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Exam 7: Cash and Receivables

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Question 51

True/False

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The receivables turnover ratio provides a way for an analyst to assess the effectiveness of a company in managing its investment in receivables.

A) True
B) False

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Question 52

Multiple Choice

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A company's investment in receivables is influenced by several variables, including:

A) The level of sales.
B) The nature of the product or service sold.
C) The credit and collection policies.
D) All of these are correct.

E) None of the above
F) All of the above

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Question 53

Multiple Choice

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Baker Inc. acquired equipment from the manufacturer on 10/1/09 and gave a noninterest-bearing note in exchange. Baker is obligated to pay $918,000 on 4/1/10 to satisfy the obligation in full. If Baker accrued interest of $9,000 on the note in its 2009 year-end financial statements, what is its imputed annual interest rate?

Brockton Carpet Cleaning prepares a bank reconciliation at the end of every month. At the end of July, the balance in the general ledger checking account was $2,750 and the bank balance on the bank statement was $2,980. Outstanding checks totaled $680 and deposits in transited were $400. The bank statement revealed that a check written for $120 was incorrectly recorded by Brockton as a $220 disbursement. The bank statement listed service charges and NSF check charges totaling $150. The corrected cash balance is:

The following information relates to Halloran Co.'s accounts receivable for 2009: What amount should Halloran report for accounts receivable, before allowances, at December 31, 2009?

Briefly explain the accounting treatment for sales returns.

The journal entry to record the replenishment of a petty cash fund includes a credit to the petty cash fund.

On December 31, 2008, Central Freight reported an allowance for uncollectible accounts of $15,300. During 2009, Central wrote off $17,000 in accounts receivable. Included in the write-off was Roskoff Corp.'s account in the amount of $750. Roskoff subsequently paid this balance. At December 31, 2009, an analysis of the accounts receivable aging schedule indicated the need for an allowance for uncollectible accounts of $14,900. Required: Prepare all implied journal entries relative to bad debt expense and the allowance for uncollectible accounts.

Cashmere Soap Corporation had the following items listed in its trial balance at 12/31/09: What amount will Cashmere Soap include in its year-end balance sheet as cash and cash equivalents?

On December 1, 2009, Watergate Hotels borrowed $400,000 at 12% interest and pledged $500,000 in accounts receivables as collateral. Additionally, Watergate 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.

Calistoga's 2009 bad debt expense is:

Cash equivalents would include investments in marketable equity securities as long as management intends to sell the securities in the next three months.

In a bank reconciliation, adjustments to the book balance could include adding or subtracting company errors.

Calistoga's adjusted allowance for uncollectible accounts at December 31, 2009, is:

Frankenstein Enterprises received two notes from customers for sales that it made to them in 2009. The notes included: Note A: Dated 5/31/09, principal of $120,000 and interest due 3/31/10. Note B: Dated 7/1/09, principal of $200,000 and interest at 8% annually, due on 4/1/10. Frankenstein had accrued interest receivable from these notes of $14,400 in its 12/31/09 balance sheet. What is annual interest rate on Note A?

For each posted entry in the allowance account during 2007, prepare the journal entry.

At December 31, 2009, Amy Jo's Appliances had unadjusted account balances in accounts receivable of $311,000 and $970 in the allowance for uncollectible accounts, following 2009 write-offs of $6,450 in bad debts. An analysis of Amy Jo's December 31, 2009, accounts receivable suggests that the allowance for uncollectible accounts should be 2% of accounts receivable. Bad debt expense for 2009 should be:

Using a T-account for the allowance for doubtful accounts, identify the changes in the account during fiscal year 2007.

What Bad debt expense would Dinty report in its first-year income statement?

A summary of Klugman Company's December 31, 2009, 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, 2009. During the year, bad debts of $750 were written off. Required: Prepare all journal entries for 2009 with respect to bad debts and the allowance for uncollectible accounts. $\begin{array}{lrr}\text { Age Group }& \text { Amount }& \%\\0-60 \text { days } & \$ 60,000 & .5 \\61-90 \text { days } & 22,000 & 1.0 \\91-120 \text { days } & 3,000 & 10.0 \\\text { Over } 120 \text { days } & 1,000 & 50.0\end{array}$