. Currency and coins on hand 580 f. U.S. treasury bills with 2-month maturity 15,000 Total \$56,380 Requirement 2 d. The \$400,000 savings account will be used for future plant expansion and therefore should be classified as a noncurrent asset, either in other assets or investments . e. The \$20,000 in the checking account is a compensating balance for a long-term loan and should be classified as a noncurrent asset, either in other assets or investments . f. The \$20,000 in 7-month treasury bills should be classified as a current asset along with other temporary investments.

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Exercise 7-2 Requirement 1 Cash and cash equivalents includes: Cash in bank – checking account \$22,500 U.S. treasury bills 5,000 Cash on hand 1,350 Undeposited customer checks 1,840 Total \$30,690 Requirement 2 The \$10,000 in 6-month treasury bills should be classified as a current asset along with other temporary investments.
Exercise 7-3 Requirement 1: U.S. GAAP Current Assets: Cash \$175,000 Current Liabilities: Bank Overdrafts \$ 15,000 Requirement 2: IFRS Current Assets: Cash \$160,000 (No current liabilities with respect to overdrafts.)

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Exercise 7-4 Requirement 1 Sales price = 100 units x \$600 = \$60,000 x 70% = \$42,000 November 17, 2011 Accounts receivable. .................................................. 42,000 .............................................................. Sales revenue ......................................................................... 42,000 November 26, 2011 Cash (98% x \$42,000) .................................................... 41,160 Sales discounts (2% x \$42,000) ..................................... 840 ................................................... Accounts receivable ......................................................................... 42,000 Requirement 2 November 17, 2011 Accounts receivable. .................................................. 42,000 .............................................................. Sales revenue ......................................................................... 42,000 December 15, 2011 Cash. ........................................................................... 42,000 ................................................... Accounts receivable ......................................................................... 42,000
Exercise 7-4 (concluded) Requirement 3 Requirement 1, using the net method: November 17, 2011 Accounts receivable. .................................................. 41,160 ........................................................ Sales revenue (98% x \$42,000) .................................................................................... 41,160 November 26, 2011 Cash. ........................................................................... 41,160 ................................................... Accounts receivable ......................................................................... 41,160 Requirement 2, using the net method: November 17, 2011 Accounts receivable. .................................................. 41,160 ........................................................ Sales revenue (98% x \$42,000) .................................................................................... 41,160 December 15, 2011 Cash. ........................................................................... 42,000 ................................................... Accounts receivable ......................................................................... 41,160 .......................................................... Interest revenue .............................................................................. 840

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Exercise 7-5 Requirement 1 Sales price = 1,000 units x \$50 = \$50,000 July 15, 2011 Accounts receivable. .................................................. 50,000 .............................................................. Sales revenue ......................................................................... 50,000 July 23, 2011 Cash (98% x \$50,000) .................................................... 49,000 Sales discounts (2% x \$50,000) ..................................... 1,000 ................................................... Accounts receivable ......................................................................... 50,000 Requirement 2 July 15, 2011 Accounts receivable. .................................................. 50,000 .............................................................. Sales revenue ......................................................................... 50,000 Aug. 15, 2011 Cash. ........................................................................... 50,000 ................................................... Accounts receivable ......................................................................... 50,000
Exercise 7-6 Requirement 1 July 15, 2011 Accounts receivable. .................................................. 49,000 ........................................................ Sales revenue (98% x \$50,000) .................................................................................... 49,000 July 23, 2011 Cash. ........................................................................... 49,000 ................................................... Accounts receivable ......................................................................... 49,000 Requirement 2 July 15, 2011 Accounts receivable. .................................................. 49,000 ........................................................ Sales revenue (98% x \$50,000) .................................................................................... 49,000 August 15, 2011 Cash. ........................................................................... 50,000 ................................................... Accounts receivable ......................................................................... 49,000 .......................................................... Interest revenue ........................................................................... 1,000

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Exercise 7-7 Requirement 1 Estimated returns = 4% x \$11,500,000 = \$460,000 Less: Actual returns (450,000 ) Remaining estimated returns \$10,000 To record the actual sales returns Sales returns. .............................................................. 450,000 ................................................... Accounts receivable ....................................................................... 450,000 Inventory – estimated returns . ................................... 292,500 ....................................... Cost of goods sold (\$450,000 x 65%) ....................................................................... 292,500 December 31, 2011 To record the estimated sales returns Sales returns. .............................................................. 10,000 ....................................... Allowance for sales returns ......................................................................... 10,000 Inventory – estimated returns . ................................... 6,500 ......................................... Cost of goods sold (\$10,000 x 65%) ........................................................................... 6,500 Note: another series of journal entries that produce the same end result would be: To record the actual sales returns Allowance for sales returns. ....................................... 450,000 ................................................... Accounts receivable ....................................................................... 450,000 December 31, 2011 To record the estimated sales returns Sales returns (4% x \$11,500,000) ................................... 460,000
....................................... Allowance for sales returns ....................................................................... 460,000 Inventory-estimated returns . ...................................... 299,000 ................................................

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## This note was uploaded on 04/04/2011 for the course ACC 615 taught by Professor Semir during the Spring '11 term at Pace.

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Solutions Ch-7-Receivables - Exercise 7-1 Requirement 1...

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