ch06 intermediate accounting nikolai 課后習(xí)題解答

CHAPTER 6CASH AND RECEIVABLESCONTENT ANALYSIS OF EXERCISES AND PROBLEMSNumberContentTime Range(minutes)E6-1Cash. Determination of items to be included as cash on the balance sheet. 5-10E6-2Cash Balance. Computing amount to be reported on balance sheet. Treatment of non-cash items. 5-10E6-3Petty Cash. Journal entries to record establishment, expenses, and replenishment. 5-10E6-4Unknown Cash Balance. Determine cash balance and adjusted cash balance through use of bank reconciliation. Journal entries to update cash account balance. 5-15E6-5Bank Reconciliation. Prepare reconciliation from account balances. Record journal entries to adjust the books.10-15E6-6Bank Reconciliation. Prepare reconciliation from various transactions. Record journal entries to adjust the books.10-15E6-7Bank Statement Balance. Determine cash balance from prior journal entries, no bank statement available. Discrepancy analysis.10-20E6-8Classification of Receivables. Journal entries to properly record receivables. Balance sheet disclosure. 5-10E6-9Sales Discounts. Journal entries to record the sale,collection, and year-end adjustment under the gross price and net price methods.10-15E6-10Discount Methods. Comparison of gross price and net price methods. Journal entries.10-15E6-11Returns and Allowances. Record as actual, record as estimate. Journal entries, financial statement disclosure.10-15E6-12Bad Debts. Estimation versus direct write-off. Journal entries.10-15NumberContentTime Range(minutes)E6-13Bad Debts. Estimating from receivable balances. Journal entries. Balance sheet disclosure. Computation of receivables turnover. 5-15E6-14Aging Analysis. Estimation of uncollectible receivables. Journal entries with various balances in the allowance account.10-20E6-15Bad Debts. Comparison of different estimation methods. Journal entries for estimates based on total sales, credit sales, and accounts receivable.10-20E6-16(AICPA adapted). Receivables-Bad Debts. Percentage of net sales method. Schedule computing balance in the allowance account.10-20E6-17Assigning Accounts Receivable. Sales return, collections, repayment. Journal entries. Balance sheet disclosure.15-20E6-18Factoring Accounts Receivable. Sales returns and allowances on factored accounts. Journal entries.10-15E6-19Credit Card Sales. Sales, sales return. Journal entries. 5-10E6-20(AICPA adapted). Factoring and Assigning Accounts Receivable. Income statement disclosure.15-20E6-21Notes Receivable. Interest-bearing, noninterest-bearing. Journal entries.10-15E6-22Notes Receivable Discounted. Interest-bearing, noninterest-bearing. Determination of proceeds.10-20E6-23Notes Receivable Discounted. Journal entries for issuance, discounting, default.10-20P6-1Cash and Other Items. Determination of cash account balance, balance sheet disclosure of other items.10-20P6-2Bank Reconciliation. Preparation from various transactions. Record journal entries to adjust the books.20-30P6-3Unknown Book Balance. Determination of unadjusted and adjusted cash balances. Journal entries to update account balances.20-30P6-4Bank Reconciliation. Preparation from bank statement.Record journal entries to adjust the books.20-40P6-5(AICPA adapted) Comprehensive Reconciliation.Bank reconciliation from various transactions. Prepare journal entries to adjust book balance.60-75NumberContentTime Range(minutes)P6-6Bad Debts. Change from direct write-off method to estimation of bad debts. Percentage of credit sales,percentage of outstanding accounts receivable.Analysis.30-40P6-7Accounts Receivable. Various transactions affectingreceivables. Journal entries. Balance sheet disclosure.30-40P6-8Notes Receivable. Interest-bearing. Discounted. Default. Journal entries.15-30P6-9Reconstructing Entries. Changes in accounts receivable,allowance for doubtful accounts, allowance for sales returns and allowances, and allowance for sales discount. Ending balance and financial statement disclosure.30-45P6-10Cash Discounts. Gross price and net price methods. Journal entries to record sale, collections, and returns. Reversing entries.30-40P6-11Accounts Receivable. Aging analysis. Journal entries to record sale, collection, write-off of accounts receivable, and bad debts expense. Balance sheet disclosure. Calculation and discussion of receivables turnover.35-45P6-12Bad Debts. Estimation as a percent of total sales, net credit sales, and gross accounts receivable. Aging analysis. Income statement vs. balance sheet approach.30-40P6-13Notes Receivable. Interest-bearing, discounted. Journal entries. Balance sheet disclosure.30-40P6-14Assigning Accounts Receivable. Journal entries for various transactions. Balance sheet disclosure.20-30P6-15Factoring Accounts Receivable. Sales on account, sales returns and allowances, and sales discounts. Factored and unfactored accounts receivable. Journal entries.20-30P6-16Factoring and Assigning Accounts Receivable. Journal entries for various transactions. Financial statement disclosure.20-30P6-17(AICPA adapted). Accounts Receivable. Reclassification of accounts. Journal entries to write-off uncollectible accounts and adjust allowance for doubtful accounts.10-20P6-18(AICPA adapted). Bad Accounts. Percentage of sales, original set up of the allowance account. Adjusting journal entries.40-60NumberContentTime Range(minutes)P6-19(AICPA adapted). Allowance for Doubtful Accounts. Prepare schedule analyzing changes in allowance account. Prepare related adjusting journal entry.40-60P6-20(AICPA adapted). Correction of Allowance Account. Prepare schedules to analyze initial and subsequent balance in allowance account, based on historical data.30-40P6-21Comprehensive Receivable Problem. Sales, collections, write-off, bad debts, assignment, returns and allowances, notes receivable discounted, default. Calculation and discussion of receivables turnover.45-60P6-22(Appendix). Proof of Cash. Preparation of four-column proof of cash from a list of account balances and transactions.45-60P6-23(Appendix). Proof of Cash. Preparation of four-column proof of cash from a list of account balances and transactions.45-60ANSWERS TO QUESTIONSQ6-1Cash consists of coins, currency, unrestricted funds on deposit with a bank (either checking accounts or savings accounts), negotiable checks, and bank drafts. Certificates of deposit, bank overdrafts, postdated checks, travel advances, and postage stamps may be confused with cash, but these items normally are categorized under other balance sheet captions. Items that are available immediately to pay current debts and are not bound by any contractual or legal restrictions are classified under the "current asset-cash" caption on the balance sheet, and those that do not meet these criteria are reported elsewhere within the assets (or liabilities, in the case of a bank overdraft) section on the balance sheet. Cash equivalents are short-term, highly liquid investments (e.g., commercial paper, treasury bills, money market securities) that are readily convertible into known amounts of cash and so near their maturity that there is little risk of changes in value because of changes in interest rates.Q6-2Internal control is the process (policies and procedures) a company uses to enhance the reliability of its financial reports, promote the effectiveness and efficiency of its operations (including safeguarding its assets), and ensure its compliance with applicable laws and regulations. Two important elements of internal control over cash are a petty cash system and a bank reconciliation.Q6-3The purpose of a petty cash system is to allow a company to pay small amounts that might be impractical or impossible to pay by check.Q6-4The actual expenses rather than the Petty Cash account are debited when the fund is replenished because the petty cash fund is always carried in the company's accounting records at its original amount. This entry has the effect of recording the expenses incurred for the period at the time the amount of cash expended is given to the custodian of the fund to replenish the petty cash fund.Q6-5A bank reconciliation is a schedule prepared by a company to analyze the difference between the ending cash balance in the company's accounting records and the ending cash balance reported by its bank in a bank statement in order to determine the correct ending cash balance. The causes of the difference between the cash balance listed on a company's bank statement and the balance shown in the company's cash account include outstanding checks, deposits in transit, charges made directly by the bank, deposits made directly by the bank, and errors.Q6-6After the bank reconciliation is completed, adjusting entries are made to bring the company records up to date. The adjustments to the company records on the bank reconciliation have not been previously recorded by the company, so journal entries must be prepared by the company for these items. An example of an item on a bank reconciliation requiring an adjusting entry would be a bank service charge of $10 deducted on the bank statement but not yet recognized on the company books. The adjusting entry would be a debit to Bank Service Charge Expense for $10 and a credit of $10 to Cash.Q6-7The two revenue recognition criteria are that (1) realization must have occurred and (2) the revenue must be earned (the earning process must be complete or virtually complete). In the case of some industries (e.g., book publishing), sometimes a company cannot make a reliable estimate of the collectibility of receivables (so realization has not occurred) or the risks and benefits of ownership have not been transferred (so that the earning process is not complete). In these cases, the company must defer revenue recognition.Q6-8The first method of recording accounts receivable (gross price method) when cash discounts are involved is to record accounts receivable and sales at the gross price. In using this method, a company records both accounts at the total invoice price as if no cash discount were involved. When the customer pays, if the allowable cash discount is taken the company records the difference between the cash received and the original amount of accounts receivable as a debit to Sales Discounts Taken. If the cash discount is not taken, the amount of cash remitted by the customer will be equal to the original balance in the Accounts Receivable account and no further adjustment is necessary.A second method (net price method) is to record accounts receivable and sales at the net invoice price. When the customer pays, if the allowable cash discount is taken by the customer no adjustment is necessary because the amount of cash received is equal to the recorded amount of the receivable. However, if the customer chooses not to take the cash discount, the amount of cash received is greater than the recorded Accounts Receivable balance. The company credits this excess to an account entitled Sales Discounts Not Taken.Q6-9A sales return occurs when a customer returns goods to the seller. A sales allowance occurs when a customer retains defective goods and is allowed a reduction in the purchase price. Conceptually, a company should estimate and record sales returns and allowances in the period of sale so as to properly report net sales revenue and correctly value its ending accounts receivable.Q6-10Under the estimation methods of recording bad debts, a company studies the historical data about the actual bad debts it has incurred on credit sales or credit accounts receivable as a result of a particular credit policy. This information is then compared with current sales or accounts receivable to determine relationships upon which to base estimates of current uncollectible accounts. These relationships provide the information the company needs to prepare the adjusting entry to record the estimated bad debt expense for the period. When the estimate of bad debts is recorded, the journal entry involves a debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts (or, alternatively, Allowance for Bad Debts). Estimation methods enable a company to match its expenses with revenues in the current period. Bad debt expense is normally reported on the company's current year income statement as an operating expense. However, some companies offset the account against gross sales, or disclose it as a financial expense in the other items section of the income statement.The direct write-off method has the advantages of simplicity and of reporting actual losses rather than estimates. When the direct write-off method is used, a company records bad debt expense when it determines a specific customer account is uncollectible. At that time, the account is written off by debiting Bad Debt Expense and crediting Accounts Receivable. However, this determination and write-off may not occur until a period later than the period of sale. The use of the direct write-off method has the disadvantage of matching expenses associated with previous sales with current revenues, and of overstating accounts receivable associated with previous sales. Furthermore, it allows the manipulation of income because management selects the period of write-off (and expense).Q6-11Under the sales or income statement approach, a company estimates bad debts based on the historical relationship to sales. This approach matches current revenues and anticipated current expenses. It is income statement oriented because it is based upon the matching principle and results in recording bad debt expense in the period during which credit sales occur. A percentage of total sales may be used as the basis for the estimate when there is a stable relationship between cash and credit sales. However, if the proportion of credit to total sales varies from period to period, a percentage of total sales is not appropriate to use in any one period and net credit sales should be used. Since this method focuses upon an expense account, any existing balance in the allowance account is ignored. Also, if a company sells many products in different locations, it may choose to extend this analysis and estimate bad debts based on the historical net credit sales of particular products or in specific locations.Q6-11 (continued)Under the accounts receivable or balance sheet approach, a company estimates bad debts based on the historical relationship between actual losses and accounts receivable. This approach is balance sheet oriented in that the resulting accounts receivable balance is properly reported on the balance sheet at its net realizable value. A relatively simple balance sheet approach is to base the estimated expense on the relationship between the actual bad debts and the outstanding receivable balance at the end of the year. However, a more sophisticated method is to categorize the outstanding receivables by the length of time they have been outstanding and then apply a different uncollectible percentage to each category. This method is termed "aging."Q6-12The net realizable value of a company's accounts receivable is the amount expected to be collected in the future. The company reports the net realizable value of its accounts receivable on its balance sheet by deducting the balance of a contra account, entitled Allowance for Doubtful Accounts, from the balance of the Accounts Receivable account. (If a company has other accounts such as Allowance for Sales Returns and Allowances, Allowance for Sales Discounts, and Deferred Gross Profit, it would also deduct these accounts from Accounts Receivable to determine the net realizable value.)Q6-13The aging of accounts receivable method categorizes individual accounts based on the length of time they are outstanding. The length of time an account is outstanding is an important factor in estimating the probability that it will be collected. A company is much more likely to collect an open account that is 30 days old than one that is 360 days old.Q6-14If bad debt expense is recorded based on an estimate, an individual account is written off the accounting records when it is determined to be uncollectible by debiting Allowance for Doubtful Accounts and crediting Accounts Receivable. This write-off is simply an adjustment required to recognize that previously anticipated losses are now realized. It has no effect on the net realizable accounts receivable on the balance sheet because both the asset and contra-asset accounts are reduced by the same amount. There is no impact on the income statement as a result of this write-off because it does not involve a revenue or expense account.Q6-15When a company pledges its accounts receivable, it is using these only as collateral for a loan, and the servicing activities generally remain the responsibility of the borrower. The borrower records the loan in the usual manner and then uses the cash collected from the receivables to repay the loan plus any interest charges. Upon full payment, the pledge is canceled. When a company assigns its accounts receivable to a finance institution (or bank), it enters into a lending agreement with the institution to receive cash on specific customer accounts. Usually the borrowing company (assignor) retains ownership of the assigned accounts, incurs bad debts, collects the amounts due from customers, and then uses these funds to repay the loan. When a company factors its accounts receivable, it sells individual accounts to a finance institution or bank, called a factor. The accounts receivable are sold without recourse so the collection activities and the risk of ownership are assumed by the factor. Also, any related collection costs and bad debt expenses are incurred by the factor.Q6-16A company (transferor) records the transfer of accounts receivable to a transferee as a sale when all of the following conditions are met:(1) The transferred assets have been isolated from the transferor (i.e., put beyond the reach of the transferor).(2)The transferee obtains the right to exchange (e.g., sell) the transferred assets.(3)The transferor does not maintain effective control over the transferred assets through an agreement that entitles and obligates the transferor to repurchase the transferred assets before their maturity.If the conditions for a sale are not met, the company records the proceeds from the transfer of accounts receivable as a secured borrowing with a pledge of collateral.Q6-17A note receivable is an unconditional written agreement to receive a certain sum of money on a specific date. Notes receivable have two attributes not found in accounts receivable: (1) They are negotiable instruments, which means that they are legally and readily transferable among parties and may be used to satisfy debts by the holders of these instruments, and (2) They usually involve interest.Q6-18A non-interest-bearing note is a note that does not specify an interest rate. For a short-term non-interest-bearing note, the maturity value is listed as the face value, and includes both principal and implicit interes