study module missed questions ch. 8

JayBird Coffee loaned $60,000 to Robin's Cups by issuing a 6-month, 5%, Note Receivable on October 1, 2019. What is the amount of Interest Revenue that JayBird can record on December 31, 2019?

JayBird can record Interest Revenue for the portion of the year that the note was outstanding. To calculate the interest earned, use the simple interest formula, Principal x Rate x Time, or: $60,000 x .05 x 3/12 = $750

Fernandez Company had an accounts receivable balance of $150,000 on December 31, Year 2, and $175,000 on December 31, Year 3. The company wrote off $40,000 of accounts receivable during Year 3. Sales for Year 3 totaled $600,000, and all sales were on account. The amount collected from customers on accounts receivable during Year 3 was:

Working backwards through the equation above, collections would then be calculated as the Ending Balance + Write-offs - Sales - Beginning Balance, or $175,000 + 40,000 - 600,000 - 150,000 = $(535,000).

Carly Company had an accounts receivable balance of $100,000 on December 31, Year 2, and $75,000 on December 31, Year 3. The company wrote off $20,000 of accounts receivable during Year 3. Sales for Year 3 totaled $400,000, and all sales were on account. The amount collected from customers on accounts receivable during Year 3 was:

Working backwards through the equation above, collections would then be calculated as the Ending Balance + Write-offs - Sales - Beginning Balance, or $75,000 + 20,000 - 400,000 - 100,000 = $(405,000).

The following are held by YRT Corporation at December 31, Year 1: Cash in checking account $ 15,000 Petty cash 250 Check from customer dated 01/31/Year 2 350 3-month Certificate of Deposit, due 01/15/Year 2 40,000 12-month Certificate of Deposit, due 02/28/Year 2 36,000 Cash in bond sinking fund account 60,000 YRT Corporation classifies investments with original maturities of three months or less as cash equivalents. In its December 31, Year 1, balance sheet, what amount should YRT Corporation report as cash and cash equivalents?

YRT Corporation should report $55,250 as cash and cash equivalents. The amount of cash and cash equivalents includes only the following items: Cash and cash equivalents Cash in checking account $ 15,000 Petty Cash 250 3-month Certificate of Deposit, due 01/15/Year 2 40,000 Total cash and cash equivalents $ 55,250

Are items included in Cash and Cash Equivalents different for companies following U.S. GAAP than for those companies following IFRS?

Yes, IFRS allows bank overdrafts to be reported as a reduction in Cash and Cash Equivalents.

Nicks Incorporated sells $300,000 of its accounts receivable to Fairfield Factors (FF) with recourse. FF charges a fee equal to 5% of the receivables factored and holds back an additional 2% as security. FF will return the hold back to Nicks when the receivables are collected. These factored receivables can be reported as a sale, with an estimated recourse liability of $9,000. What is the amount of the Loss on Sale of Receivables Nicks will report for factoring these receivables?

$24,000

Angel & Associates began the year with a $7,000 credit balance in Allowance for Uncollectible Accounts. During the year, the following transactions occurred: Recorded credit sales of $300,000 Collected on credit sales, $250,000 Wrote off $6,500 of Accounts Receivables Unexpectedly collected a $1,500 Accounts Receivable that was previously written off Estimated that approximately $3,000 in additional accounts would be uncollectible as a result of this year's sales What is the balance in the Allowance for Uncollectible Accounts account for Angel at year end?

$5,000 (credit)

ABC Co. loaned $50,000 to DEF Designs by issuing a 6-month, 6%, Note Receivable on September 1, 2019. What is the amount of Interest Revenue that ABC can record on December 31, 2019?

ABC can record Interest Revenue for the portion of the year that the note was outstanding. To calculate the interest earned, use the simple interest formula, Principal x Rate x Time, or: $50,000 x .06 x 4/12 = $1,000

How are compensating balances classified on the balance sheet?

As a separate current or non-current asset, depending on if the balance is held against short-term or long-term debt.

How do companies typically report bank overdrafts on the balance sheet?

As a current liability.

On its December 31, Year 2 balance sheet, Red Rock Candle Company reported accounts receivable of $855,000, net of an allowance for doubtful accounts of $45,000. On December 31, Year 3, Red Rock's balance sheet showed gross accounts receivable of $922,000, and Red Rock's income statement reported sales of $3,000,000. During the year, accounts receivable of $35,000 were written off and $18,000 were recovered. Based on past experience, 5% of Red Rock's ending accounts receivable are uncollectible. How much should Red Rock report as bad debt expense on its Year 3 income statement?

Bad debt expense is then calculated working backwards through the formula, Ending Allowance - Recoveries + Write-offs - Beginning Allowance, or $46,100 - 18,000 + 35,000 - 45,000 = $18,100.

What type of account is Allowance for Uncollectible Accounts?

Contra-Asset

Which of the following disclosures about accounts receivable are required? I. Accounts receivable serving as collateral II. The percentage used to calculate allowance for doubtful accounts III. Total allowance for doubtful accounts

Disclosures are required for items I. and III. Accounts receivable serving as collateral (also referred to as "pledged") and the total allowance for doubtful accounts must be disclosed. The percentage used to calculate allowance for doubtful accounts is not required to be disclosed. previous

Which of the following represents a technique a company can use to finance operations through uncollected Accounts Receivable?

Factoring Securitization Pledging YOU WERE UNSURE AND CORRECT All of these are techniques of financing with Accounts Receivable. I DON'T KNOW YET

On November 30, Year 1, Derin Corporation agreed with its customers to change accounts receivable to notes receivable in order to allow a longer payment period. The terms of the notes receivable are that the principal is due on November 30, Year 4 and the interest payments are due annually on November 30 until November 30, Year 4. Derin's customer has made all required payments to date. How should the notes receivable and accrued interest be classified on the balance sheet as of June 30, Year 3?

Notes Receivable - Noncurrent; Accrued Interest - Current

On July 1, Willette Corp. made a sale of $400,000 to Luc, Inc. on account. Terms of the sale were 3/15, n/60. Luc makes payment on July 12. Willette uses the most-likely-amount method and does not expect Luc to pay within the discount period. What is the correct journal entry to record the collection from Luc on July 12?

The Sales Discount is determined as the amount of the sale multiplied by the 3% discount terms, which results in a discount of $12,000. The cash receipt is then the amount of the receivable, $400,000, less the discount, $12,000, which results in a cash receipt of $388,000.

Which of the following statements is NOT correct?

The aging of accounts receivable method directly estimates Bad Debts Expense.

Nicks Incorporated sells $300,000 of its accounts receivable to Fairfield Factors (FF) with recourse. FF charges a fee equal to 5% of the receivables factored and holds back an additional 2% as security. FF will return the hold back to Nicks when the receivables are collected. These factored receivables can be reported as a sale, with an estimated recourse liability of $9,000. What is the amount of the Loss on Sale of Receivables Nicks will report for factoring these receivables?

The amount of the Loss on Sale of Receivables Nicks will report for factoring these receivables is $24,000.

Jules & Associates began the year with a $10,000 credit balance in Allowance for Uncollectible Accounts. During the year, the following transactions occurred: Recorded credit sales of $500,000 Collected on credit sales, $350,000 Wrote off $7,500 of Accounts Receivables Unexpectedly collected a $2,500 Accounts Receivable that was previously written off Estimated that approximately $4,000 in additional accounts would be uncollectible as a result of this year's sales What is the balance in the Allowance for Uncollectible Accounts account for Jules at year end?

The balance in the Allowance for Uncollectible Accounts account for Jules at year end is $9,000 (credit).

Kitt Company borrows $500,000 from Neville Capital by issuing a 5-year, 9% note payable. Interest is due and payable each month based on the outstanding balance at the beginning of the month. Kitt assigns $525,000 of its accounts receivable as collateral for the lending arrangement. In the first month, Kitt collected $30,000 of the assigned Accounts Receivable, and remitted this payment, plus interest, to Neville. What is the correct journal entry for the first payment to Neville?

The payment towards the principal of the Note Payable that Kitt will make to Neville after the first month will be equal to the amount of the assigned receivables that were collected, $30,000. Kitt will also have to pay interest, which is based on the balance of the note at the beginning of the month, $500,000, at the 9% annual interest rate for one month. Interest Expense is calculated as $500,000 x .09 x 1/12, which results in Interest Expense of $3,750. Therefore, the total amount of the cash payment made by Kitt is equal to the principal payment, plus the accrued interest expense, which results in a payment of $33,750. The journal entry to record the payment is: Accounts Debit Credit Notes Payable 30,000 Interest Expense 3,750 Cash 33,750

Goo Services provided customer service support for a local business, and accepted a 9-month, $50,000 non-interest bearing note receivable as payment on July 1, 2019. Goo determines that the fair value of these services is $44,000. How much Interest Revenue can Goo record on December 31, 2019 related to this note?

To determine the amount of Interest Revenue Goo can record on this note, you must first determine the total implied interest on this non-interest bearing note receivable. The fair value of the services provided by Goo was $44,000 and a $50,000 note was accepted as payment. This implies that the discount on this note and total implied interest is $6,000 ($50,000 - $44,000). Goo will be able to record $6,000 of Interest Revenue on this note over the course of 9 months. However, as of December 31, this note has only been outstanding for 6 months. Therefore, the Interest Revenue that Goo can record as of 12/31 is $4,000, calculated as $6,000 x 6/9.

Vince Ventures Company reported an opening balance of $17,500 in its allowance for uncollectible accounts. Vince Ventures determined that a $7,500 account due from Ric Associates was uncollectible. What is the correct journal entry to write off the account from Ric Associates?

ccounts Debit Credit Allowance for Uncollectible Accounts 7,500 Accounts Receivable (net) 7,500