33:010:325 Lecture Notes - Lecture 8: Money Market Fund, Accounts Receivable, Current Asset

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19 Oct 2017

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If material, they must disclose bank overdraft in the notes or list them separately on the face of bs. Restricted cash: company classi es cash as a current asset on bs unless it"s restricted from use in current period: when cash is legally restricted, company reclassi es the restricted amount from the regular cash line. Accounts receivable: amounts due to entity from its customers/clients that originated from sale of goods/services: do not involve contracts; generally no interest charged b/c it"s short-term. Trade discounts: reductions of catalog/list price whenever a company sells to a reseller in same industry. Volume discount: reduces list price for customers purchasing a large quantity of merch. Sales discount: reductions granted to customers for early cash payment as an incentive to encourage quick invoice payment: seller will collect less cash, but it will have cash earlier. !1: sales discount = contra-sales (reduces sales, but doesn"t change sales account.

Related Questions

The independent auditor is allowed to use a specialist for evaluating a complicated financial transaction provided the specialist is

knowledgeable and independent of the audit client.

approved by the client's board of directors.

all of the above.

acceptable to the PCAOB.

Inappropriately dating transfers of funds between bank accounts to cover shortages of cash is properly referred to as

Cash equivalents

represent current assets that can be converted to cash within a year or an operating cycle, whichever is shorter.

include only cash and highly liquid investments that are virtually free of risk.

should be reported as investments and not be included as cash on the balance sheet.

typically exclude money market funds and treasury bills.

A cut-off bank statement primarily is used to

determine whether reconciling items on the year-end bank reconciliation have cleared the bank.

prepare a year-end bank reconciliation.

test for kiting.

confirm the year-end balance of cash.

An imprest cash account

typically is used for many large miscellaneous disbursements.

typically earns large amounts of interest.

is another name for the general cash account of an organization.

is an account containing a stipulated amount of money to be used for a specific purpose.

An auditor may estimate the appropriate amount of interest expense to be recorded by an audit client by multiplying the average debt by the average interest rate. If the auditor's estimate is considerably larger than the client's recorded interest expense this would be evidence of a potential

failure of the client to accrue interest expense at year end.

the violation of significant loan covenants.

overstatement of recorded interest expense.

understatement of long-term debt.

Internal controls over fixed assets in a smaller entity

usually include authorization by the board of directors.

typically will be very similar to internal controls over other assets within the entity.

must be the same as in larger entities.

are of little importance since fixed assets are not subject to theft or misuse.

A change in depreciation methods employed by an audit client resulting in a material change in depreciation expense

is not necessarily a violation of generally accepted accounting principles.

requires disclosure by the audit client in the footnotes to the financial statements.

must be noted in the audit opinion due to lack of consistency.

is properly described by all of the listed statements.

Auditors typically assess inherent risk for material accounts requiring significant estimates as

Which of the following loans from an audit client, which is a financial institution, made in accordance with the normal lending practices of the financial institution would impair the CPA's independence?

A loan fully secured by certificates of deposit from the same financial institution.

A credit card loan in which the balance carried forward each month does not exceed $9,000.

An automobile loan secured by the automobile.

A home loan equal to less than 50% of the home's value and collateralized by the home.

A CPA has obtained some original records from a client during the course of an audit engagement. At the completion of her audit according to the proper professional standards the client fired the CPA and demanded that the CPA return all of his original records immediately. Under these circumstances which of the following statements is most correct according to the AICPA Code of Professional Conduct?

The CPA may hold the original records she obtained until the client pays for the services she has completed.

The CPA must return only the original records of the client upon demand regardless of the circumstances.

The CPA must return all original records and all copies of original records of the client upon demand regardless of the circumstances.

This is a matter of state law and not a matter covered by the AICPA Code of Professional Conduct.

Solve the following QS and Exercises from your textbook in chapter 8.

QS 8-1

Internal control objectives

An internal control system consists of all policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies. Evaluate each of the following statements and indicate which are true and which are false regarding the objectives of an internal control system.

____	1.	Separation of recordkeeping for assets from the custody over assets is intended to reduce theft and fraud.
____	2.	The primary objective of internal control procedures is to safeguard the business against theft from government agencies.
____	3.	The main objective of internal control procedures is best accomplished by designing an operational system with managerial policies that protect the assets from waste, fraud, and theft.
____	4.	Separating the responsibility for a transaction between two or more individuals or departments will not help prevent someone from creating a fictitious invoice and paying the money to herself or himself.

QS 8-2

Cash and equivalents

Choose from the following list of terms/phrases to best complete the following statements.

a.	Cash
b.	Cash equivalents
c.	Outstanding check
d.	Liquidity
e.	Bank reconciliation
f.	Current assets

____	1.	The category includes currency and coins along with amounts on deposit in bank accounts, checking accounts, and savings accounts.
____	2.	The term __________ refers to a companyâs ability to pay for its near-term obligations
____	3.	The __________ category includes short-term highly liquid investment assets that are readily convertible to a known cash amount and sufficiently close to their due dates so that their market value is not sensitive to interest rate changes.

QS 8-3

Internal control for cash

A good system of internal control for cash provides adequate procedures for protecting both cash receipts and cash disbursements. Identify each of the following statements as either true or false regarding this protection.

____	a.	A basic guideline for safeguarding cash is that all cash receipts be deposited weekly or monthly.
____	b.	A voucher system of control is a control system exclusively for cash receipts.
____	c.	A basic guideline for safeguarding cash is to separate the duties of those who have custody of cash from those who keep cash records.
____	d.	A petty cash system is not a control procedure for safeguarding cash.

QS 8-4

Petty cash accounting

The petty cash fund of the Brooks Agency is established at $150. At the end of the current period, the fund contained $28 and had the following receipts: film rentals, $24; refreshments for meetings, $46 (both expenditures to be classified as Entertainment Expense); postage, $30; and printing, $22. Prepare journal entries to record (a) establishment of the fund and (b) reimbursement of the fund at the end of the current period.

Identify the two events from the following that cause a Petty Cash account to be credited in a journal entry.

____	a.	Fund amount is being reduced
____	b.	Fund amount is being increased
____	c.	Fund is being eliminated
____	d.	Fund is being established

Exercise 8-13^A

Documents in a voucher system

Match each document in a voucher system in column one with its description in column two.

Document

1.	Purchase requisition
2.	Purchase order
3.	Invoice
4.	Receiving report
5.	Invoice approval
6.	Voucher

Description

____	A.	An itemized statement of goods prepared by the vendor listing the customerâs name, items sold, sales prices, and terms of sale.
____	B.	An internal file used to store documents and information to control cash disbursements and to ensure that a transaction is properly authorized and recorded.
____	B.	An internal file used to store documents and information to control cash disbursements and to ensure that a transaction is properly authorized and recorded.
____	C.	A document used to place an order with a vendor that authorizes the vendor to ship ordered merchandise at the stated price and terms.
____	D.	A checklist of steps necessary for the approval of an invoice for recording and payment; also known as a check authorization.
____	E.	A document used by department managers to inform the purchasing department to place an order with a vendor.
____	F.	A document used to notify the appropriate persons that ordered goods have arrived, including a description of the quantities and condition of goods.

Exercise 8-14^B

Record invoices at gross or net amounts

Piere Imports uses the perpetual system in accounting for merchandise inventory and had the following transactions during the month of October. Prepare entries to record these transactions assuming that Piere Imports records invoices (a) at gross amounts and (b) at net amounts.

Oct.	2	Purchased merchandise at a $3,000 price, invoice dated October 2, terms 2/10, n/30.
	10	Received a $500 credit memorandum (at full invoice price) for the return of merchandise that it purchased on October 2.
	17	Purchased merchandise at a $5,400 price, invoice dated October 17, terms 2/10, n/30.
	27	Paid for the merchandise purchased on October 17, less the discount.
		31Paid for the merchandise purchased on October 2. Payment was delayed because the invoice was mistakenly filed for payment today. This error caused the discount to be lost. Please provide all the answer thank you

tanmouse0

1. As of December 31, 2000, DaltonCompany has $7,240 cash in its checking account, as well as severalother items listed below:

Bank credit card slips signed by customers $ 900

Money market fund balance 4,000

Investment in US Treasury bills 10,000

Checks received from customers, but not

yet deposited in the bank 700

Investment in ATT 10% bonds, maturing June2001 15,000

What amount should be shown in Dalton's December 31,2000, balance sheet as "Cash and cash equivalents"?

A) $15,600.

B) $22,840

C) $37,840

D) $30,600

The Cash account in the ledger of Townhouse Co. shows a balanceof $16,526 at September 30. The bank statement, however, shows abalance of $20,900 at the same date. The only reconciling itemsconsist of a bank service charge of $6, a large number ofoutstanding checks totaling $5,930, and a deposit in transit.

2. Refer to the abovedata. What is the adjusted cash balance in the September30 bank reconciliation?

Answer A) $10,590.

B) $16,520.

C) $14,970

D) $14,964

3. Silbey Inc. had accounts receivable of$200,000 and an allowance for doubtful accounts of $8,700 justbefore writing off as worthless an account receivable from WalleyCompany of $1,200. After writing off this receivable what would bethe balance in Silbey's Allowance for Doubtful Accounts?

Answer A) $8,700 creditbalance.

B) $9,900 credit balance.

C) $7,500 credit balance.

D) $7,500 debit balance.

4. At the start of the current year, AcquaCorporation had a credit balance in the Allowance for DoubtfulAccounts of $1,200. During the year a monthly provision of 2% ofsales was made for uncollectible accounts. Sales for the year were$400,000, and $7,400 of accounts receivable were written off asworthless. No recoveries of accounts previously written off weremade during the year. The year-end financial statements shouldshow:

A) Uncollectible accountsexpense of $15,400.

B) Allowance forDoubtful Accounts with a credit balance of $1,800.

C) Allowance forDoubtful Accounts with a credit balance of $8,600.

D) Uncollectibleaccounts expense of $7,400.

5. Vector Corporation invested $290,000cash in available-for-sale marketable securities in earlyDecember. On December 31, the quoted market price forthese securities is $307,000. Which of the followingstatements is correct?

Answer A) Vector'sDecember income statement includes a $17,000 gain oninvestments.

B) If Vector sellsthese investments on January 2 for $300,000, it will report a lossof $7,000.

C) Vector's December 31balance sheet reports marketable securities at $290,000 and anUnrealized Holding Gain on investments of $17,000.

D) Vector's December 31balance sheet reports marketable securities at $307,000 and anUnrealized Holding Gain on Investments of $17,000.

6. On June 1, 2001, Swift Company acquired a 10%, ten-month notereceivable from a customer in settlement of an existing accountreceivable of $120,000. Interest and principal are due atmaturity.

8. Refer to the abovedata. The proper adjusting entry at December 31, 2001,with regard to this note receivable includes a:

A) Debit to Cash of $7,000.

B) Debit to NotesReceivable of $12,000.

C) Credit to InterestRevenue of $12,000.

D) Debit to AccruedInterest Receivable of $7,000.

7. In order to achieve internal controlover cash receipts:

A) The employee who handleschecks received in the mail should not prepare the controllisting.

B) The cashier shouldnot deposit cash in the bank.

C) The salesclerkshould not count the cash in the register at the end of theday.

D) The checks receivedin the mail from customers should not be sent to the accountingdepartment to be recorded as cash receipts.

Use the following to answer questions 8 - 9:

On November 1, 2000, Raceway Corporation sold land priced at$700,000 in exchange for a 12%, six-month note receivable.

8 Refer to the above data. Raceway'sbalance sheet at December 31, 2000, includes which of the followingas a result of the sale of land on November 1?

A) Notes Receivable of$700,000 and Interest Receivable of $14,000.

B) Notes Receivable of$742,000 and Interest Receivable of $14,000.

C) Notes Receivable of$700,000 and Interest Receivable of $42,000.

D) Notes Receivable of$700,000 only.

9. Refer to the above data. OnMay 1, 2001 (maturity date), the note is collected in full byRaceway Corporation. Assuming a fiscal year-end of December 31,Raceway recognizes which of the following in its income statementfor 2001 with regard to this note?

A) $742,000 sales revenue

B) $28,000 interest revenue.

C) $14,000 interest revenue

D) $42,000 interest revenue

10. When there is an Allowance for Doubtful Accountsin use, the writing-off of an uncollectible accounts receivablewill:

A). Reduce income

B) Reduce an expense

C). Not change income or totalassets

D). Increase totalassets

11. At the end of January, the unadjusted trialbalance of Windsor, Inc. included the following accounts:

Debit Credit

Sales (80% represent credit sales) 500,000

Accounts Receivable 340,000

Allowance for Doubtful Accounts 800

Refer to the above data. Windsor uses the balance sheet approachin estimating uncollectible accounts expense, and aging theaccounts receivable indicates the estimated uncollectible portionto be $7,400. What is the amount of uncollectible accounts expenserecognized in Windsor's income statement for January?

A). $7,400

B). $6,600

C). $8,200

D). Some otheramount

12. Deegan Industries has an accounts receivableturnover rate of 8. Which of the following statements is nottrue?

A). Deegan's accounts receivableare more liquid than those of a business whose accounts receivableturnover rate is 5

B). Deegan waits approximately 46days to make collections of its credit sales. (Use 365 days in ayear.)

C). Deegan writes off accountsreceivable as uncollectible if they are over 45 daysold.

D). Deegan's net credit sales are about eighttimes the amount of its average accounts receivable

13. Randall, Inc. uses the allowance method supportedby an aging of its accounts receivable to recognize uncollectibleaccounts expense in its financial statements. What method ofrecognizing this expense does Randall use in its income taxreturn?

A). It must use the same method

B). The direct write-offmethod

C). Either the balance sheet or incomestatement approach is acceptable.

D). None, since uncollectible accounts expenseis not deductible for income tax purposes

14. If a 15%, 60-day note receivable is acquired froma customer in settlement of an existing account receivable of$5,000, the accounting entry for acquisition of the note will:

A). Include a debit to Notes Receivable for$5,750

B). Include a debit to Notes Receivable for$5,062.50

C). Include a credit to Interest Revenue for$62.50.

D). Include a debit to Notes Receivable for$5,000 and no entry for interest

15. On June 1, 2009, Jensen Company acquired an 8%,ten-month note receivable from a customer in settlement of anexisting account receivable of $130,000. Interest and principal aredue at maturity. The company has a December 31st year-end. Jensen'sentry to record the collection of this note at maturity includesa:

A). Credit to Accrued Interest Receivable of$6,067

B). Credit to Interest Revenue of$6,067

C). Credit to Interest Receivable of$2,600

D). Credit to Notes Receivable of$140,400

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33:010:325 Lecture Notes - Lecture 8: Money Market Fund, Accounts Receivable, Current Asset

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