Cash & A/R Flashcards

1
Q

Cash equivalents

A
  • coin or cash on hand
  • claims to cash like checks, money orders, or bank drafts
  • money market funds
  • savings accounts
  • checks written by firm, but mailed after financial statement date
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2
Q

Not cash

A
  • certificates of deposit
  • compensating balances
  • overdrafts
  • check with a future date/post dated check
  • bond sinking fund
  • escrow accounts/restricted accounts
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3
Q

FOB Shipping Freight Charges

A

Buyer is responsible for paying for the freight

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4
Q

FOB Destination Freight Charges

A

Seller is responsible for paying for the freight

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5
Q

When you have different Banks

A

You can net the accounts in one bank together, but not for separate banks

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6
Q

Marketable Securities & Cash

A

Marketable securities are not cash equivalents

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7
Q

When you see something held for resale or to be sold the following year

A

It would be considered a current asset

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8
Q

Balance Per Bank

A

+ Deposits in Transit
+ Cash on Hand
- Outstanding Checks
+/- Errors

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9
Q

Balance Per Books

A
\+ Interest Earned
\+ Note Collected
- Service Charges
- NSF Checks
\+/- Errors
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10
Q

Calculating Disbursements

A

Subtract last month’s outstanding checks from current month’s Disbursements and then add current month’s outstanding checks

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11
Q

Cash Balance Per Books with last month’s banking information

A
  • Subtract last month’s deposits in transit from current month’s Deposits
  • Subtract last month’s outstanding checks from current month’s Disbursements
  • Add Balance per books end of last month and current month’s deposits then subtract current month’s disbursements
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12
Q

Accounts Receivable with Inventory Information

A
  • Find COGS and if company began operations that year, there is no beginning inventory
  • Multiply COGS by markup (1.4) to find credit sales
  • Subtract collections from credit sales
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13
Q

Direct Write Off Method - Bad debt expense & Recovered

A

Bad Debt Expense
—–Accounts Receivable

Cash
—–Bad Debts Recovered

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14
Q

Allowance Method - Write Off

A

Allowance for Doubtful Accounts

———Accounts Receivable

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15
Q

Allowance Method - Recovery

A

Accounts Receivable
—–Allowance for Doubtful Accounts

Cash
—–Accounts Receivable

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16
Q

Allowance Method - End of period adjustment

A

Bad Debt Expense

—–Allowance for Doubtful Accounts

17
Q

Claims against shipper or other things

A

Counts as a Receivable because you are making a dispute/claim to potentially be paid back

18
Q

Allowance balance when you have Ending A/R (gross) and Net Realizable value or Aging ending A/R (net)

A

The difference between them is the balance for allowance for doubtful accounts at the end of the year

19
Q

% of Accounts Receivable uncollectible

A

It would equal ending balance for Allowance account

20
Q

Accrued Interest Receivable for a Note

A

Use the face amount and its % to calculate

21
Q

Total Interest Revenue for Note Receivable

A

Total annual payments minus the present value of the note

22
Q

Sale of A/R with recourse

A

Transferor is still responsible if transferee defaults

23
Q

Sale of A/R without recourse

A

Transferee assumes full responsibility

24
Q

Sale of Accounts Receivable if things go well

A

Cash
—–Accounts Receivable

Also gain or loss

25
Q
  • Firm factors $20,000
  • 5% factor charges & 3% holdback
  • Without recourse
A

Cash 18,400(20,000[1-5%-3%])
Receivable from Factor 600(20,0003%)
Loss on Sale of Receivables 1,000(20,000
5%)
—–Accounts Receivable 20,000

Sales Returns & Allowances 600
———-Receivable from Factor 600

26
Q
  • Firm factors $20,000
  • With Recourse
  • 2% factor charge
  • Liability for bad debts is $1,000
A

Cash 19,600(20,0002%)
Loss on Sale of Receivables 1,400([20,000
2%] + 1,000)
———-Accounts Receivable 20,000
———-Recourse Liability 1,000

27
Q
  • Firm factors $20,000
  • With Recourse
  • 2% factor charge
  • Liability for bad debts is $1,000
  • Does not meet criteria for sale
A

Cash $20,000(1.00 − .02) 19,600
Discount on Factor Liability $20,000(.02) 400
—–Factor Liability 20,000
Allowance for Doubtful Accounts 1,000
—–Accounts Receivable 1,000

Factor Liability 20,000
—–Accounts Receivable 19,000
—–Cash (to pay for uncollectible accounts) 1,000
Interest Expense 400
—–Discount on Factor Liability 400

28
Q

Due from Factor & Recourse Liability

A
  • Due from factor accounts for allowances, returns, and discounts
  • Recourse liability is recorded to indicate probable uncollectible accounts
29
Q

Factoring questions asking about total cash recorded

A

Include holdback fee

30
Q

Cost of factoring fees

A

Does not include holdback fee

31
Q

When note becomes impaired

A

Record a loss equal to Difference between carrying value of note and PV of cash flows expected to be received

32
Q

When Journalized for A/R Factorization

A
  • Holdback gets own line as a debit and other deductions are netted into cash received
  • Cash received is A/R minus holdback & other deductions