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

Use the information that follows from the financial statements of Pines Company at December 31, 2010, to answer questions 16 through 20 that follow. -Calculate total working capital for Pines Company at December 31, 2010.

Cash may consist of

The procedures designed to ensure that the cash account on the balance sheet reflects the actual amount of cash in the company's possession are referred to as

During the year, Caltech Inc.'s accounts receivable turnover rate increased from 10 to 12 times. The company makes credit sales only with credit terms of 3/10, n/40. The best explanation for the increase is that

The face amount of accounts receivable for Rio Inc. is $20,000. It was estimated that 5% of the accounts will not be collected, cash discounts of $500 will be exercised, and $200 of sales returns will be experienced. The net realizable value of accounts receivable is

Identify the limitations of current asset classification.

Tyson Corp. uses the aging method to estimate bad debts. The bookkeeper provided the following schedule as of March 30th, 2010: What is the amount of receivables deemed uncollectible?

Montego Bay Resort Club offers a cash discount of 3% if its customers pay within 15 days after the customer eats dinner. Otherwise, the customer must pay within 30 days. If a customer does not take advantage of the cash discount, then he/she is paying an annual interest rate for not delaying payment for 15 days of

At the beginning of 2010, Cyrus Corp.'s allowance for doubtful accounts is $12,500. During 2010, $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 debts expense that should be reported on Cyrus's 2010 income statement? a. $5,720 b. $26,780 c. $2,280 d.$18,280

Hummel Inc. and Nadia Co. have experienced identical economic performances for the last several years of growing sales. Each uses identical accounting measurement rules except that Hummel uses the allowance method and Nadia uses the direct write-off method of accounting for bad debts. Both companies have experienced a gradual increase in uncollectible accounts. Which one of the following statements is true in the first year of operations for both companies?

On 12/31/09, Phoebe Company's balance sheet revealed a $7,000 balance in its allowance for doubtful accounts. During 2010, $2,000 of accounts were written off and $500 of accounts receivable previously written off were collected. On 12/31/10, bad debts expense was estimated to be 5% on net credit sales, which were $400,000. Calculate the balance in the allowance for doubtful accounts on 12/31/10.

The balances of the allowance for doubtful accounts on the balance sheets dated December 31 of 2010 and 2009 were $2,000 and $7,000, respectively. During 2010, bad debts expense was $12,000. What is the amount of accounts receivable that were written off as uncollectible during 2010? a. $22,000 b. $8,000 c. $17,000 d. $2,000

The following information concerning the current assets and current liabilities of Mason Company at December 31, 2010, is presented below. Based on this information, how would the quick ratio be affected if Mason purchased $1,300 of inventory on account? a. The quick ratio would decrease from 1.30 to 1.21. b. The quick ratio would not change. c. The quick ratio would decrease from 1.09 to 1.00. d. The quick ratio would decrease from 1.09 to 1.21.

The following is a partial balance sheet for Quenton Company dated December 31, 2010: During 2010, $4,000 of accounts receivable were written off as uncollectible and bad debts expense recognized on Quenton's 2010 net 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.

Use the information that follows concerning the current assets and current liabilities of Ryan Company at December 31, 2010, to answer problems 3 through 8. Each problem is independent of the others. -How would the current ratio be affected if Ryan paid off its wages and taxes?

Calculate the quick ratio for Pines Company at December 31, 2010.

On December 11, 2010, Bisbee Co. purchased capsules from a Canadian company for 10,000 Canadian dollars (10,000 C$) to be paid on January 2, 2011. The exchange rates on December 11 and December 31, 2010 are US$0.79 = 1C$ and US$0.82 = 1C$, respectively. What is the cost of the capsules in U.S. dollars and the 2010 exchange loss?

Which of the following are components of the current ratio?

On December 1, 2010, Sedona Trading Co. sold goods to a German company for 25,000 German marks (25,000 DM) to be collected on January 12, 2011. The exchange rates on December 1 and December 31, 2010 are US$0.75 = 1 DM and US$.90 = 1 DM, respectively. What is Sedona's exchange gain or loss for 2010? a.$22,500 Exchange Gain b. $3,750 Exchange Loss c. $3,750 Exchange Gain d. $18,750 Exchange Loss

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