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Exam 7: Cash and Receivables

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Question 71

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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:

A) The transferee has received substantially all the risks and rewards of ownership.
B) The age of the receivables transferred differs from the average age of the receivables.
C) The transferor of the receivable surrenders control over the assets transferred.
D) The transferee relies on funds from the transferor to maintain operations.

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

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Question 72

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Use the following to answer questions The following note disclosure is taken from the 2016 annual report to shareholders of Winchester International Corporation. NOTE 5: ALLOWANCE FOR LOAN LOSSES The allowance for loan loss is maintained at a level to absorb probable losses inherent in the loan portfolio.This allowance is increased by provisions charged to operating expense and by recoveries on loans previously charged off,and reduced by charge-offs on loans. The following is a summary of the changes in the allowances for loan losses for three years: Winchester also reported (in thousands)in its comparative balance sheet that it held Loans receivable,net,of $6,869,911 and $6,819,209 at December 31,2016,and December 31,2015,respectively. -If Winchester is using the balance sheet approach to determining loan losses and the Allowance account balance,what percentage did it use in 2016?

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Loans Receivable (net)= Loans Receivable...

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Question 73

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Collection of accounts receivable that previously have been written off results in an increase in cash and an increase in:

Define what it is meant by internal control.

On April 1 of the current year,Troubled Company factored receivables with a carrying value of $85,000 for $60,000 in cash from Scrooge Lenders.The transfer was made without recourse.On April 1,Troubled would:

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms with respect to accounting under IFRS.Match each phrase with the number for the correct term.

The entry to record interest on December 31,2016 would be:

Gershwin Wallcovering Inc.shipped the wrong shade of paint to a customer.The customer agreed to keep the paint upon being offered a 15% price reduction.Gershwin would record this reduction by crediting accounts receivable and debiting:

Calistoga's 2016 bad debt expense is:

On February 1,2016,Stealth Trucks sold a diesel rig to Kansas Transports for $250,000,receiving a $50,000 down payment and a 12-month,10% note for the balance.Principal and interest are due at maturity,and the 10% interest rate reflected the market rate of interest at the time of sale.On August 1,2016,Kansas Transports discounted the note without recourse at the First South Bank at 12% interest. Required: Prepare all required journal entries at August 1 to recognize interest revenue and the discounting of the note.

When a creditor's receivable becomes impaired,the receivable is revalued based on the discounted present value of currently expected cash flows at the loan's original effective rate.

Compensating balances represent:

Under IFRS,accounts receivable impairments are not recognized.

Rusty's 2016 income statement would report net sales of:

Explain the reason that Halliburton indicates that its receivables are generally not collateralized.What significance does this have to the reader?

On December 1,2016,General Mole borrowed $400,000 at 12% interest and pledged $500,000 in accounts receivable as collateral.Additionally,General Mole was charged a finance fee equal to 1% of the accounts receivable assigned.At the end of December,$300,000 of the assigned receivables were collected and remitted to the lender along with accrued interest. Required: Prepare journal entries to record the borrowing,the assignment of receivables,the collection on the receivables,and the recognition of interest expense.

Rebound Inc.reports under IFRS.In 2016 Rebound recognized an impairment of $200,000 due to a troubled debt restructuring.In 2017 Rebound was pleased to determine that more cash flows would be received from the receivable than was previously thought,such that,if the total impairment were to be calculated in 2017,it would be estimated as $150,000 rather than $200,000.How should Rebound treat this in its 2017 income statement?

What is the balance in the allowance for sales returns account at the end of 2016?

If a company uses the balance sheet approach to estimate bad debt expense,bad debt expense for a period can be determined by:

Brewer Inc.is owed $200,000 by Carol Co.under a 10% note with two years remaining to maturity.Due to financial difficulties Carol Co.did not pay the prior year's interest.Brewer agrees to settle the receivable (and accrued interest) in exchange for a cash payment of $150,000.The journal entry that Brewer would make to record this transaction would include a loss on troubled debt restructuring of: