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Reporting issues for cash and cash equilvalents, acocunts receivable, factoring

Accounting Cash Flows for Intermediate Accounting

11. MC053

Peterson Company has the following items at year-end:
Cash in bank $30,000
Petty cash 500
Short-term paper with maturity of 2 months 8,200
Postdated checks 2,100

Peterson should report cash and cash equivalents of

a. $30,000.
b. $30,500.
c. $38,700.
d. $40,800.

12. MC069

Henry Co. assigned $400,000 of accounts receivable to Easy Finance Co. as security for a loan of $335,000. Easy charged a 2% commission on the amount of the loan; the interest rate on the note was 10%. During the first month, Henry collected $110,000 on assigned accounts after deducting $380 of discounts. Henry accepted returns worth $1,350 and wrote off assigned accounts totaling $2,980.

The amount of cash Henry received from Easy at the time of the transfer was

a. $301,500.
b. $327,000.
c. $328,300.
d. $335,000.

13. MC056

Before year-end adjusting entries, Bass Company's account balances at December 31, 2007, for accounts receivable and the related allowance for uncollectible accounts were $600,000 and $45,000, respectively. An aging of accounts receivable indicated that $62,500 of the December 31 receivables are expected to be uncollectible. The net realizable value of accounts receivable after adjustment is

a. $582,500.
b. $537,500.
c. $492,500.
d. $555,000.

14. MC060

A trial balance before adjustments included the following:
Debit Credit
Sales $425,000
Sales returns and allowance$14,000
Accounts receivable43,000
Allowance for doubtful accounts 760

If the estimate of uncollectibles is made by taking 10% of gross account receivables, the amount of the adjustment is

a. $3,540.
b. $4,300.
c. $4,224.
d. $5,060.

15. MC075

Mike McKinney Corporation had accounts receivable of $100,000 at 1/1. The only transactions affecting accounts receivable were sales of $600,000 and cash collections of $550,000. The accounts receivable turnover is

a. 4.0.
b. 4.4.
c. 4.8.
d. 6.0.

16. MC029

Which of the following should be recorded in Accounts Receivable?

a. Receivables from officers
b. Receivables from subsidiaries
c. Dividends receivable
d. None of these

17. MC041

Which of the following statements is incorrect regarding the classification of accounts and notes receivable?

a. Segregation of the different types of receivables is required if they are material.
b. Disclose any loss contingencies that exist on the receivables.
c. Any discount or premium resulting from the determination of present value in notes receivable transactions is an asset or liability respectively.
d. Valuation accounts should be appropriately offset against the proper receivable accounts.

18. MC072

On February 1, 2007, Norton Company factored receivables with a carrying amount of $300,000 to Koch Company. Koch Company assesses a finance charge of 3% of the receivables and retains 5% of the receivables. Relative to this transaction, you are to determine the amount of loss on sale to be reported in the income statement of Norton Company for February.

Assume that Norton factors the receivables on a with recourse basis. The recourse obligation has a fair value of $1,500. The loss to be reported is

a. $9,000.
b. $10,500.
c. $15,000.
d. $25,500.

19. MC026

Bank overdrafts, if material, should be

a. reported as a deduction from the current asset section.
b. reported as a deduction from cash.
c. netted against cash and a net cash amount reported.
d. reported as a current liability.

20. MC077

If a petty cash fund is established in the amount of $250, and contains $150 in cash and $95 in receipts for disbursements when it is replenished, the journal entry to record replenishment should include credits to the following accounts

a. Petty Cash, $75.
b. Petty Cash, $100.
c. Cash, $95; Cash Over and Short, $5.
d. Cash, $100.

Solution Preview

11. MC053

Peterson Company has the following items at year-end: Cash in bank $30,000
Petty cash 500
Short-term paper with maturity of 2 months 8,200
Postdated checks 2,100

Peterson should report cash and cash equivalents of
(30000+500+8200)=

a. $30,000.
b. $30,500.
c. $38,700.
d. $40,800.

C.38700

12. MC069

Henry Co. assigned $400,000 of accounts receivable to Easy Finance Co. as security for a loan of $335,000. Easy charged a 2% commission on the amount of the loan; the interest rate on the note was 10%. During the first month, Henry collected $110,000 on assigned accounts after deducting $380 of discounts. Henry accepted returns worth $1,350 and wrote off assigned accounts totaling $2,980.
Reference: Ref 7-2

The amount of cash Henry received from Easy at the time of the transfer was

a. $301,500.
b. $327,000.
c. $328,300.
d. $335,000.

((335000-(335000*2%))=328300

13. MC056

Before year-end adjusting entries, Bass Company's account balances at December 31, 2007, for accounts receivable and the related allowance for uncollectible accounts were ...

Solution Summary

The reporting issues for cash and cash equivalents are examined.

$2.19