BU387 Midterm: Cash and Receivables STUDY GUIDE

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Restricted cash not available for use, but bank can use these funds. If material, must be segregated from cash. E(cid:272)ei(cid:448)a(cid:271)les (cid:272)a(cid:374) (cid:271)e (cid:858)trade re(cid:272)eiva(cid:271)les" (a/r or n/r) o(cid:396) (cid:858)non-trade re(cid:272)eiva(cid:271)les" (government/dividend/interest receivables) Nrv of ar = gross ar - afda - allowance for sales returns and allowances. Given ,000 in sales with terms (2/10, n/30): Can use % of receivables or aged receivables methods: mix of procedures. At yea(cid:396) e(cid:374)d, 9,900 (cid:449)o(cid:374)(cid:859)t (cid:271)e (cid:272)olle(cid:272)ted a(cid:374)d the (cid:271)ala(cid:374)(cid:272)e of the allo(cid:449)a(cid:374)(cid:272)e is ,500. Afda opening balance (9,900 7,500 = ,400) Notes receivable contain interest a) stated rate of interest b) zero interest bearing. Interest earned each year is at coupon rate- ,000 9-month note is issued, 8% is implied int. Rate bus n/r is discounted at market rate. Long term loans receivable recognized at fair value. Microsoft issues a ,000, 10% 3-year note, market rate is 12% Annual interest payments are ,000 (,000 x 10%)