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Determining Cash Balance for Clint Eastwood Co

E7-1 (Determining Cash Balance) The controller for Clint Eastwood Co. is attempting to determine
the amount of cash to be reported on its December 31, 2007, balance sheet. The following information is

1. Commercial savings account of $600,000 and a commercial checking account balance of $900,000
are held at First National Bank of Yojimbo.
2. Money market fund account held at Volonte Co. (a mutual fund organization) permits Eastwood
to write checks on this balance, $5,000,000.
3. Travel advances of $180,000 for executive travel for the first quarter of next year (employee to
reimburse through salary reduction).
4. Aseparate cash fund in the amount of $1,500,000 is restricted for the retirement of long-term debt.
5. Petty cash fund of $1,000.
6. An I.O.U. from Marianne Koch, a company customer, in the amount of $190,000.
7. A bank overdraft of $110,000 has occurred at one of the banks the company uses to deposit its
cash receipts. At the present time, the company has no deposits at this bank.
8. The company has two certificates of deposit, each totaling $500,000. These CDs have a maturity
of 120 days.
9. Eastwood has received a check that is dated January 12, 2008, in the amount of $125,000.
10. Eastwood has agreed to maintain a cash balance of $500,000 at all times at First National Bank of
Yojimbo to ensure future credit availability.
11. Eastwood has purchased $2,100,000 of commercial paper of Sergio Leone Co. which is due in
60 days.
12. Currency and coin on hand amounted to $7,700.

(a) Compute the amount of cash to be reported on Eastwood Co.'s balance sheet at December 31, 2007.
(b) Indicate the proper reporting for items that are not reported as cash on the December 31, 2007,
balance sheet.

E7-12 (Journalizing Various Receivable Transactions) Presented below is information related to James
Garfield Corp.

July 1 James Garfield Corp. sold to Warren Harding Co. merchandise having a sales price of
$8,000 with terms 2/10, net/60. Garfield records its sales and receivables net.
5 Accounts receivable of $9,000 (gross) are factored with Andrew Jackson Credit Corp.
without recourse at a financing charge of 9%. Cash is received for the proceeds; collections
are handled by the finance company. (These accounts were all past the discount period.)
9 Specific accounts receivable of $9,000 (gross) are pledged to Alf Landon Credit Corp. as
security for a loan of $6,000 at a finance charge of 6% of the amount of the loan. The finance
company will make the collections. (All the accounts receivable are past the discount period.)
Dec. 29 Warren Harding Co. notifies Garfield that it is bankrupt and will pay only 10% of its account.

Give the entry to write off the uncollectible balance using the allowance method. (Note:
First record the increase in the receivable on July 11 when the discount period passed.)

Prepare all necessary entries in general journal form for Garfield Corp.

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Solution Summary

The solution examines determining cash balances for Clint Eastwood Co.