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Exam 7: Cash and Receivables

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Question 1

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Priscilla's Exotic Pets discounted a note receivable without recourse and the sales criteria were met.The discounting is recorded as:

A) A secured borrowing.
B) Only note disclosure of the arrangement is required.
C) A sale.
D) None of these answer choices are correct.

E) C) and D)
F) All of the above

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Question 2

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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?

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U.S.GAAP requires that accounts receivable from related parties be disclosed separately from accounts receivable from ordinary trade customers.IFRS does not require that separate disclosure. Separate disclosure is useful because a receivable from a related party might not have the same collection pattern as a receivable from a trade customer.The related party could potentially get more extended terms,such that those receivables are collected slower.Alternatively,to make the company appear more effective in its collections,a related party might pay more quickly than necessary.

Question 3

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The cash collection on December 31,2017,would be recorded as:

What entry would Cherokee make on December 10,assuming the correct payment was received on that date?

Listed below are 10 terms followed by a list of phrases that describe or characterize the terms.Match each phrase with the number for the correct term.

Use the following to answer questions The following information is taken from the 2013 annual report to shareholders of Hewlett-Packard (HP)Co. -How could a company with receivables like HP be able to manage earnings in applying generally accepted accounting principles?

Explain the reason that Halliburton indicates that its receivables include notes with varying interest rates totaling $12 million at December 31.What significance does this have to the reader?

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the correct term.

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

If Frasquita accrued interest of $15,000 on the note in its 2016 year-end financial statements,what would the manufacturer record in its 2016 income statement for this transaction?

On October 1,2016,Watergate Hotels borrowed $400,000 at 12% interest and pledged $500,000 in accounts receivables as collateral.Additionally,Watergate 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.

Rahal's accounts receivable at December 31,2016,are:

Use the following to answer questions The following note disclosure is taken from the 2016 annual report to shareholders of Winchester International Corporation. NOTE 5: ALLOWANCE FOR LOAN LOSSES The allowance for loan loss is maintained at a level to absorb probable losses inherent in the loan portfolio.This allowance is increased by provisions charged to operating expense and by recoveries on loans previously charged off,and reduced by charge-offs on loans. The following is a summary of the changes in the allowances for loan losses for three years: Winchester also reported (in thousands)in its comparative balance sheet that it held Loans receivable,net,of $6,869,911 and $6,819,209 at December 31,2016,and December 31,2015,respectively. -How might a company with loan receivables like Winchester be able to manage earnings in applying generally accepted accounting principles?

The transferor is considered to have surrendered control over its receivables if:

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:

The journal entry to establish the petty cash fund includes:

Use the following to answer questions The following information is taken from the 2013 annual report to shareholders of Hewlett-Packard (HP)Co. -What is the balance in HP's allowance for doubtful accounts at the end of the fiscal years 2013 and 2012,respectively?

Using the balance sheet approach,bad debt expense is an indirect result of estimating the net realizable value of accounts receivable.

Rahal's 2016 bad debt expense is:

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.