2811422512

2811422512 - Chapter 5 Short-Term Investments and...

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Unformatted text preview: Chapter 5 Short-Term Investments and Receivables Check Points (5 min.) CP 5-1 1. Trading investments are reported at their current market value. 2. 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 company’s operating cycle if longer than a year. (10 min.) CP 5-2 BALANCE SHEET Current assets: Short-term trading investments, at market value.. $74,000 INCOME STATEMENT Other revenue and gains (losses): Unrealized loss on investment……………………... $ (6,000) Chapter 5 Receivables and Short-Term Investments 59 (10 min.) CP 5-3 1. Paid $100,000 2. Unrealized Loss on Investment ($100,000 – $98,000)… 2,000 Short-Term Investment……………………………….. 2,000 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…………………………… $ (2,000) (5 min.) CP 5-4 Jennings, the accountant, should not handle the company’s cash. With cash-handling duties, the accountant can steal cash and hide the theft by writing off a customer’s account receivable as uncollectible. Financial Accounting 5/e Solutions Manual 60 (5 min.) CP 5-5 1. Uncollectible-Account Expense ($900,000 × .01) ….. 9,000 Allowance for Uncollectible Accounts…………… 9,000 2. Balance sheet Accounts receivable………………………………… $90,000 Less Allowance for uncollectible accounts…….. (9,000 ) Accounts receivable, net…………………………… $81,000 (5-10 min.) CP 5-6 1. Accounts Receivable…………………………………. 800,000 Sales Revenue……………………………………… 800,000 2. Cash……………………………………………………… 780,000 Accounts Receivable……………………………… 780,000 3. Allowance for Uncollectible Accounts…………….. 5,000 Accounts Receivable………………………………. 5,000 4. Uncollectible-Account Expense ($800,000 × .01) … 8,000 Allowance for Uncollectible Accounts…………. 8,000 Chapter 5 Receivables and Short-Term Investments 61 (10 min.) CP 5-7 1. Accounts Receivable Beg. bal. 90,000 Net credit sales 800,000 Collections 780,000 Write-offs 5,000 End. bal. 105,000 Amount customers owe the company 2. Allowance for Uncollectible Accounts Beg. bal. 9,000 Write-offs 5,000 Uncollectible- account expense 8,000 End. bal. 12,000 Amount Spitzer expects not to collect 3. and 4. BALANCE SHEET: Accounts receivable, net ($105,000 – $12,000)………………………… $93,000 Amount Spitzer expects to collect INCOME STATEMENT: Sales revenue…………………………………... $800,000 Uncollectible-account expense……………… 8,000 Financial Accounting 5/e Solutions Manual 62 (5-10 min.) CP 5-8...
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This homework help was uploaded on 04/07/2008 for the course ACCT 203 taught by Professor Fewox during the Spring '08 term at CofC.

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2811422512 - Chapter 5 Short-Term Investments and...

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