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POA11e09

# POA11e09 - CHAPTER 9Solutions CASH AND RECEIVABLES Chapter...

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Ch9 SE1 to SE3 CHAPTER 9—Solutions CASH AND RECEIVABLES Chapter 9, SE 1. 1. c (also could be a) 2. a 3. b 4. d Chapter 9, SE 2. Receivable Turnover = Net Sales Average Accounts Receivable = \$720,000 ( \$90,000 + \$70,000 2 = \$720,000 = 9.0times \$80,000 = 365 days Receivable Turnover = 365 days = 40.6 days 9.0 times Chapter 9, SE 3. Currency and coins on hand \$ 125 Deposits in checking accounts 750 U.S. Treasury bills 7,500 Cash and cash equivalents \$8,375 ) ÷ Days' Sales Uncollected

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Ch9 SE4 to SE6 Chapter 9, SE 4. Balance per bank, June 30 \$4,862.77 Add deposits in transit 654.24 \$5,517.01 Less outstanding checks 3,028.89 Adjusted bank balance, June 30 \$2,488.12 Balance per books, June 30 \$2,479.48 Add interest income 8.64 Adjusted book balance, June 30 \$2,488.12 Chapter 9, SE 5. Oct. 31 Uncollectible Accounts Expense 15,000 Allowance for Uncollectible Accounts 15,000 To record estimated uncollectible accounts expense \$1,500,000 x 0.01 = \$15,000 Chapter 9, SE 6. (a) June 30 Uncollectible Accounts Expense 68,000 Allowance for Uncollectible Accounts 68,000 To record estimated uncollectible accounts expense \$86,000 – \$18,000 = \$68,000 (b) June 30 Uncollectible Accounts Expense 100,000 Allowance for Uncollectible Accounts 100,000 To record estimated uncollectible accounts expense \$86,000 + \$14,000 = \$100,000
Ch9 SE7 to SE8 Chapter 9, SE 7. Accounts receivable \$50,800 \$46,400 Allowance for uncollectible accounts 9,800 5,400 Net accounts receivable \$41,000 \$41,000 Net accounts receivable is the same before and after the write-off. Chapter 9, SE 8. Maturity date: November 23 6 Days in September 30 Days in October 31 Days in November 23 Total days 90 Interest at maturity: \$443.84 \$20,000.00 x 9 / 100 x 90 / 365 = \$443.84 Maturity value: \$20,443.84 Principal + Interest = Maturity Value \$20,000.00 + \$443.84 = \$20,443.84 Before Write-off After Write-off Days remaining in August (31 25) Principal x Rate of Interest x Time = Interest

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Ch9 E1 to E2 Chapter 9, E 1. 1. Seasonal businesses have varying needs for cash throughout the year. These include toy companies, college textbook publishers, amusement parks, con- struction companies, sports equipment companies, etc. Businesses whose need for cash is relatively stable over the year would include grocery stores, drug stores, and fast-food restaurants. 2. The primary advantage when a company finances its receivables is improved financial flexibility (cash flows). 3. The result of increasing credit terms from 15 to 30 days is a smaller receivable turnover and longer average days to collect. These changes occur because av- erage accounts receivable increases relative to sales. The change will have an adverse effect on cash flows because, on average, the company will have to wait longer to receive cash from sales. 4. A decreasing receivables turnover and an increasing days' sales uncollected from period to period, especially in the absence of changes in credit policies or economic conditions, might mean that management is underestimating the amount of losses from uncollectible amounts. If underestimating of uncollect- ibles enabled management to receive cash bonus awards, the actions would be unethical.
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POA11e09 - CHAPTER 9Solutions CASH AND RECEIVABLES Chapter...

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