Exam 6: The Current Asset Classification, Cash, and Accounts Receivable

The following is a partial balance sheet for Quenton Company dated December 31, 2017: Cash \ 20,000 Accounts receivable \4 5,000 Allowance for doubtful accounts (3,000) Net realizable value \ 42,000 Irventary Tatal current assets Current liabilities During 2017, $4,000 of accounts receivable were written off as uncollectible and bad debt expense (based on an aging schedule) recognized on Quenton's 2017 income statement was $8,000. However, the president of the company believes that $2,500 of these receivables were written off too soon. She believes that there is a good chance that they will be collected next year. There is some historical evidence to back the president's position. A partial explanation for her position is that Quenton has a debt covenant requiring it to maintain a current ratio of 1.5. The president believes that by reversing the write-off of $2,500 of accounts receivable, the current assets will be $97,500 and the current ratio will be 1.5. However, the chief financial officer states that a better approach to getting the current ratio to 1.5 is to pay off some accounts payable. If the company paid $5,000 of accounts payable, the current ratio would become the minimum 1.5 required by the debt covenant. Comment, with numerical illustration, on the president's and chief financial officer's positions.

Alma Company uses the allowance method of accounting for bad debts. Alma:

If a company's collection period for accounts receivable is considered to be excessively long, then

Preston Bank has $50 million of loans outstanding on December 31 of the current year, in which it recorded net income of $770,000. Preston did not provide for any uncollectible loans because all of its loans are collateralized by real estate. That is, if the loans were to default, Preston would obtain the title to the real estate for which the loans were made. However, during the audit of Preston's financial statements, the auditing company determined that $5 million of the outstanding loans would probably be dishonored (uncollectible). Because during the last three years real estate values have deteriorated, they also investigated the real estate that backed these collateralized loans. The market value of that real estate is negligible. Recalculate Preston's loans receivable on December 31 and current net income to an amount that would be acceptable to the auditors.

At the beginning of 2017, Cyrus Corp.'s allowance for doubtful accounts is $12,500. During 2017, $4,250 was written off as uncollectible. At December 31, the company used an aging schedule of accounts receivable and determined that $10,530 of the accounts receivable would probably be uncollectible. What would be the bad debt expense that should be reported on Cyrus's 2017 income statement?

Why might an operating cycle of one company differ from an operating cycle of another company?

Before adjusting entries, Martin's accounts receivable and allowance for doubtful accounts are $65,000 and $1,500 (debit balance), respectively. Using an aging schedule of accounts receivable, it is determined that $4,000 of the accounts receivable would probably be uncollectible. Calculate bad debt expense to be reported on Martin's current year's income statement.

The following information concerning the current assets and current liabilities of Mason Company at December 31, 2017, is presented below. Current Assets Cash \ 6,700 Accounts Receivable \ 7,900 Less Allowance 7,830 Inventory 2,270 Prepaid expenses Total Current Liabilities Accounts payable \ 9,000 Wages payable 500 Taxes payable 200 Rent payable 1,600 Notes payable Total Based on this information, how would the current ratio be affected if Mason collects some accounts receivable and then uses $9,000 cash to pay off the accounts payable?

The balances of the allowance for doubtful accounts on the balance sheets dated December 31 of 2017 and 2016 were $1,000 and $4,000, respectively. During 2017, bad debt expense was $9,000. What is the amount of accounts receivable that were written off as uncollectible during 2017?

The following information was taken from the unadjusted trial balance and aging schedule of Diane Company on December 31, 2017. All sales are on account. Accounts and related balances at December 31, 2017 before adjustment: Debit Credit Accounts receivable \ 46,000 Allowance for doubtful accounts \6 80 Sales (all on account) 500,000 Sales returns 3.000 Aging Schedule of Accounts Receivable: Age Amount \% Uncollectible 0-30 days \ 14,000 5\% 30-60 days 20,000 8\% Over 60 days 12,000 12\% If Diane uses the aging schedule of accounts receivable to determine bad debts, what is the net realizable value of accounts receivable on the 2017 financial statements?

Tyson Corp. uses the aging method to estimate bad debts. The bookkeeper provided the following schedule as of March 30th, 2017: Account Age Balance Noncollection Probability Current \ 50,000 3\% 1--30 days past due 40,000 4\% 31--60 days past due 10,000 8\% Over 60 days past due 5,000 15\% What is the amount of receivables deemed uncollectible?

Most companies

The following information concerning the current assets and current liabilities of Mason Company at December 31, 2017, is presented below. Current Assets Cash \ 6,700 Accounts Receivable \ 7,900 Less Allowance 7,830 Inventory 2,270 Prepaid expenses Total Current Liabilities Accounts payable \ 9,000 Wages payable 500 Taxes payable 200 Rent payable 1,600 Notes payable Total Based on this information, what would the quick ratio be if Mason sold all of its inventory for $6,000 cash?

Accounts used to cover day-to-day office expenses are referred to as

Use the information that follows from the financial statements of Pines Company at December 31, 2017, to answer questions 16 through 20 that follow. Accounts payable \ 2,000 Accounts receivable 3,000 Capital stock 8,000 Cash 5,000 Inventory 19,000 Land 24,000 Notes payable (short-term) 5,000 Cost of goods sold 12,000 Retained earnings 21,000 Sales revenue 20,000 -Calculate total working capital for Pines Company at December 31, 2017.

On December 1, 2017, Casio Trading Co. sold goods to a German company for 20,000 German marks (20,000 DM) to be collected on January 12, 2018. The exchange rates on December 1 and December 31, 2017 are US$0.50 = 1 DM and US$.60 = 1 DM, respectively. Calculate Casio's revenue in U.S. dollars and its exchange gain or loss for 2017.

On December 1, 2017, Sedona Trading Co. sold goods to a German company for 25,000 German marks (25,000 DM) to be collected on January 12, 2018. The exchange rates on December 1 and December 31, 2017 are US$0.75 = 1 DM and US$.90 = 1 DM, respectively. What is Sedona's sales revenue in U.S. dollars?

The following are partial balance sheets for Pedro Co, dated December 31: 2016 2017 Accounts receivable \ 55,000 \ 68,000 Allowance for doubtful accounts Net realizable value During 2017, $4,000 of accounts receivable were written off as uncollectible. Calculate the amount of bad debt expense recognized on Pedro's 2017 income statement.

The following information is provided for Atlanta Inc. Balance Sheet 2017 2016 Cash and cash equivalents \ 89,000 \ 106,000 Accounts Receivables, less allowance for doubtful accounts of \ 4,600(2017) and \ 2,000(2016) 198,000 154,000 What is the amount of the Net Realizable Value of the receivables at December 31, 2017?