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Chapter 7: Question 18Q (page 362)
Indicate three reasons why a company might sell its receivables to another company.
Business entities are generally involved in selling receivables in situations ofunavailability of credit, non-violation of lending arrangements, and difficulty in collecting receivables.
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Use the information from BE7-2, assuming Restin Co. uses the net method to account for cash discounts. Prepare the required journal entries for Restin Co.
Of what merit is the contention that the allowance method lacks the objectivity of the direct write-off method? Discuss in terms of accounting鈥檚 measurement function.
On January 1, 2017, Lombard Co. sells property for which it had paid \(690,000 to Sargent Company, receiving in return Sargent鈥檚 zero-interest-bearing note for \)1,000,000 payable in 5 years. What entry would Lombard make to record the sale, assuming that Lombard frequently sells similar items of property for a cash sales price of $640,000?
(Note Transactions at Unrealistic Interest Rates) On July 1, 2017, Agincourt Inc. made two sales.
1. It sold land having a fair value of \(700,000 in exchange for a 4-year zero-interest-bearing promissory note in the face amount of \)1,101,460. The land is carried on Agincourt鈥檚 books at a cost of \(590,000.
2. It rendered services in exchange for a 3%, 8-year promissory note having a face value of \)400,000 (interest payable annually).
Agincourt Inc. recently had to pay 8% interest for money that it borrowed from British National Bank. The customers in these two transactions have credit ratings that require them to borrow money at 12% interest.
Instructions
Record the two journal entries that should be recorded by Agincourt Inc. for the sales transactions above that took place on July 1, 2017.
(Petty Cash) The petty cash fund of Fonzarelli鈥檚 Auto Repair Service, a sole proprietorship, contains the following.
1. Coins and Currency | \(15.20 | |
2. Postage Stamps | 2.90 | |
3. An I.O.U from Cunningham, an employee, for cash advance | 40 | |
4. Check payable to Fonzarelli鈥檚 Auto Repair from Pottsie Weber, an employee, marked NSF | 34 | |
5. Vouchers for the following: | ||
Stamps | 20 | |
Two Rose Bowl tickets for Nick Fonzarelli | 170 | |
Printer cartridge | 14.35 | 204.35 |
\)296.45 |
The general ledger account Petty Cash has a balance of $300.
Instructions
Prepare the journal entry to record the reimbursement of the petty cash fund.
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