1. An article recently appeared in the Wall Street Journal indicating that companies are selling their receivables at
a record rate. Why are companies selling their receivables?
2. How is a gain or loss on the sale of a plant asset computed?
3. What are natural resources, and what is their distinguishing
4. Explain what depletion is and how it is computed.
5. On January 1, 2002, Case Western Company had Accounts Receivable of $54,200 and
Allowance for Doubtful Accounts of $4,700. Case Western Company prepares financial statements
annually. During the year the following selected transactions occurred.
Jan. 5 Sold $7,000 of merchandise to Garth Brooks Company, terms
Feb. 2 Accepted a $7,000, 4-month, 12% promissory note from Garth Brooks
Company for balance due.
12 Sold $7,800 of merchandise to Gage Company and accepted Gage's $7,800,
2-month, 10% note for the balance due.
26 Sold $4,000 of merchandise to Mathias Co., terms n/10.
Apr. 5 Accepted a $4,000, 3-month, 8% note from Mathias Co. for balance
12 Collected Gage Company note in full.
June 2 Collected Garth Brooks Company note in full.
July 5 Mathias Co. dishonors its note of April 5. It is expected that Mathias will
eventually pay the amount owed.
15 Sold $5,000 of merchandise to Tritt Co. and accepted Tritt's $5,000, 3-
month, 12% note for the amount due.
Oct. 15 Tritt Co.'s note was dishonored. Tritt Co. is bankrupt, and there is no hope of future settlement.
Journalize the transactions.
1. When the economy is expanding, firms business is also grows and this requires more cash. Receivables represent cash that has not yet been collected. If the firm needs cash urgently, selling receivables is a good way of generating cash.
2. The gain or loss on sale of plant asset is dependant on the book value and the sale price. When an asset is purchased, it is recored ...
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