Beruflich Dokumente
Kultur Dokumente
Accounting
Prepared by
Coby Harmon
University of California, Santa Barbara
7-1
Intermediate Accounting
14th Edition
Learning Objectives
7-3
1.
2.
3.
4.
5.
6.
7.
8.
9.
Cash
What is cash?
Reporting cash
Summary of
cash-related
items
Accounts
Receivable
Notes
Receivable
Recognition of
accounts
receivable
Recognition of
notes
receivable
Valuation of
accounts
receivable
Valuation of
notes
receivable
Special
Issues
Fair value
option
Disposition of
accounts and
notes
receivable
Presentation
and analysis
7-4
What is Cash?
Cash
7-5
Current asset
Reporting Cash
Cash Equivalents
Short-term, highly liquid investments that are both
(a) readily convertible to cash, and
(b) so near their maturity that they present insignificant
risk of changes in interest rates.
Examples: Treasury bills, Commercial paper, and Money
market funds.
7-6
Reporting Cash
Restricted Cash
Companies segregate restricted cash from regular cash.
Examples, restricted for:
(1) plant expansion, (2) retirement of long-term debt,
and (3) compensating balances.
Illustration 7-1
7-7
LO 2
Reporting Cash
Bank Overdrafts
Company writes a check for more than the amount in its
cash account.
7-8
7-9
LO 2
Accounts Receivable
Receivables - Claims held against customers and
others for money, goods, or services.
7-10
Accounts
Receivable
Notes
Receivable
Accounts Receivable
Nontrade Receivables
1. Advances to officers and employees.
2. Advances to subsidiaries.
3. Deposits to cover potential damages or losses.
4. Deposits as a guarantee of performance or payment.
5. Dividends and interest receivable.
6. Claims against: Insurance companies for casualties sustained;
defendants under suit; governmental bodies for tax refunds; common
carriers for damaged or lost goods; creditors for returned, damaged,
or lost goods; customers for returnable items (crates, containers,
etc.).
7-11
Accounts Receivable
Nontrade Receivables
Illustration 7-3
7-12
7-13
10 %
Discount for
new Retail
Store
Customers
7-14
Payment
terms are
2/10, n/30
7-15
Accounts receivable
2,000
Sales
June 12
7-16
2,000
1,960
40
2,000
Accounts receivable
1,960
Sales
June 12
7-17
1,960
1,960
1,960
June 3
Accounts receivable
1,960
Sales
June 12
Cash
Accounts receivable
Sales Discounts Forfeited
7-18
1,960
2,000
1,960
40
7-19
Accounts Receivable
Allowance for
Doubtful Accounts
Beg.
500
25
Beg.
End.
500
25
End.
7-20
Accounts Receivable
Assets
Current Assets:
Cash
Accounts receivable
Less: Allowance for doubtful accounts
Inventory
Prepaids
Total current assets
Fixed Assets:
Office equipment
Furniture & fixtures
Less: Accumulated depreciation
Total fixed assets
Total Assets
7-21
$
500
(25)
346
475
812
40
1,673
5,679
6,600
(3,735)
8,544
10,217
Accounts Receivable
Assets
Current Assets:
Cash
Accounts receivable, net of $25 allowance
Inventory
Prepaids
Total current assets
Fixed Assets:
Office equipment
Furniture & fixtures
Less: Accumulated depreciation
Total fixed assets
Total Assets
7-22
346
475
812
40
1,673
5,679
6,600
(3,735)
8,544
10,217
Accounts Receivable
Journal entry for credit sale of $100?
Accounts receivable
Sales
Accounts Receivable
100
100
Allowance for
Doubtful Accounts
Beg.
500
25
Beg.
End.
500
25
End.
7-23
Accounts Receivable
Journal entry for credit sale of $100?
Accounts receivable
Sales
Accounts Receivable
Beg.
500
Sale
100
End.
600
7-24
100
100
Allowance for
Doubtful Accounts
25
Beg.
25
End.
Accounts Receivable
Collected of $333 on account?
Cash
333
Accounts receivable
Accounts Receivable
Beg.
500
Sale
100
End.
600
7-25
333
Allowance for
Doubtful Accounts
25
Beg.
25
End.
Accounts Receivable
Collected of $333 on account?
Cash
333
Accounts receivable
Accounts Receivable
Beg.
500
Sale
100
End.
267
7-26
333
333
Allowance for
Doubtful Accounts
25
Beg.
25
End.
Coll.
Accounts Receivable
Adjustment of $15 for estimated Bad-Debts?
Bad debt expense
15
Accounts Receivable
Beg.
500
Sale
100
End.
267
7-27
333
15
Allowance for
Doubtful Accounts
25
Beg.
25
End.
Coll.
Accounts Receivable
Adjustment of $15 for estimated Bad-Debts?
Bad debt expense
15
Accounts Receivable
Beg.
500
Sale
100
End.
267
7-28
333
Coll.
15
Allowance for
Doubtful Accounts
25
Beg.
15
Est.
40
End.
Accounts Receivable
Write-off of uncollectible accounts for $10?
Allowance for Doubtful accounts
Accounts receivable
Accounts Receivable
Beg.
500
Sale
100
End.
267
7-29
333
Coll.
10
10
Allowance for
Doubtful Accounts
25
Beg.
15
Est.
40
End.
Accounts Receivable
Write-off of uncollectible accounts for $10?
Allowance for Doubtful accounts
10
Accounts receivable
Accounts Receivable
Beg.
500
Sale
100
End.
7-30
257
333
Coll.
10
W/O
10
Allowance for
Doubtful Accounts
W/O
25
Beg.
15
Est.
30
End.
10
Accounts Receivable
Assets
Current Assets:
Cash
Accounts receivable, net of $30 allowance
Inventory
Prepaids
Total current assets
Fixed Assets:
Office equipment
Furniture & fixtures
Less: Accumulated depreciation
Total fixed assets
Total Assets
7-31
13
227
812
40
1,092
5,679
6,600
(3,735)
8,544
9,636
7-32
Direct Write-Off
Theoretically deficient:
No matching.
Percentage-of-sales.
Percentage-of-receivables.
7-33
Allowance Method
Emphasis on
the Income
Statement
relationships
Emphasis on
the Balance
Sheet
relationships
7-34
7-35
8,000
8,000
Illustration 7-7
7-36
LO 5
Not matching.
7-37
What entry
would Wilson
make assuming
that no balance
existed in the
allowance
account?
37,650
37,650
What entry
would Wilson
make assuming
the allowance
account had a
credit balance
of $800 before
adjustment?
36,850
36,850
7-40
7,500
7,500
LO 5
6,000
6,000
LO 5
1,000
Accounts Receivable
1,000
Assume that on July 1, Randall Co. pays the $1,000 amount that
Brown had written off on March 1. These are the entries:
7-43
Accounts Receivable
Allowance for Doubtful Accounts
1,000
Cash
Accounts Receivable
1,000
1,000
1,000
LO 5
7-44
A negotiable instrument.
7-45
7-46
Short-Term
Long-Term
Record at
Face Value,
less allowance
Record at
Present Value
of cash expected to
be collected
Interest Rates
Note Issued at
Face Value
Premium
Discount
$1,000
1,000
1,000 Interest
n=3
7-47
$1,000
Interest Received
7-48
2.48685
Factor
$2,487
Present Value
$10,000
Principal
7-49
.75132
Factor
$7,513
Present Value
$ 2,487
7,513
$10,000
Date
Account Title
Jan. yr. 1 Notes receivable
Debit
10,000
Cash
Dec. yr. 1 Cash
Interest revenue
7-50
Credit
10,000
1,000
1,000
Zero-Interest-Bearing Note
Illustration: Jeremiah Company receives a three-year, $10,000
zero-interest-bearing note. The market rate of interest for a
note of similar risk is 9 percent. How does Jeremiah record the
receipt of the note?
i = 9%
$10,000 Principal
$0
$0
$0 Interest
n=3
7-51
Zero-Interest-Bearing Note
PV of Principal
$10,000
Principal
7-52
.77218
Factor
$7,721.80
Present Value
Zero-Interest-Bearing Note
Illustration 7-12
7-53
Zero-Interest-Bearing Note
Journal Entries for Zero-Interest-Bearing note
Present value of Principal
Date
Account Title
Jan. yr. 1
Dec. yr. 1
Notes receivable
$7,721.80
Debit
Credit
10,000.00
2,278.20
Cash
7,721.80
694.96
694.96
($7,721.80 x 9%)
7-54
Interest-Bearing Note
Illustration: Morgan Corp. makes a loan to Marie Co. and
receives in exchange a three-year, $10,000 note bearing interest
at 10 percent annually. The market rate of interest for a note of
similar risk is 12 percent. How does Morgan record the receipt of
the note?
i = 12%
$10,000 Principal
$1,000
1,000
1,000 Interest
n=3
7-55
Interest-Bearing Note
PV of Interest
$1,000
Interest Received
7-56
2.40183
Factor
$2,402
Present Value
Interest-Bearing Note
PV of Principal
$10,000
Principal
7-57
.71178
Factor
$7,118
Present Value
Interest-Bearing Note
Illustration: How does Morgan record the receipt of the note?
Illustration 7-14
Notes Receivable
Discount on Notes Receivable
Cash
7-58
10,000
480
9,520
Interest-Bearing Note
Illustration 7-15
7-59
Interest-Bearing Note
Journal Entries for Interest-Bearing Note
Date
Account Title
Beg. yr. 1
Notes receivable
Debit
10,000
480
Cash
End. yr. 1
Cash
Discount on notes receivable
Interest revenue
Credit
9,520
1,000
142
1,142
($9,520 x 12%)
7-60
7-61
Notes Receivable
Discount on Notes Receivable
Land
Gain on Sale of Land
7-62
35,247
15,247
14,000
6,000
financial statements.
7-63
190,000
7-64
190,000
Reasons:
Competition.
7-65
7-66
7-67
LO 8
Instructions:
7-68
a)
b)
c)
On July 1, 2012, Prince paid Third National all that was due from the
loan it secured on April 1, 2012.
LO 8 Explain accounting issues related to disposition
of accounts and notes receivable.
Account Title
Cash
Finance Charge
Debit
Credit
290,000
10,000
Notes Payable
300,000
($500,000 x 2% = $10,000)
(b)
Cash
350,000
Accounts Receivable
(c)
Notes Payable
Interest Expense
Cash
350,000
300,000
7,500
307,500
LO 8
Sales of Receivables
Factors are finance companies or banks that buy receivables
from businesses for a fee.
Illustration 7-17
7-70
Sales of Receivables
Sale Without Recourse
7-71
Sales of Receivables
Illustration: Crest Textiles, Inc. factors $500,000 of accounts
receivable with Commercial Factors, Inc., on a without recourse
basis. Commercial Factors assesses a finance charge of 3 percent of
the amount of accounts receivable and retains an amount equal to 5
percent of the accounts receivable (for probable adjustments). Crest
Textiles and Commercial Factors make the following journal entries for
the receivables transferred without recourse.
Illustration 7-18
7-72
Sales of Receivables
Illustration: Assume Crest Textiles sold the receivables on a with
recourse basis. Crest Textiles determines that this recourse
obligation has a fair value of $6,000. To determine the loss on the
sale of the receivables, Crest Textiles computes
the net proceeds from the sale as follows.
Illustration 7-19
Net Proceeds
Computation
Illustration 7-20
Loss on Sale Computation
7-73
LO 8
Sales of Receivables
Illustration: Prepare the journal entries for both Crest Textiles and
Commercial Factors for the receivables sold with recourse.
Crest
Textiles, Inc.
Commercial
Factors, Inc.
7-74
Cash
Due from Factor
Loss on Sale of Receivables
Accounts (Notes) Receivable
Recourse Liability
460,000
25,000
21,000
Accounts Receivable
Due to Crest Textiles
Financing Revenue
Cash
500,000
500,000
6,000
25,000
15,000
460,000
The FASB
concluded that a
sale occurs only if
the seller surrenders
control of the
receivables to the
buyer.
Three conditions
must be met.
7-75
7-77
APPENDIX
7A
CASH CONTROLS
7-78
APPENDIX
7A
CASH CONTROLS
7-79
Collection float.
Lockbox accounts
APPENDIX
7A
CASH CONTROLS
Steps:
1. Record $300 transfer of funds to petty cash:
Petty Cash
Cash
300
300
7-80
APPENDIX
7A
CASH CONTROLS
42
Postage Expense
53
Entertainment Expense
76
7-81
2
173
APPENDIX
7A
CASH CONTROLS
50
Petty cash
7-82
50
APPENDIX
7A
CASH CONTROLS
7-83
APPENDIX
7A
CASH CONTROLS
Time Lags
7-84
APPENDIX
7A
CASH CONTROLS
7-85
Illustration 7A-1
Bank Reconciliation
Form and Content
APPENDIX
7-86
7A
CASH CONTROLS
LO 10
APPENDIX
7A
CASH CONTROLS
Illustration 7A-2
7-87
APPENDIX
7A
CASH CONTROLS
Nov. 30
Cash
542
Office expense
Accounts receivable
7-88
18
220
Accounts payable
180
Interest revenue
600
APPENDIX
7A
CASH CONTROLS
Review Question
The reconciling item in a bank reconciliation that will result
in an adjusting entry by the depositor is:
a. outstanding checks.
b. deposit in transit.
c. a bank error.
7-89
APPENDIX
7B
IMPAIRMENT OF RECEIVABLES
7-90
APPENDIX
7B
IMPAIRMENT OF RECEIVABLES
7-91
APPENDIX
7B
IMPAIRMENT OF RECEIVABLES
7-92
APPENDIX
7B
IMPAIRMENT OF RECEIVABLES
12,437
7-93
12,437
Copyright
Copyright 2011 John Wiley & Sons, Inc. All rights reserved.
7-94