Defining cash and equivalents; journal entries for bad debts
Not what you're looking for?
Stowe Enterprises owns the following assets at December 31, 2007.
Cash in bank - savings account 63,000
Checking account balance 17,000
Cash on hand 9,300
Postdated Checks 750
Cash refund due from IRS 31,400
Certificates of deposit (180 day) 90,000
What amount should be reported as cash?
(DON'T NEED TO DO THIS ONE) 7-4. Battle Tank, Inc. had net sales in 2007 of $1,200,000. At December 31, 2007, before adjusting entries, the balances in selected accounts were: Accounts Receivable $250,000 debit, and Allowance for Doubtful Accounts $2,100 credit. If Battle Tank estimates that 2% of its net sales will prove to be uncollectible, prepare the December 31, 2007, journal entry to record bad debt expense.
2. 7-5. Use the information presented in BE7-4 for Battle Tank, Inc.
1. Instead of estimating the uncollectibles at 2% of net sales, assume that 10% of accounts receivable will prove to be uncollectible. Prepare the entry to record bad debts expense.
2. Instead of estimating uncollectibles at 2% of net sales, assume Battle Tank prepares an aging schedule that estimates total uncollectible accounts at $24,600. Prepare the entry to record bad debts expense.
Purchase this Solution
Solution Summary
The solution defines cash and cash equivalents for reporting on the balance sheet. Amounts that don't fit the category are excluded with an explanation.
Journal entries for estimated bad debts under three methods of calculation are included in the solution as well as an explanation of which method of calculation is preferred.
Solution Preview
1. The definition of cash is usually termed 'cash and cash equivalents'. Following is a good definition:
Cash includes money an entity holds and money deposited with financial institutions that can be withdrawn without notice. Cash equivalents are defined as short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value ...
Purchase this Solution
Free BrainMass Quizzes
Managing the Older Worker
This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce
Production and cost theory
Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.
Income Streams
In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.