# RSM220H1 Chapter Notes -Commercial Paper, Scotiabank, Money Market

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9 Nov 2011
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Chapter 7 ā 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
27,200
Allowance for Doubtful Accounts
27,200
(\$30,000 ā \$2,800)
BRIEF EXERCISE 7-7
33,000
Allowance for Doubtful Accounts
33,000
(\$30,000 + \$3,000)
BRIEF EXERCISE 7-10
(a)
30,053
30,053
3,005
3,005
3,306
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3,306
3,636
3,636
40,000
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 ā \$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
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(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
750,000
Leander
Accounts Receivable
750,000
Due to Landstalker
37,500
Financing Revenue
30,000
Cash
682,500
BRIEF EXERCISE 7-14
Cash
682,500
Due from Leander
37,500
Loss on Sale of Accounts Receivable
39,000
Accounts Receivable
750,000
Recourse Liability
9,000
BRIEF EXERCISE 7-17
2007:
The accounts receivable turnover ratio is calculated as follows:
Net Sales
\$17,752
=
9.43 times
\$1,864 + \$1,902
2
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