Textbook Notes (368,125)
Canada (161,663)
RSM220H1 (54)
Xin Baohua (17)
Chapter

ch 07

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Department
Rotman Commerce
Course
RSM220H1
Professor
Xin Baohua
Semester
Fall

Description
Chapter 7 Cash and Receivables Self-Study Questions Brief Exercises (BE): 7-4 to 7-7, 7-10, 7-11, 7-13, 7-14, 7-17 Exercises (E): 7-1, 7-6, 7-11, 7-15, 7-19, Problems (P): 7-3, 7-9, 7-11 BRIEF EXERCISE 7-4 Accounts Receivable 45,000 Sales 45,000 Cash 44,550 Sales Discounts 450 Accounts Receivable 45,000 BRIEF EXERCISE 7-5 Accounts Receivable 44,550 Sales 44,550 ($45,000 X .99) Cash 44,550 Accounts Receivable 44,550 BRIEF EXERCISE 7-6 Bad Debt Expense 27,200 Allowance for Doubtful Accounts 27,200 ($30,000 $2,800) BRIEF EXERCISE 7-7 Bad Debt Expense 33,000 Allowance for Doubtful Accounts 33,000 ($30,000 + $3,000) BRIEF EXERCISE 7-10 (a) Notes Receivable 30,053 Cash 30,053 Notes Receivable 3,005 Interest Revenue 3,005 ($30,053 X 10%) Notes Receivable 3,306 Interest Revenue 3,306 ([$30,053 + $3,005] X 10%) Notes Receivable 3,636 Interest Revenue 3,636 ([$30,053 + $3,005 + $3,306] X 10%) Cash 40,000 Notes Receivable 40,000 Take the present value of the cash flows and divide by the face value of the note ($30,053 / $40,000) gives a factor of .75132. Under the table for the present value of a single payment, for three years, the factor .75132 appears under the column for 10%. Taking a financial calculator. Using a financial calculator: PV $ (30,053) I ? Yields 10.0% N 3 PMT 0 FV 40,000 Type 0 Excel formula: =RATE(nper,pmt,pv,fv,type) BRIEF EXERCISE 7-11 (a) Note Receivable 3,861 Accumulated Depreciation ($15,000 $2,500) 12,500 Equipment 15,000 Gain on Sale of Equipment 1,361 Using a financial calculator: PV ? Yield $(3,861) I 9% N 3 PMT 0 FV $5,000 Type 0 Excel formula: =PV(rate,nper,pmt,fv,type) * Present value of the note: $5,000 X PVF3, 9% $5,000 X 0.77218 = $3,861 Discount on Note Receivable = $5,000 - $3,861 = $1,139 Fair Value of Equipment (present value of note) $3,861 Carrying Amount 2,500 Gain on Sale of Equipment $1,361(b) Interest for Year 1: Note Receivable 347 Interest Revenue 347 ($3,861 X 9% = $347) Interest for Year 2: Note Receivable 379 Interest Revenue 379 ([$3,861 + $347] X 9% = $379) (b) Continued: Interest for Year 3: Note Receivable 413 Interest Revenue 413 ([$3,861 + $347 + $379] X 9% = $413) (c) Collection of Note at Maturity: Cash 5,000 Note Receivable 5,000 BRIEF EXERCISE 7-13 Landstalker Cash 682,500 Due from Leander 37,500 Loss on Sale of Accounts Receivable 30,000 Accounts Receivable 750,00
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