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Chapter 7: Q4Q (page 362)
Springsteen Inc. reported in a recent annual report 鈥淩estricted cash for debt redemption.鈥� What section of the balance sheet would report this item?
Theasset section of the balance sheet would report the above provided item.
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On June 3, Arnold Company sold to Chester Company merchandise having a sale price of \(3,000 with terms of 2/10, n/60, f.o.b. shipping point. An invoice totaling \)90, terms n/30, was received by Chester on June 8 from John Booth Transport Service for the freight cost. On June 12, the company received a check for the balance due from Chester Company
Instructions
(a) Prepare journal entries on the Arnold Company books to record all the events noted above under each of the following bases.
(1) Sales and receivables are entered at gross selling price.
(2) Sales and receivables are entered at net of cash discounts.
(b) Prepare the journal entry under basis 2, assuming that Chester Company did not remit payment until July 29.
GROUPWORK (Income Effects of Receivables Transactions) Sandburg Company requires additional cash for its business. Sandburg has decided to use its accounts receivable to raise the additional cash and has asked you to determine the income statement effects of the following contemplated transactions.
1. On July 1, 2017, Sandburg assigned \(400,000 of accounts receivable to Keller Finance Company. Sandburg received an advance from Keller of 80% of the assigned accounts receivable less a commission of 3% on the advance. Prior to December 31, 2017, Sandburg collected \)220,000 on the assigned accounts receivable, and remitted \(232,720 to Keller, \)12,720 of which represented interest on the advance from Keller.
2. On December 1, 2017, Sandburg sold \(300,000 of net accounts receivable to Wunsch Company for \)270,000. The receivables were sold outright on a without recourse basis.
3. On December 31, 2017, an advance of \(120,000 was received from First Bank by pledging \)160,000 of Sandburg鈥檚 accounts receivable. Sandburg鈥檚 first payment to First Bank is due on January 30, 2018.
Instructions
Prepare a schedule showing the income statement effects for the year ended December 31, 2017, as a result of the above facts.
Discuss the accounting for sales allowances and how they relate to the concept of variable consideration.
(Notes Receivable Journal Entries) On December 31, 2017, Oakbrook Inc. rendered services to Beghun Corporation at an agreed price of \(102,049, accepting \)40,000 down and agreeing to accept the balance in four equal installments of $20,000 receivable each December 31. An assumed interest rate of 11% is imputed.
Instructions
Prepare the entries that would be recorded by Oakbrook Inc. for the sale and the receipts and interest on the following dates (prepare an amortization schedule). (Assume that the effective-interest method is used for amortization purposes.)
(a) December 31, 2017.
(b) December 31, 2018.
(c) December 31, 2019.
(d) December 31, 2020.
(e) December 31, 2021.
Kraft Enterprises owns the following assets at December 31, 2017.
Cash in bank 鈥� saving account | 68,000 | Checking account balance | 17,000 |
Cash on hand | 9,300 | Post-dated Checks | 750 |
Cash refunded due from IRS | 31,400 | Certificate of deposits (180-days) | 90,000 |
What amount should be reported as cash?
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