Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Chapter 6, Problem 2C
1.
To determine
State the methods used to record accounts receivable with cash discounts.
2.
To determine
Exhibit the theoretical soundness of each method.
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Springer Products wishes to borrow $90,000 from a local bank using its accounts receivable to secure the loan. The bank's policy is to accept as collateral any accounts that are normally paid within 30 days of the end of the credit period, as long as the average age of the account is not greater than the customer's average payment period. Springer's accounts receivable, their average ages, and the average payment period for each customer are shown in the following table:
Customer
Accounts
Receivable
Average age
of account
Average payment
period of customer
A
$11,000
42 days
50 days
B
$25,000
70 days
65 days
C
$10,000
48 days
45 days
D
$28,000
55 days
50 days
E
$14,000
50 days
60 days
F
$19,000
21 days
35 days
G
$30,000
10 days
30 days
H
$16,000
25 days
40 days…
A cheque in the amount of $455 was returned by the bank marked "NSF". A bank service fee of $15 was charged for processing the returned cheque. Upon notification of the NSF, the company who initially received the customer’s cheque will most likely
1. reverse the customer’s payment on their books to re-establish the accounts receivable for $455 and debit the accounts receivable for the bank service fee of $15.
2. reverse the customer’s payment on their books to re-establish the accounts receivable for $455.
3. reverse the customer’s payment on their books to re-establish the accounts receivable for $455 and debit bank charges expense for the bank service fee of $15.
4. make no changes to the accounting records but advise the customer that the payment was declined and is still outstanding.
Easter Supply sells a variety of merchandise to retail stores on account, but it insists that any customer who fails to pay an invoice when due must replace their accont receivable with an interest bearing nte. The company adjusts and closes its accounts at december 31. Among the transactions relating to notes receivables were the following.
sept. 1 Receivable from a customer (Party Plus) a 9 month, 10 percent note for $75,000 in settlement of account receivable due today.
june 1 Collected in full the 9 month, 10 percent note receivable from Party Plus, including interest.
I need
a. prepaqre a journal entries ( in general journal form) to record: (1) the receipt note on September1; (2) the adjustment for interest on December 31; and (3) collection of principla and interest on June 1. (To better illustrate the allocation of interest revenue between accounting periods, W will assume Easter Supply make ajusting entries only at year end.)
b. Assume that instead of paying the same the…
Chapter 6 Solutions
Intermediate Accounting: Reporting And Analysis
Ch. 6 - What are the components of cash? What items may be...Ch. 6 - Prob. 2GICh. 6 - Prob. 3GICh. 6 - Prob. 4GICh. 6 - Prob. 5GICh. 6 - How are trade receivables different from nontrade...Ch. 6 - How is revenue recognition related to the...Ch. 6 - Prob. 8GICh. 6 - Prob. 9GICh. 6 - What is a sales return? A sales allowance?...
Ch. 6 - Discuss the differences between the allowance...Ch. 6 - Prob. 12GICh. 6 - Prob. 13GICh. 6 - What method of bad debt estimation categorizes...Ch. 6 - Why does the write-off of uncollectible accounts...Ch. 6 - Discuss the difference between a secured borrowing...Ch. 6 - When does a company record the transfer of...Ch. 6 - Prob. 18GICh. 6 - What is a non-interest-bearing note? How does...Ch. 6 - Prob. 20GICh. 6 - How are the cash proceeds determined when a note...Ch. 6 - Under IFRS, what criteria must be satisfied in...Ch. 6 - Prob. 23GICh. 6 - (Appendix 6. 1) What is the purpose of a petty...Ch. 6 - (Appendix 6. 7) Why are actual expenses, rather...Ch. 6 - Prob. 26GICh. 6 - Prob. 27GICh. 6 - Prob. 1MCCh. 6 - Greenfield Company had the following cash balances...Ch. 6 - A company is in its first year of operations and...Ch. 6 - Marmol Corporation uses the allowance method for...Ch. 6 - On January 1, 2019, King Companys Allowance for...Ch. 6 - Prior to adjustments, Barrett Companys account...Ch. 6 - A method of estimating bad debts that focuses on...Ch. 6 - When the accounts receivable of a company are sold...Ch. 6 - Prob. 9MCCh. 6 - Prob. 10MCCh. 6 - Prob. 11MCCh. 6 - On December 31, Harrison Company reports the...Ch. 6 - Lindley Enterprises sells hand woven rugs. Paige...Ch. 6 - Long Corporation is a fabric manufacturing...Ch. 6 - Refer to RE6-3. Assume Long records accounts...Ch. 6 - Longmire Sons nude sales un credit to Alderman...Ch. 6 - Refer to RE6-5. Assume Longmire uses a perpetual...Ch. 6 - McKinney Co. estimates its uncollectible accounts...Ch. 6 - Refer to RE6-7. At the end of the first quarter of...Ch. 6 - Refer to RE6-8. On April 23, 2020, McKinncy Co....Ch. 6 - On December 1 of the current year, Jordan Inc....Ch. 6 - On December 1 of the current year, Jordan Inc....Ch. 6 - On December 1, Newton Enterprises sells 100,000 of...Ch. 6 - Kaseys Cake Shop made 20,000 in sales of wedding...Ch. 6 - On June 1, Phillips Corporation sold, with...Ch. 6 - Prob. 15RECh. 6 - Prob. 16RECh. 6 - Computing; the Cash Balance Listed below are ten...Ch. 6 - Prob. 2ECh. 6 - Journal Entry to Separate Receivables An...Ch. 6 - Prob. 4ECh. 6 - Prob. 5ECh. 6 - Prob. 6ECh. 6 - Accounts Receivable Calculations The following...Ch. 6 - Estimation versus Direct Write-Off of Bad Debts...Ch. 6 - Estimating Bad Debts from Receivables Balances The...Ch. 6 - Aging Analysis of Accounts Receivable Cowens, a...Ch. 6 - Comparison of Bad Debt Estimation Methods Bradford...Ch. 6 - Inferring Accounts Receivable Amounts At the end...Ch. 6 - ReceivablesBad Debts At January 1, 2019, the...Ch. 6 - Transferring Accounts Receivable White Corporation...Ch. 6 - Transfer of Accounts Receivable Inder Corporation...Ch. 6 - Generating Cash from Receivables Guide Company...Ch. 6 - Interest-Bearing and Non-Interest-Bearing Notes On...Ch. 6 - Computing the Proceeds from the Sale of Notes...Ch. 6 - Recording the Sale of Notes Receivable Singer...Ch. 6 - Prob. 20ECh. 6 - Prob. 21ECh. 6 - Prob. 22ECh. 6 - Prob. 23ECh. 6 - Prob. 24ECh. 6 - Prob. 1PCh. 6 - Prob. 2PCh. 6 - Estimating Bad Debts Keegan Corporations...Ch. 6 - Allowance for Bad Accounts Installment Jewelry...Ch. 6 - Allowance for Doubtful Accounts From inception of...Ch. 6 - Prob. 6PCh. 6 - Aging Accounts Receivable On September 30. 2019...Ch. 6 - Prob. 8PCh. 6 - Prob. 9PCh. 6 - Prob. 10PCh. 6 - Factoring and Assignment of Accounts Receivable...Ch. 6 - Recording Note Transactions The following...Ch. 6 - Notes Receivable Transactions The following notes...Ch. 6 - Analyzing Accounts Receivable Upham Companys June...Ch. 6 - Comprehensive Receivables Problem Blackmon...Ch. 6 - Prob. 16PCh. 6 - Unknown Book Balance (Appendix 6.1) The following...Ch. 6 - Prob. 18PCh. 6 - Prob. 19PCh. 6 - Prob. 1CCh. 6 - Prob. 2CCh. 6 - Bad Debt Expense When a company has a policy of...Ch. 6 - Prob. 4CCh. 6 - Receivables Issues Magrath Company has an...Ch. 6 - Components of Cash Cash is an important asset of a...Ch. 6 - Prob. 7CCh. 6 - Transfer of Accounts and Notes Receivable Tidal...Ch. 6 - Ethics and Sales Returns At the end of 2019, the...Ch. 6 - Analyzing Starbuckss Cash and Receivables...Ch. 6 - Researching GAAP Situation Hamilton Company...
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