Untitled Quiz

Cash Balance Inclusion

• NSF checks not included, categorized under Accounts Receivable.
• Savings account included as cash.
• Compensating balance excluded, classified as Current or Noncurrent Asset.
• Postdated checks excluded, also logged under Accounts Receivable.
• IOUs excluded, fall under Accounts Receivable.
• Cash on hand included as cash.
• Cash in sinking fund excluded, recorded as a Long-term Investment.
• Travel advance not included, classified as a Prepaid Expense.
• Bank drafts included as cash.
• Prepaid debit cards included as cash.

Sales and Collections

• Lynch Incorporated sold $20,000 merchandise with terms 2/10, n/EOM on December 1, 2016.
• Collections of $13,000 occurred on December 11, 2016, and an additional $6,000 on December 31, 2016.
• To utilize the 2% discount, a payment must be made 20 days earlier, equivalent to an annual interest rate of 36.5%.

Accounts Receivable and Interest Rates

• Eastman Corporation sold merchandise with a list price of $12,000 on February 1 with terms 1/10, n/30.
• Payment for $7,000 was made on February 10, with the remaining balance collected by March 1.
• A 1% discount results in an annual interest rate of 18.25%, emphasizing the importance of recording receivables at net prices to avoid overstated figures.

Sales Returns and Allowances

• Towbin Products sold merchandise on December 1, 2016, for $7,000, estimating returns at 4% of sales.
• A return of $200 was credited on December 22, 2016.
• Accounts Receivable and Return liability are recorded on the balance sheet to avoid inflated sales revenue.

Accounts Receivable Summary

• Karras Inc. had a debit balance of $141,120 in accounts receivable at the end of 2016.
• Credit balance for allowance for doubtful accounts started at $4,350 and ended at $9,420.
• Total credit sales for the year were $1,530,000, with collections of $1,445,700 and bad debt expenses recorded at $83,750.
• Accounts Receivable written off totaled $78,680; beginning balance was $135,500.

Allowance for Doubtful Accounts

• Master Company began 2016 with a $400,000 credit balance in the Allowance for Doubtful Accounts.
• The provision for doubtful accounts for 2016 was estimated at 0.7% of total credit sales of $50,000,000, amounting to $350,000.
• Total write-offs during 2016 were $410,000, resulting in a year-end balance of $340,000.

Notes Receivable Transactions

• On December 11, 2016, Hooper Inc. made a credit sale of $36,000 to Marshall Company, requiring a signed 60-day note.

Proceeds from Sale of Notes Receivable

• Various customer notes were sold without recourse, needing calculations for each:
  • Non-interest bearing note of $8,000 sold after 15 days at 12% yielded proceeds of $7,880.
  • 12% note of $9,000 sold after 30 days produced proceeds of $9,072.90.
  • 10% note of $6,000 sold after 30 days resulted in proceeds of $6,027.
  • 12% note of $10,000 sold after 45 days gave proceeds of $10,075.