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Exam 7: Cash and Receivables

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Question 61

True/False

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Under IFRS, transfer of risks and rewards of ownership, rather than transfer of control, is the primary factor determining whether a factored receivable can be treated as sold rather than as part of a secured borrowing.

A) True
B) False

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Question 62

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When a creditor's receivable becomes impaired due to a troubled debt restructuring, the receivable is revalued based on the discounted present value of currently expected cash flows at the loan's original effective rate.

A) True
B) False

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Question 63

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What entry would Oswego make on June 10, assuming the customer made the correct payment on that date?

Frasquita acquired equipment from the manufacturer on 6/30/2013 and gave a noninterest-bearing note in exchange. Frasquita is obligated to pay $550,000 on 4/30/2014 to satisfy the obligation in full. If Frasquita accrued interest of $15,000 on the note in its 2013 year-end financial statements, what amount would it record the equipment on its 6/30/2013 balance sheet?

On June 30, 2013, Blondie Fixtures was considering alternatives to bolster its cash position. Option One called for transferring $400,000 in accounts receivable to Dogwood Finance Company without recourse for a 5% fee. Option Two calls for Blondie to transfer the $400,000 in receivables to Dogwood with recourse. Dogwood's charges a 4% fee for receivables factored with recourse. Option Two meets the conditions to be considered a sale, but Blondie estimates a $3,000 recourse liability. Under either option, Dogwood will immediately remit 90% of the factored receivables to Blondie, and retain 10%. When Dogwood collects the remaining receivables, it remits the amount, less the fee, to Blondie. Blondie estimates that the fair value of the final 10% of the receivables is $25,000 (ignoring the factoring fee). Required: 1. Prepare any necessary journal entry or entries if receivables are factored under Option One. 2. Prepare any necessary journal entry or entries if receivables are factored under Option Two.

The journal entry to record the replenishment of a petty cash fund includes a credit to the petty cash fund.

What entry would Harvey's make on June 10, assuming the customer made the correct payment on that date?

Cashmere Soap Corporation had the following items listed in its trial balance at 12/31/2013: What amount will Cashmere Soap include in its year-end balance sheet as cash and cash equivalents?

Which of the following is recorded by a credit to accounts receivable?

Cash may not include:

During Bricker Company's first year of operations, credit sales totaled $200,000 and collections on credit sales totaled $145,000. Bricker estimates that $1,000 of its ending accounts receivable balance will not be collected. By year-end, Bricker had written off $330 of specific accounts as uncollectible. Required: 1. Prepare all appropriate journal entries relative to uncollectible accounts and bad debt expense. 2. Show the year-end balance sheet presentation for accounts receivable.

Huckabee's 2013 average collection period (rounded) is:

Costa Co. has the following cash balances at local banks as of 12/31/2013: Required: 1. Prepare the Current Assets and Current Liabilities section of Costa's 2013 balance sheet, assuming Parker reports under U.S. GAAP. 2. Prepare the Current Assets and Current Liabilities section of Costa's 2013 balance sheet, assuming Parker reports under IFRS.

Frasquita acquired equipment from the manufacturer on 6/30/2013 and gave a noninterest-bearing note in exchange. Frasquita is obligated to pay $550,000 on 4/30/2014 to satisfy the obligation in full. If Frasquita accrued interest of $15,000 on the note in its 2013 year-end financial statements, what would the manufacturer record in its 2013 income statement for this transaction?

The journal entry to establish the petty cash fund includes:

Companies can have accounts receivable from ordinary trade customers and from related parties (e.g., directors, employees or large shareholders). How does U.S. GAAP differ from IFRS in its requirements regarding separate disclosure of trade receivables and related-party receivables? Why might separate disclosure of related party receivables be useful?

Which of the following is considered a sale of receivables?

On December 1, 2013, General Mole borrowed $400,000 at 12% interest and pledged $500,000 in accounts receivable as collateral. Additionally, General Mole was charged a finance fee equal to 1% of the accounts receivable assigned. At the end of December, $300,000 of the assigned receivables were collected and remitted to the lender along with accrued interest. Required: Prepare journal entries to record the borrowing, the assignment of receivables, the collection on the receivables, and the recognition of interest expense.

In a good system of internal control, the person who initiates a transaction should be allowed to effectively control the processing of the transaction through its final inclusion in the accounting records.

On February 14, 2013, Prime Company sold 50 air-conditioning units to L&P Heating and Cooling. The units list for $700 each, but L&P was granted a 30% trade discount. All of Prime's sales are subject to terms 2/10, n30. Prime uses the net method of accounting for sales discounts. Required: 1. Prepare the journal entry to record the sale. 2. Prepare the journal entry to record receipt of the payment, assuming the correct amount was received on February 22, 2013. 3. Prepare the journal entry to record receipt of the payment, assuming the correct amount was received on March 10, 2013.