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Exam 7: Cash and Receivables

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Question 61

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Describe some key elements of an internal control system for cash.

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Separation of duties is essential to goo...

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Question 62

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Cash that is restricted and not available for current operations is reported in the balance sheet as:

A) Equity.
B) Investments.
C) Liabilities.
D) A separate section between liabilities and equity.

E) B) and C)
F) None of the above

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Question 63

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On June 14, 2009, Rumsfeld Company sold 100 air conditioning units to Powell Heating and Cooling. The units list for $600 each but Powell was granted a 25% trade discount. All of Rumfeld's sales are subject to terms 2/10, n30. Rumsfeld uses the gross 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 June 22, 2009. 3. Prepare the journal entry to record receipt of the payment, assuming the correct amount was received on July 10, 2009.

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.

In a bank reconciliation, adjustments to the bank balance could include adding deposits in transit and deducting bank service charges.

Tom's Textiles shipped the wrong material to a customer, who refused to accept the order. Upon receipt of the material, Tom's would credit accounts receivable and debit:

Huckabee's 2009 average collection period is:

A company's investment in receivables is affected by several related variables. Give an example of this interrelationship.

AT&T's financial statements for the 2007 and 2006 fiscal years contained the following information: In addition, the statement of cash flows disclosed bad debt expense of $1,617 million in 2007 and $586 million in 2006. Required: 1. Determine the amount of actual bad debt write-offs made during 2007 2. Determine the amount of cash collected from customers during 2007 3. Compute the receivables turnover ratio for 2007 ($ in millions)

Tokyo Imports sold merchandise to Tall-Mart, receiving a 6-month, noninterest-bearing note for $100,000. The implied discount rate on the note is 10% per annum. Tokyo uses a periodic inventory system. Required: 1. Prepare the journal entry to record the sale. 2. Compute the effective rate of interest.

Frasquita acquired equipment from the manufacturer on 6/30/09 and gave a noninterest-bearing note in exchange. Frasquita is obligated to pay $550,000 on 4/30/10 to satisfy the obligation in full. If Frasquita accrued interest of $15,000 on the note in its 2009 year-end financial statements, at what amount would it record the equipment on its 6/30/09 balance sheet?

A note receivable Mild Max Cycles discounted with recourse was dishonored on its maturity date. Mild Max would debit:

The petty cash fund of Western Glass Company contained the following items on November 30, 2009: The petty cash fund was established on November 1, 2009, with a transfer of $250 from cash to the petty cash account. Required: Prepare the journal entries to establish the petty cash account and to replenish the fund at the end of November.

The journal entry to establish the petty cash fund includes:

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

Cash equivalents do not include:

During Burns Company's first year of operations, credit sales totaled $140,000 and collections on credit sales totaled $105,000. Burns estimates that bad debt losses will be 1.5% of credit sales. By year-end, Burns had written off $300 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.

Nontrade receivables do not include:

Explain the reason that Halliburton indicates that its receivables are generally not collateralized. What significance does this have to the reader?

For each posted entry in the Allowance account during 2009, indicate the remaining entry(ies) in other accounts.