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Chapter
7
Intermediate Accounting 12th Edition Kieso, Weygandt, and Warfield
Chapter 7-1
Identify items considered as cash. Indicate how to report cash and related items. Define receivables and identify the different types of receivables. Explain accounting issues related to recognition of accounts receivable. Explain accounting issues related to valuation of accounts receivable. Explain accounting issues related to recognition of notes receivable. Explain accounting issues related to valuation of notes receivable. Explain accounting issues related to disposition of accounts and notes receivable. Describe how to report and analyze receivables.
Cash
What is cash? Management and control of cash Reporting cash Summary of cashrelated items
Receivables
Recognition of accounts receivable Valuation of accounts receivable Recognition of notes receivable Valuation of notes receivable Disposition of accounts and notes receivable
Chapter 7-3
Chapter 7-5
Chapter 7-6
Chapter 7-7
Chapter 7-8
Receivables Receivables
Claims held against customers and others money, goods, or services. Oral promises of the purchaser to pay for goods and services sold. for
Chapter 7-9
Receivables Receivables
Nontrade Receivables
Examples:
1.
2. Advances to subsidiaries. 3. Deposits to cover potential damages or losses. 4. Deposits as a guarantee of performance or payment. 5. Dividends and interest receivable.
Chapter 7-10
Chapter 7-11
Chapter 7-12
Chapter 7-14
Chapter 7-16
End.
Chapter 7-17
500
25
End.
Current Assets: Current Assets: Cash Cash Accounts receivable Accounts receivable Less allowance for doubtful accounts Less allowance for doubtful accounts Inventory Inventory Prepaids Prepaids Total current assets Total current assets Fixed Assets: Fixed Assets: Office equipment Office equipment Furniture & fixtures Furniture & fixtures Less: Accumulated depreciation Less: Accumulated depreciation Total fixed assets Total fixed assets Total Assets Total Assets
Chapter 7-18
Assets Assets
500 500 25 25
$ 346 $ 346 475 475 812 812 _ 40 _ 40 1,673 1,673 5,679 5,679 6,600 6,600 (3,735) (3,735) 8,544 8,544 $10,217 $10,217
Current Assets: Current Assets: Cash Cash Accounts receivable, net of $25 allowance Accounts receivable, net of $25 allowance for doubtful accounts for doubtful accounts Inventory Inventory Prepaids Prepaids Total current assets Total current assets Fixed Assets: Fixed Assets: Office equipment Office equipment Furniture & fixtures Furniture & fixtures Less: Accumulated depreciation Less: Accumulated depreciation Total fixed assets Total fixed assets Total Assets Total Assets
Chapter 7-19
Assets Assets
$ 346 $ 346 475 475 812 812 _ 40 _ 40 1,673 1,673 5,679 5,679 6,600 6,600 (3,735) (3,735) 8,544 8,544 $10,217 $10,217
End.
Chapter 7-20
500
25
End.
End.
Chapter 7-21
600
25
End.
End.
Chapter 7-22
600
25
End.
End.
Chapter 7-23
267
25
End.
End.
Chapter 7-24
267
25
End.
End.
Chapter 7-25
267
40
End.
End.
Chapter 7-26
267
40
End.
10 10
Coll. W/O
257
Current Assets: Current Assets: Cash Cash Accounts receivable,,net of $30 allowance Accounts receivable net of $30 allowance for doubtful accounts for doubtful accounts Inventory Inventory Prepaids Prepaids Total current assets Total current assets Fixed Assets: Fixed Assets: Office equipment Office equipment Furniture & fixtures Furniture & fixtures Less: Accumulated depreciation Less: Accumulated depreciation Total fixed assets Total fixed assets Total Assets Total Assets
Chapter 7-28
Assets Assets
$ 346 $ 346 227 227 812 812 _ 40 _ 40 1,673 1,673 5,679 5,679 6,600 6,600 (3,735) (3,735) 8,544 8,544 $10,217 $10,217
Chapter 7-29
Chapter 7-30
Percentage of Receivables
Net Realizable Value Receivables - Allowance for Bad Debt
Chapter 7-31
Allowance for Doubtful Accounts: Allowance for Doubtful Accounts: Case I $150 (credit balance) Case I $150 (credit balance) Case 2 $150 (debit balance) Case 2 $150 (debit balance)
Chapter 7-32
Estimated expense $ 6,250 Estimated expense $ 6,250 =================================================== =================================================== What should the ending balance be for the allowance What should the ending balance be for the allowance account? -- Case 11 and Case 2 account? -- Case and Case 2
Chapter 7-33
6,250 6,250
Desired balance Desired balance =================================================== =================================================== What should the ending balance be for the allowance What should the ending balance be for the allowance account? -- Case 11 and Case 2 account? -- Case and Case 2
Chapter 7-35
5,650 5,650
5,950 5,950
Chapter 7-39
Chapter 7-40
0
Chapter 7-42
PV of Interest
12% 0.89286 3.60478 5.65022 6.81086 7.46944
Discount Rate 8% 10% 0.92593 3.99271 6.71008 8.55948 9.81815 0.90900 3.79079 6.14457 7.60608 8.51356
0.96154 0.94340 4.45183 4.21236 8.11090 7.36009 11.11839 9.71225 13.59033 11.46992
$8,000
Interest
Chapter 7-43
3.99271
Factor
$31,942
Present Value
PV of Principal
12% 0.89286 0.56743 0.32197 0.18270 0.10367
Discount Rate 8% 10% 0.92593 0.68058 0.46319 0.31524 0.21455 0.90909 0.62092 0.38554 0.23939 0.14864
$100,000
Principal
Chapter 7-44
.68058
Factor
$68,058
Present Value
Chapter 7-45
0
Chapter 7-46
Cash Received Date of issue End of yr. 1 End of yr. 2 End of yr. 3 End of yr. 4 End of yr. 5 -
Chapter 7-47
$74,726
Debit 100,000 25,274 74,726 Credit
Chapter 7-48
$ 92,418
Cash Received Date of issue End of yr. 1 End of yr. 2 End of yr. 3 End of yr. 4 End of yr. 5 8,000 8,000 8,000 8,000 8,000 40,000
Chapter 7-50
Chapter 7-51
Chapter 7-52
Disposition of Accounts and Notes Receivable Disposition of Accounts and Notes Receivable
Owner may transfer accounts or notes receivables to another company for cash. Reasons: Competition. Sell receivables because money is tight. Billing / collection are time-consuming and costly. Transfer accomplished by:
1. Secured borrowing 2. Sale of receivables
Chapter 7-53
Account Title
Credit
200,000
Chapter 7-56
Chapter 7-58
Segregate the different types of receivables that a company possesses, if material. Appropriately offset the valuation accounts against the proper receivable accounts. Determine that receivables classified in the current assets section will be converted into cash within the year or the operating cycle, whichever is longer. Disclose any loss contingencies that exist on the receivables. Disclose any receivables designated or pledged as collateral. Disclose all significant concentrations of credit risk arising from receivables.
LO 9 Explain how receivables are reported and analyzed.
4. 5. 6.
Chapter 7-59
Copyright Copyright
Copyright 2006 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.
Chapter 7-61