Chapter 7, Cash amd Receivables Video Solutions, Intermediate Accounting

00:52

Problem 1

What may be included under the heading of "cash"?

Kaylee Mcclellan

Numerade Educator

02:45

In what accounts should the following items be classified?
(a) Coins and currency.
(b) U.S. Treasury (government) bonds.
(c) Certificate of deposit.
(d) Cash in a bank that is in receivership.
(e) $\mathrm{NSF}$ check (returned with bank statement).
(f) Deposit in foreign bank (exchangeability limited).
(g) Postdated checks.
(h) Cash to be used for retirement of long-term bonds.
(i) Deposits in transit.
(j) 100 shares of Dell stock (intention is to sell in one year or less).
(k) Savings and checking accounts.
(l) Petty cash.
$(\mathrm{m})$ Stamps.
(n) Travel advances.

Pragya Ahuja

Numerade Educator

02:08

Problem 3

Define a "compensating balance." How should a compensating balance be reported?

Rithvik Manne

Numerade Educator

01:58

Problem 4

Springsteen Inc. reported in a recent annual report "Restricted cash for debt redemption." What section of the balance sheet would report this item?

Natalie Britton

Numerade Educator

02:51

Problem 5

What are the reasons that a company gives trade discounts? Why are trade discounts not recorded in the accounts like cash discounts?

Oluwadamilola Ameobi

Numerade Educator

02:51

Problem 6

What are two methods of recording accounts receivable transactions when a cash discount situation is involved? Which is more theoretically correct? Which is used in practice more of the time? Why?

Oluwadamilola Ameobi

Numerade Educator

01:43

Problem 7

What are the basic problems that occur in the valuation of accounts receivable?

Jennifer Stoner

Numerade Educator

04:37

Problem 8

What is the theoretical justification of the allowance method as contrasted with the direct write-off method of accounting for bad debts?

Puneet Prajapati

Numerade Educator

02:29

Problem 9

Indicate how well the percentage-of-sales method and the aging method accomplish the objectives of the allowance method of accounting for bad debts

Oluwadamilola Ameobi

Numerade Educator

05:06

Problem 10

Of what merit is the contention that the allowance method lacks the objectivity of the direct write-off method? Discuss in terms of accounting's measurement function.

Puneet Prajapati

Numerade Educator

05:30

Problem 11

Explain how the accounting for bad debts can be used for earnings management.

Anas Venkitta

Numerade Educator

02:24

Problem 12

Because of calamitous earthquake losses, Bernstein Company, one of your client's oldest and largest customers, suddenly and unexpectedly became bankrupt. Approximately $30 \%$ of your client's total sales have been made to Bernstein Company during each of the past several years. The amount due from Bernstein Company-none of which is collectible-equals $22 \%$ of total accounts receivable, an amount that is considerably in excess of what was determined to be an adequate provision for doubtful accounts at the close of the preceding year. How would your client record the write-off of the Bernstein Company receivable if it is using the allowance method of accounting for bad debts? Justify your suggested treatment.

Adriano Chikande

Numerade Educator

05:06

Problem 13

What is the normal procedure for handling the collection of accounts receivable previously written off using the direct write-off method? The allowance method?

Puneet Prajapati

Numerade Educator

04:05

Problem 14

On January $1,2010,$ Lombard Co. sells property for which it had paid $\$ 690,000$ to Sargent Company, receiving in return Sargent's zero-interest-bearing note for $\$ 1,000,000$ payable in 5 years. What entry would Lombard make to record the sale, assuming that Lombard frequently sells similar items of property for a cash sales price of $\$ 640,000 ?$

Suzanne W.

Numerade Educator

04:19

Problem 15

What is "imputed interest"? In what situations is it necessary to impute an interest rate for notes receivable? What are the considerations in imputing an appropriate interest rate?

Harmender Singh Yadav

Numerade Educator

04:10

Problem 16

What is the fair value option? Where do companies that elect the fair value option report unrealized holding gains and losses?

Narayan Hari

Numerade Educator

04:10

Problem 17

What is the fair value option? Where do companies that elect the fair value option report unrealized holding gains and losses?

Narayan Hari

Numerade Educator

02:51

Problem 18

When is the financial components approach to recording the transfers of receivables used? When should a transfer
of receivables be recorded as a sale?

Oluwadamilola Ameobi

Numerade Educator

01:14

Problem 19

Moon Hardware is planning to factor some of its receivables. The cash received will be used to pay for inventory purchases. The factor has indicated that it will require "recourse" on the sold receivables. Explain to the controller of Moon Hardware what "recourse" is and how the recourse will be reflected in Moon's financial statements after the sale of the receivables.

Nick Johnson

Numerade Educator

09:16

Problem 20

Horizon Outfitters Company includes in its trial balance for December 31 an item for Accounts Receivable $\$ 789,000$ This balance consists of the following items: Illustrate how these items should be shown in the balance
sheet as of December 31

Oluwadamilola Ameobi

Numerade Educator

03:17

Problem 21

What is the accounts receivable turnover ratio, and what type of information does it provide?

Kaylee Mcclellan

Numerade Educator

00:50

Problem 22

You are evaluating Woodlawn Racetrack for a potential loan. An examination of the notes to the financial statements indicates restricted cash at year-end amounts to $\$ 100,000 .$ Explain how you would use this information in evaluating Woodlawn's liquidity

Prashant Bana

Numerade Educator

04:15

Problem 23

Where can authoritative iGAAP guidance be found related to cash and receivables?

Puneet Prajapati

Numerade Educator

01:35

Problem 24

Briefly describe some of the similarities and differences between U.S. GAAP and iGAAP with respect to the accounting for cash and receivables.

Ameer Said

Numerade Educator

05:04

Problem 25

Simonis Company, which uses iGAAP, has a note receivable with a carrying value of $\$ 30,000$ at December 31,2010 On January 2,2011 , the borrower declares bankruptcy, and Simonis estimates that only $\$ 25,000$ of the note will be collected. Prepare the journal entry to record this loss. Briefly describe the accounting for the loan subsequent to the bankruptcy, assuming Simonis estimates that more than $\$ 25,000$ can be repaid.

Puneet Prajapati

Numerade Educator

03:29