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Unformatted text preview: 380 CHAPTER 7 Cash and Receivables CHAPTER ASSIGNMENTS Short Exercises LO1 M anagem ent Issues SE 1. Indicate whether each of the following actions is related to (a) managing cash needs, (b) setting credit policies, (c) financing receivables, or (d) ethically reporting receivables: 1. Selling accounts receivable to a factor 2. Borrowing funds for short-term needs during slow periods 3. Conducting thorough checks of new customers' ability to pay 4. Making every effort to reflect possible future losses accurately LO1 Short-Term Liquidity Ratios SE 2. Graff Company has cash of $40,000, net accounts receivable of $90,000, and net sales of $720,000. Last year's net accounts receivable were $70,000. Compute the following ratios: (a) receivable turnover and (b) days' sales uncollected. LO2 Cash and Cash Equivalents SE 3. Compute the amount of cash and cash equivalents on Car Wash Company's balance sheet if, on the balance sheet date, it has currency and coins on hand of $125, deposits in checking accounts of $750, U.S. Treasury bills due in 80 days of $7,500, and U.S. Treasury bonds due in 200 days of $12,500. 1.02 Bank Reconciliation SE 4. Prepare a bank reconciliation from the following information: a. Balance per bank statement as of June 30, $4,862.77 b. Balance per books as of June 30, $2,479.48 c. Deposits in transit, $654.24 d. Outstanding checks, $3,028.89 e. Interest on average balance, $8.64 LO3 Percentage of Net Sales Method SE 5. At the end of October, Zion Company's management estimates the uncol- lectible accounts expense to be 1 percent of net sales of $1,500,000. Prepare the entry in journal form to record the uncollectible accounts expense, assuming the Allowance for Uncollectible Accounts has a debit balance of $7,000. LO3 Accounts Receivable Aging Method SE 6. An aging analysis on June 30 of the accounts receivable of Sung Corpora- tion indicates that uncollectible accounts amount to $86,000. Prepare the entry in journal form to record uncollectible accounts expense under each of the fol- lowing independent assumptions: a. Allowance for Uncollectible Accounts has a credit balance of $18,000 before adjustment. b. Allowance for Uncollectible Accounts has a debit balance of $14,000 before adjustment. Stop & Review 379 REVIEW of Concepts and Terminology The following concepts and terms were introduced in this chapter. Accounts receivable 355 (101) Accounts receivable aging method 368 (L03) Aging of accounts receivable 368 (L03) Allowance for Uncollectible Accounts 366 (L03) Allowance method 365 (an) Bank reconciliation 362 (102) Cash 354 ton Cash equivalents 361 (m) Compensating balance 354 ton Contingent liability 358 ton Direct charge-off method 365 (103) Discounting 359 (L01) Dishonored note 375 (Loa) Duration of a note 374 (Lat) Electronic funds transfer (EFT) 362 (102) Factor 358 ton Factoring 358 (101) Imprest systems 361 (102) Installment accounts receivable 355 ton Interest 374 (104) Maturity date 373 (Loss) Maturity value 375 (L04)...
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This note was uploaded on 02/18/2012 for the course ACCOUNTING 2301 taught by Professor Dr.susaneason during the Spring '12 term at San Jacinto.
- Spring '12