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Exam 7: Cash and Receivables

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Question 71

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Priscilla's Exotic Pets discounted a note receivable without recourse and the sales criteria were met. The discounting is recorded as:

A) A secured borrowing.
B) Only note disclosure of the arrangement is required.
C) A sale.
D) None of the above.

E) A) and B)
F) B) and D)

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Question 72

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A summary of Klugman Company's December 31, 2013, accounts receivable aging schedule is presented below along with the estimated percent uncollectible for each age group: The allowance for uncollectible accounts had a balance of $1,400 on January 1, 2013. During the year, bad debts of $750 were written off. Required: Prepare all journal entries for 2013 with respect to bad debts and the allowance for uncollectible accounts.

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Question 73

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Unless specific sales criteria are met, the factoring of accounts receivable with recourse is accounted for as a loan.

The petty cash fund of Western Glass Company contained the following items on November 30, 2013: The petty cash fund was established on November 1, 2013, with a transfer of $250 from cash to the petty cash account. Required: Prepare the journal entries to establish the petty cash account and to replenish the fund at the end of November.

Explain briefly how IFRS and U.S. GAAP differ in determining whether a transfer of an accounts receivable qualifies as a sale.

Long-term notes receivable issued for noncash assets at an unrealistically low interest rate will be:

A company uses the allowance method to account for bad debts. What is the effect on each of the following accounts of the collection of an account previously written off?

Briefly explain why the direct write-off of uncollectible accounts is not permitted by GAAP if bad debts are material.

Recognizing sales returns when they occur could result in an overstatement of income in the period of the related sale.

Nontrade receivables do not include:

What entry would Oswego make on April 12?

Last year, Simpson Company had a receivables turnover ratio of 12. Homer, Simpson's president, was delighted when the ratio went to 18 for this year. This year, Simpson's long-standing credit terms of net 30 were changed to net 10. Should Homer be happy? Explain.

False Value's 2013 income statement would report net sales of:

Cash that is restricted and not available for current operations is reported in the balance sheet as:

As of December 31, 2012, Gill Co. reported accounts receivable of $216,000 and an allowance for uncollectible accounts of $8,400. During 2013, accounts receivable increased by $22,000, and $7,800 of bad debts were written off. An analysis of Gill Co.'s December 31, 2013, accounts receivable suggests that the allowance for uncollectible accounts should be 3% of accounts receivable. Bad debt expense for 2013 would be:

Frankenstein Enterprises received two notes from customers for sales that Frankenstein made to them in 2013. The notes included: Note A: Dated 5/31/2013, principal of $120,000 and interest due 3/31/2014. Note B: Dated 7/1/2013, principal of $200,000 and interest at 8% annually, due on 4/1/2014. Frankenstein had accrued interest receivable from these notes of $14,400 on its 12/31/2013 balance sheet. What amount of interest revenue would Frankenstein earn on these notes during 2014?

In deciding whether financing with receivables is a secured borrowing or a sale under U.S. GAAP, the critical element is the extent to which:

Under IFRS, accounts receivable can be accounted for as "available for sale" if that approach is elected upon initial recognition of the receivable.

Which of the following is true about reporting cash under IFRS?

Securitization of receivables is a type of secured borrowing.