Exam (elaborations)
INTERMEDIATE ACCOUNTING EXAM 3- CHAPTER #7 QUESTIONS AND ANSWERS
- Course
- Institution
INTERMEDIATE ACCOUNTING EXAM 3- CHAPTER #7 QUESTIONS AND ANSWERS
[Show more]
Content preview
INTERMEDIATE ACCOUNTING EXAM 3-CHAPTER #7 QUESTIONS AND
ANSWERS
Forms of cash considered current assets - Answer-- coin
- currency
- available funds on deposit at the bank
- money orders
- certified checks
- cashier's checks
- personal checks
- bank drafts
- savings account
- CDs
- money market savings certificate
- short-term paper
- petty cash funds
Postdated checks, I.O.Us are treated as - Answer-receivables
How to classify cash - Answer-current asset
How to classify cash equivalents - Answer-short-term, highly liquid investments that are
1. readily convertible to cash
2. near maturity; present insignificant risk of changes in interest rates
- included in cash calculation
Examples of cash equivalent - Answer-treasury bills, commercial paper, money market
funds
Restricted cash - Answer-either classified in current assets or long-term assets
depending on date of availability/disbursement
1. plant expansion
2. retirement of long-term debt
3. compensating balances
Bank overdrafts - Answer-company writes a check for more than the amount in its cash
account
- current liability
- offset against other cash accounts only when they are with the same bank
Postage on hand - Answer-prepaid expenses
, Cash equivalent - Answer-short-term, highly liquid investments that are both
a) readily convertible to known amounts of cash
b) so near their maturity that they present insignificant risk of changes in value because
of changes in interest rates
- 3 months or less
Exception that requires bank overdrafts to be included in the cash account - Answer-
when available cash is present in another account in the same bank on which the
overdraft occurred
- offsetting
Receivables - Answer-claims held against customers and others for money, goods or
services
Accounts receivable - Answer-oral promises of the purchaser to pay for goods and
services sold
- open accounts
- collected within 30 to 60 days
Current or non-current - Answer-Current = short-term; collected within a year
Noncurrent= long-term
Gross method - Answer-discount taken = deduction to sales
- entering receivable and sale at the gross amount and using a sales discount only
when they receive payment within the discount period
Net method - Answer-discount not taken = show as other revenue
Trade discounts - Answer-reduction in sales prices
- not recognized in the accounting records
- customers are billed net of discounts
- quoted in percentages
Sales returns and allowances - Answer-contra revenue account to sales revenue
- offsets sales revenue on the income statement
Allowance for Sales return and allowances - Answer-contra asset account to A/R and
offsets accounts receivable on the balance sheet
Example: On 1/31/17, before preparing financial statements, Max estimates than an
additional $100 in sales returns and allowances will result from the sale to Oliver on
1/4/17. Record the adjusting entry to record this additional allowance - Answer-Sale
Returns and Allowances 100
Allowance for Sales returns and Allowances 100
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller biggdreamer. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $12.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
76449 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now