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Chapter 7: Cash and Receivables

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Intermediate Accounting (Kieso)
Pages: 324 - 385

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115 Questions for Chapter 7: Cash and Receivables

  1. Wood Incorporated factored $150,000 of accounts receivable with Engram Factors Inc. on a without-recourse basis. Engram assesses a 2% finance charge of the amount of accounts receivable and retains an amount equal to 6% of accounts receivable for possible adjustments. Prepare the journal entry for Wood Incorporated and Engram Factors to record the factoring of the accounts receivable to Engram.

    Found on Page 363
  2. Use the information in BE7-10 for Wood. Assume that the receivables are sold with recourse. Prepare the journal entry for Wood to record the sale, assuming that the recourse liability has a fair value of $7,500.

    Found on Page 363
  3. 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.

    Found on Page 362
  4. Arness Woodcrafters sells $250,000 of receivables to Commercial Factors, Inc. on a with recourse basis. Commercial assesses a finance charge of 5% and retains an amount equal to 4% of accounts receivable. Arness estimates the fair value of the recourse liability to be $8,000. Prepare the journal entry for Arness to record the sale.

    Found on Page 364
  5. Use the information presented in BE7-12 for Arness Woodcrafters but assume that the recourse liability has a fair value of $4,000, instead of $8,000. Prepare the journal entry and discuss the effects of this change in the value of the recourse liability on Arness’s financial statements.

    Found on Page 364
  6. Recent financial statements of General Mills, Inc. report net sales of $12,442,000,000. Accounts receivable are $912,000,000 at the beginning of the year and $953,000,000 at the end of the year. Compute General Mills’ accounts receivable turnover. Compute General Mills’ average collection period for accounts receivable in days.

    Found on Page 364
  7. Finman Company designated Jill Holland as petty cash custodian and established a petty cash fund of $200. The fund is reimbursed when the cash in the fund is at $15, which it is. Petty cash receipts indicate funds were disbursed for office supplies $94 and miscellaneous expense $87. Prepare journal entries for the establishment of the fund and the reimbursement.

    Found on Page 364
  8. Horton Corporation is preparing a bank reconciliation and has identified the following potential reconciling items. For each item, indicate if it is (1) added to balance per bank statement, (2) deducted from balance per bank statement, (3) added to balance per books, or (4) deducted from balance per books.

    Found on Page 364
  9. Use the information presented in BE7-16 for Horton Corporation. Prepare any entries necessary to make Horton’s accounting records correct and complete.

    Found on Page 364
  10. Assume that Toni Braxton Company has recently fallen into financial difficulties. By reviewing all available evidence on December 31, 2017, one of Toni Braxton’s creditors, the National American Bank, determined that Toni Braxton would pay back only 65% of the principal at maturity. As a result, the bank decided that the loan was impaired. If the loss is estimated to be $225,000, what entry(ies) should National American Bank make to record this loss?

    Found on Page 364

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