Johnson Co. accepts a note receivable from a customer in exchange for some damaged inventory.
The note requires the customer make semiannual installments of $50,000 each for 10 years. The
first installment begins six months from the date the customer t
At a recent meeting of the accounting staff in your company, the controller raised the issue of
using present value techniques to conduct impairment tests for some of the companys fixed
assets. Some of the more senior members of the staff admitted havi
The financial statements and accompanying notes of P&G are presented in Appendix 5B or can
be accessed at the books companion website, www.wiley.com/college/kieso.
(a) Examining each item in P&Gs balance sheet, identify those items that re
Horizon Outfitters Company includes in its trial balance for December 31 an item for
Accounts Receivable $789,000. This balance consists of the following items:
Due from regular customers $523,000
Refund receivable on prior years income
taxes (an estab
You have been hired as a benefit consultant by Jean Honore, the owner of Attic Angels. She
wants to establish a retirement plan for herself and her three employees. Jean has provided the
following information: The retirement plan is to be based upon an
James Kirk is a financial executive with McDowell Enterprises.
Although James Kirk has not had any formal training in finance or accounting, he has a good
sense for numbers and has helped the company grow from a very small company ($500,000
sales) to a
Carrie Underwood believes that by establishing a loss contingency for
uncollectible receivables, a company provides financial protection against the
According to FASB ASC 450-20-05 (Accruals
Arness Woodcrafters sells $250,000 of receivables to Commercial Factors, Inc. on a with
recourse basis. Commercial assesses a finance charge of 5% and retains an amount equal to
4% of accounts receivable. Arness estimates the fair value of the recourse
Use the information presented in BE7-11 for Arness Woodcrafters but assume that the
recourse liability has a fair value of $4,000, instead of $8,000. Prepare the journal entry and
discuss the effects of this change in the value of the recourse liabilit
The financial statements of General Mills, Inc. report net sales of $12,442,000,000.
Accounts receivable are $912,000,000 at the beginning of the year and $953,000,000 at the
end of the year. Compute General Millss accounts receivable turnover ratio. C
Milner Family Importers sold goods to Tung Decorators for $30,000 on November 1, 2012,
accepting Tungs $30,000, 6-month, 6% note. Prepare Milners November 1 entry,
December 31 annual adjusting entry, and May 1 entry for the collection of the note and
Wood Incorporated factored $150,000 of accounts receivable with Engram Factors Inc. on
a without recourse basis. Engram assesses a 2% finance charge of the amount of accounts
receivable and retains an amount equal to 6% of accounts receivable for possi
On October 1, 2012, Chung, Inc. assigns $1,000,000 of its accounts receivable to Seneca
National Bank as collateral for a $750,000 note. The bank assesses a finance charge of 2%
of the receivables assigned and interest on the note of 9%. Prepare the Oc
Use the information in BE7-9 for Wood. Assume that the receivables are sold with recourse.
Prepare the journal entry for Wood to record the sale, assuming that the recourse liability
has a fair value of $7,500.
Dold Acrobats lent $16,529 to Donaldson, Inc., accepting Donaldsons 2-year, $20,000, zerointerest bearing note. The implied interest rate is 10%. Prepare Dolds journal entries for
the initial transaction, recognition of interest each year, and the coll
Use the information presented in BE7-4 for Wilton, Inc.
(a) Instead of estimating the uncollectibles at 2% of net sales, assume that 10% of accounts
receivable will prove to be uncollectible. Prepare the entry to record bad debt expense.
(b) Instead of
What are the basic problems that occur in the valuation of accounts receivable?
The basic problems that relate to the valuation of receivables are (1) the determination of the face
value of the receivable, (2) the probability of future collection of
Define a compensating balance. How should a compensating balance be reported?
A compensating balance is that portion of any cash deposit maintained by an enterprise which
constitutes support for existing borrowing arrangements with a lending institu
Indicate how well the percentage-of-sales method and the aging method accomplish the
objectives of the allowance method of accounting for bad debts.
The percentage-of-sales method. Under this method Bad Debt Expense is debited and Allowance
Dannys Lawn Equipment sells high-quality lawn mowers and offers a 3-year warranty on all
new lawn mowers sold. In 2012, Danny sold $300,000 of new specialty mowers for golf greens
for which Dannys service department does not have the equipment to do th
In this simulation, you are asked to address questions concerning the application of time value
of money concepts to accounting problems. Prepare responses to all parts.
In what accounts should the following items be classified?
(a) Coins and currency.
(b) U.S. Treasury (government) bonds.
(c) Certificate of deposit.
(d) Cash in a bank that is in receivership.
(e) NSF check (returned with bank statement).
(f) Deposit i
Murphy Mining Company recently purchased a quartz mine that it intends to work for the next
10 years. According to state environmental laws, Murphy must restore the mine site to its
original natural prairie state after it ceases mining operations at th
The controller for Nesheim Construction Company believes that it is appropriate to offset a note
payable to Oregon Bank against an account receivable from Oregon Bank related to remodeling
services provided to the bank. What is the authoritative guidan
Because of calamitous earthquake losses, Bernstein Company, one of your clients oldest
and largest customers, suddenly and unexpectedly became bankrupt. Approximately 30%
of your clients total sales have been made to Bernstein Company during each of th
Ellison Inc., a manufacturer of steel school lockers, plans to purchase a new punch press for use
in its manufacturing process. After contacting the appropriate vendors, the purchasing
department received differing terms and options from each vendor. T
Consolidated Natural Gas Company (CNG), with corporate headquarters in Pittsburgh,
Pennsylvania, is one of the largest producers, transporters, distributors, and marketers of natural
gas in North America. Periodically, the company experiences a decreas
Dunn Inc. owns and operates a number of hardware stores in the New England region. Recently,
the company has decided to locate another store in a rapidly growing area of Maryland. The
company is trying to decide whether to purchase or lease the buildin
Access the glossary (Master Glossary) to answer the following.
(a) What is the definition of cash?
(b) What is the definition of securitization?
(c) What are the three contexts that give rise to recourse?
From the Master Glossary
Craig Brokaw, newly appointed controller of STL, is considering ways to reduce his companys
expenditures on annual pension costs. One way to do this is to switch STLs pension fund assets
from First Security to NET Life. STL is a very well-respected com