Cash and Cash Equivalents

Balance in Checking $15,200Balance in Savings $23,800Undeposited Customer Checks $6,900Currency and Coins on hand $750Balance in Savings Account $0Balance in checking account $0U.S. Treasury bills $32,000

Total $78,650

a.

b.

c.

The controller of the Red Wing Corporation is in the process of preparing the company’s 2016 financial statements. She is trying to determine the correct balance of cash and cash equivalents to be reported as a current asset in the balance sheet. The following items are being considered:

Balances in the company’s accounts at the First National Bank; checking $15,200, savings $23,800.

Undeposited customer checks of $6,900.

Currency and coins on hand of $750.

d.

e.

f.

Required:

Savings account at the East Bay Bank with a balance of $570,000. This account is being used to accumulate cash for future plant expansion (in 2018).

$40,500 in a checking account at the East Bay Bank. The balance in the account represents a 15% compensating balance for a $270,000 loan with the bank. Red Wing may not withdraw the funds until the loan is due in 2019.

U.S. Treasury bills; 2-month maturity bills totaling $32,000, and 7-month bills totaling $37,000.

1

Determine the correct balance of cash and cash equivalents to be reported in the current asset section of the 2016 balance sheet.

Journal Entry WorksheetDate General Journal DebitMarch 17 Allowance for uncollectible accounts $ 2,200

Accounts recivable

March 30 Note recievable $ 27,000 Note Payable

May 30 interest recievable $ 360 interest revenue

May 30 Cash $ 26,973 Loss on Sale of note recievable $ 387 Note ReceivableInterest receiveable

June 30 Accounts Receivable $ 17,000 Sales Rev

July 8 Cash $ 16,490 Sales Discounts $ 510 Accounts Receivable

August 31 Note receivable $ 7,000 discount on note rec ? investmentsgain on sale of investments

Dec 31 Bad Debt Expense $ 7,500 Allowance for uncollectible accounts

Record Accrued interest Discount on note rec ? Dec 31 Interest rev

Journal Entry WorksheetCredit

$ 2,200

$ 27,000

$ 360

$ 27,000 $ 360

$ 17,000

$ 17,000

$ 5,500 ?

$ 7,500

?

Journal Entry Worksheet

Accounts receivable of $2,200 were written off as uncollectible. The company uses the allowance method.

Loaned an officer of the company $27,000 and received a note requiring principal and interest at 8% to be paid on March 30, 2017.

Discounted the $27,000 note at a local bank. The bank’s discount rate is 9%. The note was discounted without recourse and the sale criteria are met.*the 8 is from 8% interest from march 30

Record the cash received on the discounted note.Face Amount of NoteInterest to maturity = ($27,000 * 8%)Maturity Value = $27,000 + 2160 =$29,160Discount = ($29,160 * 9% * 10/12) = $2187Cash = 29,160 - 2187 = $26973

Sold merchandise to the Blankenship Company for $17,000. Terms of the sale are 3/10, n/30. Weldon uses the gross method to account for cash discounts.

The Blankenship Company paid its account in full.

Record the sale of stock with a book value of $5,500 and accepted a $7,000 noninterest-bearing note with a discount rate of 9% due on February 28, 2017.

Bad debt expense is estimated to be 1% of credit sales for the year. Credit sales for 2016 were $750,000.

Journal Entry Worksheet

Journal EntryEvent General Journal Debit1 Allowance for uncollectible accounts $ 54,000

Accounts Rec

2 Accounts Receivable $ 4,500 Allowance for uncollectible accounts

3 Cash $ 4,500 Accounts Rec

Journal Bad DebtsEvent General Journal Debita Bad Debt Expense $ 73,000

Allowance for uncollectible accounts

b Bad Debt Expense $ 46,300 Allowance for uncollectible accounts

c Bad Debt Expense $ 44,210 Allowance for uncollectible accounts

Part TwoNet account rec reported

a $ 349,500 b $ 376,200 c $ 378,290

Journal EntryCredit

Record accounts receivable written off during the year 2016. $ 54,000

$ 4,500 Record entry to reinstate an account receivable previously written off.

$ 4,500 Record collection of an account receivable previously written off.

Journal Bad DebtsCredit

Bad debt expense is estimated to be 4% of credit sales for the year. $ 73,000

Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable. $ 46,300

2015 ReceivablesNet allowance for uncollectable accountsCredit salesCash CollectionsWritten off accounts recAllowance for uncollectable accounts

net allowance for uncollectable accountswritten off accounts reccollected write offAllowance for doubtful accounts

$ 44,210 Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is determined by an aging of accounts receivable.

Age group0-6061-9091-120over 120

Journal Entry

Record accounts receivable written off during the year 2016.

Record entry to reinstate an account receivable previously written off.

Record collection of an account receivable previously written off.

Journal Bad Debts

Bad debt expense is estimated to be 4% of credit sales for the year.

Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable.

$ 507,000 $ 45,000 $ 1,825,000 $ (1,905,000) $ (54,000) $ 418,000

$ 45,000 $ (54,000) $ 4,500 $ (4,500)

Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is determined by an aging of accounts receivable.

% of year end re % uncollectible Bad debt 70% 0.05 $ 14,630 20% 0.15 $ 12,540

5% 0.2 $ 4,180 5% 0.4 $ 8,360

Total $ 39,710 Debit bala $ 4,500

$ 44,210

Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable.

Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is determined by an aging of accounts receivable.

Journal EntryDate General Journal Debit CreditJuly 1 Cash $ 560,000

Note Payable $ 560,000

July 2016 cash $ 672,000 accounts rec $ 672,000

July 31 Interest Expense $ 4,200 Note payable $ 560,000 Cash $ 564,200

Journal EntryDate General Journal Debit CreditJuly 1 Cash $ 556,800

Loss on Transfer of rec $ 23,200 Accounts rec $ 580,000

july 31 Cash $ 208,000 Accounts Rec $ 208,000

Journal Entry

Borrow $560,000, sign a note payable, and assign the entire receivable balance as collateral.

Record the collection of receivables, assuming that 80% of all June 30 receivables are collected on July 31.

At the end of each month, a remittance will be made to the bank that equals the amount of receivables collected plus 9% interest on the unpaid balance of the note at the beginning of the period.

Journal Entry

Transfer $580,000 of specific receivables to the bank without recourse. The bank will charge a 4% factoring fee on the amount of receivables transferred.

Record the collection of receivables, assuming that 80% of all June 30 receivables are collected on July 31. The bank will collect the transferred receivables directly.

Borrow $560,000, sign a note payable, and assign the entire receivable balance as collateral.

Record the collection of receivables, assuming that 80% of all June 30 receivables are collected on July 31.

At the end of each month, a remittance will be made to the bank that equals the amount of receivables collected plus 9% interest on the unpaid balance of the note at the beginning of the period.

Transfer $580,000 of specific receivables to the bank without recourse. The bank will charge a 4% factoring fee on the amount of receivables transferred.

Record the collection of receivables, assuming that 80% of all June 30 receivables are collected on July 31. The bank will collect the transferred receivables directly.

At the end of each month, a remittance will be made to the bank that equals the amount of receivables collected plus 9% interest on the unpaid balance of the note at the beginning of the period.

Record the collection of receivables, assuming that 80% of all June 30 receivables are collected on July 31. The bank will collect the transferred receivables directly.

Journal EntryDate General Journal Debit

28-Feb Note Rec $ 20,000 sales Rev

31-Mar Note Receivable $ 18,000 Discount on note recsales rev

3-Apr Account rec $ 17,000 Sales rev

11-Apr Cash $ 16,320 Sales DiscountAccounts Receivable

17-Apr Sales Return $ 6,500 Accounts Receivable

Inventory $ 4,700 Cost of Goods Sold

30-Apr Cash $ 63,050 Loss on Sale of AR $ 1,950 Accounts Rec

30-Jun Interest Receivable $ 800 Interest Rev

30-Jun Cash $ 20,651 Loss on Sale of Note Receivable $ 149 Interest ReceivableNote Receivable

30-Sep No journal Entry Req

Journal EntryDate General Journal Debit

31-Dec Discount on Note Rec $ 1,620 Interest Rev

Journal EntryCredit

Sold merchandise to Lennox, Inc. for $20,000 and accepted a 12%, 7-month note. 12% is an appropriate rate for this type of note. $ 20,000

Sold merchandise to Maddox Co. and accepted a noninterest-bearing note with a discount rate of 12%. The $18,000 payment is due on March 31, 2017. $ 2,160 $ 15,840

Sold merchandise to Carr Co. for $17,000 with terms 4/10, n/30. Evergreen uses the gross method to account for cash discounts. $ 17,000

Collected the entire amount due from Carr Co $ 680 ??? $ 17,000

A customer returned merchandise costing $4,700. Evergreen reduced the customer’s receivable balance by $6,500, the sales price of the merchandise. Sales returns are recorded by the company as they occur. $ 6,500

A customer returned merchandise costing $4,700. $ 4,700

Transferred receivables of $65,000 to a factor without recourse. The factor charged Evergreen a 3% finance charge on the receivables transferred. The sale criteria are met.

$ 65,000

$ 800

Face Amount $ 20,000 Interest to Maturity $ 1,400 Maturity value $ 21,400

$ 800 Discount $ 749 $ 20,000 Cash $ 20,651

Lennox, Inc., paid the note amount plus interest to the bank

Journal EntryCredit

$ 1,620

Sold merchandise to Lennox, Inc. for $20,000 and accepted a 12%, 7-month note. 12% is an appropriate rate for this type of note.

Sold merchandise to Maddox Co. and accepted a noninterest-bearing note with a discount rate of 12%. The $18,000 payment is due on March 31, 2017.

Sold merchandise to Carr Co. for $17,000 with terms 4/10, n/30. Evergreen uses the gross method to account for cash discounts.

A customer returned merchandise costing $4,700. Evergreen reduced the customer’s receivable balance by $6,500, the sales price of the merchandise. Sales returns are recorded by the company as they occur.

Transferred receivables of $65,000 to a factor without recourse. The factor charged Evergreen a 3% finance charge on the receivables transferred. The sale criteria are met.

Sold merchandise to Maddox Co. and accepted a noninterest-bearing note with a discount rate of 12%. The $18,000 payment is due on March 31, 2017.

A customer returned merchandise costing $4,700. Evergreen reduced the customer’s receivable balance by $6,500, the sales price of the merchandise. Sales returns are recorded by the company as they occur.

Transferred receivables of $65,000 to a factor without recourse. The factor charged Evergreen a 3% finance charge on the receivables transferred. The sale criteria are met.