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Chapter 8: Q2RQ (page 465)
List some common examples of other receivables, besides accounts receivable and notes receivable.
Answer
Dividends receivable, interest receivable, and taxes receivable are typical illustrations of other receivables.
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How is the acid-test ratio calculated, and what does it signify?
Question: On June 6, Lakeland Bank & Trust lent $80,000 to Stephan Stow on a 30-day, 9% note.
Requirements
1. Journalize for Lakeland the lending of the money on June 6.
2. Journalize the collection of the principal and interest at maturity. Specify the date Round to the nearest dollar
Lovett Company reported the following selected items at March 31, 2018 (last year鈥檚鈥�2017鈥攁mounts also given as needed):
Accounts Payable \( 128,000 Accounts Receivable, net:
Cash 104,000 March 31, 2018 \) 108,000
Merchandise Inventory: March 31, 2017 68,000
March 31, 2018 116,000 Cost of Goods Sold 460,000
March 31, 2017 80,000 Short-term Investments 56,000
Net Credit Sales Revenue 1,168,000 Other Current Assets 48,000
Long-term Assets 168,000 Other Current Liabilities 72,000
Long-term Liabilities 52,000
14. Compute Lovett鈥檚 (a) acid-test ratio, (b) accounts receivable turnover ratio, and (c) days鈥� sales in receivables as of
March 31, 2018.
At January 1, 2018, Hilltop Flagpoles had Accounts Receivable of \(28,000, and Allowance for Bad Debts had a credit balance of \)3,000. During the year, Hilltop Flagpoles recorded the following:
a. Sales of \(185,000 (\)164,000 on account; \(21,000 for cash). Ignore Cost of Goods Sold.
b. Collections on account, \)135,000.
c. Write-offs of uncollectible receivables, $2,300.
Requirements
1. Journalize Hilltop鈥檚 transactions that occurred during 2018. The company uses the allowance method.
2. Post Hilltop鈥檚 transactions to the Accounts Receivable and Allowance for Bad Debts T-accounts.
3. Journalize Hilltop鈥檚 adjustment to record bad debts expense assuming Hilltop estimates bad debts as 3% of credit sales. Post the adjustment to the appropriate T-accounts.
4. Show how Hilltop Flagpoles will report net accounts receivable on its December 31, 2018, balance sheet.
Suppose The Right Rig Dealership is opening a regional office in Omaha. Cary Regal, the office manager, is designing the internal control system. Regal proposes the following procedures for credit checks on new customers, sales on account, cash collections, and write-offs of uncollectible receivables:
鈥� The credit department runs a credit check on all customers who apply for credit. When an account proves uncollectible, the credit department authorizes the write off of the accounts receivable.
鈥� Cash receipts come into the credit department, which separates the cash received from the customer remittance slips. The credit department lists all cash receipts by customer name and amount of cash received.
鈥� The cash goes to the treasurer for deposit in the bank. The remittance slips go to the accounting department for posting to customer accounts.
鈥� The controller compares the daily deposit slip to the total amount posted to customer accounts. Both amounts must agree.
Recall the components of internal control. Identify the internal control weakness in this situation, and propose a way to correct it.
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