Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 6, Problem 4C
1.
To determine
Provide explanation regarding the various types of arrangements used to obtain cash from outstanding accounts receivable.
2.
To determine
State the factor that determines whether the transfer is accounted for as secured bowering or a sale, if Company M decides to transfer its accounts receivable.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Bank Reconciliation
A bank reconciliation explains the causes for any differences between a company's cash balance on its bank statement and its cash balance on the books (that is, in the ledger. )
Allez Company's monthly bank statement shows an account balance of $5968.78. The cash balance in its ledger is $5047.03.
A thorough bank reconciliation investigation yields the following information:
The bank erroneously deducted $365.99 from the company's account when the actual amount of a check written by the company was $325.99.
The company erroneously recorded a check it wrote for $364.57 as $621.43.
The company recently made a $602.99 deposit that has not yet been reflected on the bank statement.
The bank collected a $490.00 note receivable, plus $9.00 in interest, which has not been recorded in the company's records.
Bank service charges of $14.00 have been assessed to the company's account.
There are two checks outstanding (not yet appearing on the bank statement) that…
Bank Reconciliation (in case of Overdraft )
Prepare Bank Reconciliation Statement as on 30th June, 2017 for Jyoti Sales Private Limited from the information given below: RO.(i) Bank overdraft as per Cash Book on 30th June, 2017. 1,10,450
(ii) Cheques issued on 20th June, 2017 but not yet presented 15,000
(iii) Cheques deposited but not yet credited by the bank. 22,750
(iv) Bills sent for collection not advised by the bank but credited to the account. 47,200
(v) Interest debited by the bank on 27th June, 2017 but no advice received. 12,115(vi) Subsidy received from the authorities by the bank on our behalf, credited
to the account…
4. Waran Co. has accounts receivable of $500,000 and an allowance for doubtful accounts of $20,000 at the end of 2015. On January 10, 2016, the company learns that its receivable from Ted Inc. is not collectible, and management authorizes a write-off of $3,000.a. Prepare the journal entry to record the write-off.b. What is the cash realizable value of the accounts receivable (1) before the write-off and after the write-off?
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...
Knowledge Booster
Similar questions
- Researching GAAP Situation Hamilton Company operates in an industry with numerous competitors. It is experiencing a shortage of cash and decides to obtain money from a large bank by using some of its receivables as collateral. Hamilton pledges 5100,000 of its receivables, is charged a 12% fee on this amount, and notifies these credit customers to make their payments directly to the bank. Hamilton transfers the receivables to the bank, and the bank assumes the servicing activities, but Hamilton is responsible for all bad debts which it reasonably estimates to be 2% of the receivables amount. When the balance of the receivables pledged is reduced to 3,000, Hamilton is required to repurchase the receivables, notify the remaining credit customers to make payments to it, and reassume the servicing activities. The bank has the right to sell the receivables, except to Hamiltons major competitor. Hamiltons president has asked you how to account for (and record) this transaction. Directions Research the related generally accepted accounting principles and prepare a short memo to the president that answers his question. Cite your reference and applicable paragraph numbers.arrow_forwardOrion Rentals is unable to collect on a note worth $25,000 and has accumulated interest of $250. It convert this note and interest to accounts receivable. After some time, Orion is still unable to collect the debt and it decides to sell the converted note to a collection agency. The collection agency will pay only 20% of the value of accounts receivable to Orion. What is the amount of cash paid to Orion from the collection agency? A. $5,000 B. $5,050 C. $20,000 D. $19,950arrow_forwardProblem 1 - Prepare a bank reconciliationThe following information relates to M Park Corporation for the month of March 2022:1. Cash balance per books, March 31 was $20,647.002. Deposits in transit, March 31 were $8,140.003. The March bank service charge was $34.00 and has not been recorded by the company.4. Outstanding checks, March 31 were $3,905.005. An electronic funds transfer (EFT) collected by the bank was $590. The collection has not been recorded by M Park Corporation.6. The bank made an error and recorded a $3,000 deposit twice.7. Cash balance per bank, March 31 was $19,968.00PurposeThe purpose of this problem is to demonstrate an understanding of preparing a bank reconciliation.InstructionsAfter analyzing the data, prepare a bank reconciliation for M Park Corporation at March 31st. Reconcile the cash balance per the bank firstand list items that increase the cash balance first. Also, round amounts to two decimal places. Please provide explainations, thanks! (arrow_forward
- 39. Haru Company sold accounts receivable without recourse for P10, 600,000. Mild company received P10, 000,000 cash immediately from the factor. The remaining P600, 000 will be received once the factor verifies that none of the accounts receivable is in dispute. The accounts receivable had a face amount of P12, 000,000. Mild company had previously established an allowance for bad debts of P500, 000 in connection with these accounts. How much is the loss on factoring?arrow_forward1. A company makes a sale to a customer on credit and borrows cash (70-90% of the amount of sales) from a bank using receivables as security. When the company receives the customer payment, it sends this money to the lender. This transaction is an example of what? Factoring with recourse Securitization Collateralized borrowing Nonrecourse factoring 2. Which of the following statements about the direct and indirect methods for presenting Cash Flow Statement is NOT true? According to the indirect method, cash flows begin with net income or loss and is followed by subsequent additions to or deductions from that amount for non-cash revenue and expense items, resulting in cash flow from operating activities. The direct method is based on use of actual cash inflows and outflows from a company’s operations. Using direct and indirect methods leads to different amounts shown as cash flow from operations, investing, and financing activities.…arrow_forward38 Assume that Arkan Majan International LLC sold goods to its customer on credit for OMR 2500 and received notes receivables for the same amount. The customer directly deposited the amount of OMR2500 in company bank account that the company unaware. The company received the bank statement in which OMR 2500 is showing more as compared to company’s cash book balance. Therefore while preparing the Bank Reconciliation statement, what adjustment the accountant will do? Choose the correct answer from the following given options. a. Add OMR2500 to the bank statement balance b. Add OMR2500 to the cash book balance c. Less OMR2500 from the cash book balance d. Less OMR2500 from the bank statement balance Clear my choicearrow_forward
- The following facts apply to Walken Company during December 2021: a. Walken began December with an accounts receivable balance (net of bad debts) of €25,000.b. Walken had credit sales of €85,000.c. Walken had cash collections of €30,000.d. Walken factored €20,000 of net accounts receivable with Reliable Factor Company, transferring allrisks and rewards associated with the receivable, and otherwise meeting all criteria necessary toqualify for treating the transfer of receivables as a sale.e. Walken factored €15,000 of net accounts receivable with Dependable Factor Company, retainingall risks and rewards associated with the receivable, and otherwise meeting all criteria necessaryto qualify for treating the transfer of receivables as a sale.f. Walken did not recognize any additional bad debts expense, and had no write-offs of bad debtsduring the month.g. At December 31, 2021, Walken had a balance of €40,000 of cash at M&V Bank and an overdraft of(€5,000) at First National Bank. (That…arrow_forwardPlease answer “True” or “False” and expain WHY to the following statements. Factoring is a method for companies with high risk accounts receivable to insure the receipt of at least some of the cash owed to them. Leasing is not considered a debt for balance sheet and liquidity purposes. A company with a liquidity covenant of $500,000 must maintain that amount of available cash at all times.arrow_forwardA Company provided the following account balances on December 31, 2021:Accounts receivable P1,300,000 Allowance for bad debts 500,000 Financial assets at fair value through profit or loss400,000 Financial assets at amortized cost/held to maturity 1,100,000 Cash in bank, net of bank overdraft of P200,000 maintained in the same bank 900,000 Petty cash 10,000 Inventory (including inventory out on consignment amounting P50,000) 200,000 Equipment and furniture 1,300,000 Accumulated depreciation 1,100,000 Patent 300,000 Prepaid expenses 200,000 **Determine total amount of (5) current assets and (6) non-current assets on December 31, 2021.arrow_forward
- The following information is related to December 31, 2021 balances. • Accounts receivable $3490000 • Allowance for doubtful accounts (credit) ( 254000) • Cash realizable value $3236000 During 2022 sales on account were $ 885000 and collections on account were $ 500000. Also during 2022 the company wrote off $49000 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that bad debts should be estimated at $ 323000. The change in the cash realizable value from the balance at 12/31/21 to 12/31/22 was a $ 322000 increase. $ 267000 increase. $ 370000 increase. $ 316000 increase.arrow_forwardA clothing wholesaler is experiencing cash flow problems for several years due to its accounts receivables. Some of the amounts due by debtors are irrecoverable and the company is contemplating creating a provision for doubtful debts. (a) How is a provision for doubtful debts created and maintained? Explain, with figures if necessary, in not more than 200 words. (b) Discuss, in not more than 200 words, the concept or convention on which a provision for doubtful debts is based. (c) Explain, in not more than 300 words the differences between a bad debt and a provision for doubtful debts. (d) The financial year end of the clothing wholesaler is 31 December. You have been provided the following information by the management of the company: YEAR Bad debts written off year to 31 December Accounts receivable at 31 December after bad debts written off Percentage allowance for doubtful debts 1 Use…arrow_forwardCompany sold accounts receivable without recourse for 6,100,000. The entity received 4,000,000 cash immediately from the factor. The remaining 275,000 will be received once the factor verifies that none of the account receivable is in dispute. The accounts receivable had a face amount of 5,200,000. The entity had previously established an allowance for bad debts of 230,000 in connection with such accounts. What amount of loss on factoring should be recognized? A. 925,000 b. 295,000 c. 695,000 d. 965,000arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage LearningIntermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
Survey of Accounting (Accounting I)
Accounting
ISBN:9781305961883
Author:Carl Warren
Publisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning