1Cash Receivables & Marketable Securities KK Receivables & Marketable Securities 2 CASH A. Definition 1. Cash on the balance sheet is that is & and available to be spent in

Cash, Receivables & Marketable Securities

KK

Cash, Receivables & Marketable Securities

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CURRENT ASSETS ()

Cash ()

Marketable Securities ()

Accounts Receivable ()

Notes Receivable ()

Inventories ()

Prepaid expenses ()

1. Cash

Definition, Cash Equivalents, Bank Reconciliation

2. Marketable Securities

3

0~20% Marketable Securities Cost method

Asset 1

20~50%Equity Method (), Topic

50%Consolidations

3. Accounts Receivable

Bad Debts Expense ()

4. Notes Receivable

Topic

5. Inventories

Pricing Method 12 31 Inventory

6. Prepaid expenses Non-Factor 3

1 1 ?

CPA 1~5 Topic

Cash, Receivables & Marketable Securities

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CASH A. Definition

1. Cash on the balance sheet is that is & and available to be spent in

2. Be careful of cash you cant Examples: a.

b.

c. B. Cash Equivalents

Three-Month Rule: Highly liquid securities with an maturity of _____________________ or less are treated as cash.

Examples: a.

b.

c. C. Bank Reconciliation Primary area for exam questions Work space and additional notes:

money free clearcurrent operationspend in current operation

security depositcompensating bank balancebond sinking fund

originalthree month

CDT-BillsCP

CD (Certificate of Deposit)

( Treasury Bills ) T-Bills

CP (Commercial Paper)

Cash, Receivables & Marketable Securities

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MULTIPLE-CHOICE QUESTION 1 1. In preparing its August 31, Year 2 bank reconciliation, Apex Corp. had available the following information:

Balance per bank statement, 8/31 $18,050 Deposit in transit, 8/31 3,250 Return of customers check for insufficient funds, 8/31 600 Outstanding checks, 8/31 2,750 Bank service charges for August 100

At August 31, Year 2, Apexs correct cash balance is

a. $18,550 b. $17,950 c. $17,850 d. $17,550 Work Space: Bank Balance, 8/31 $ Deposit in Transit Returned Check Outstanding Checks Service Charges Correct Cash Balance $ Additional notes:

Independently answer multiple-choice question 2.

18,050+3,250NO-2,750NO18,550

Cash, Receivables & Marketable Securities

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MULTIPLE-CHOICE QUESTION 2 2. The following information pertains to Grey Co. at December 31, 20X3: Checkbook balance $12,000 Bank statement balance 16,000 Check drawn on Greys account, payable to a vendor, dated and recorded 12/31/X3 but not mailed until 1/10/X4 1,800 On Greys December 31, 20X3 balance sheet, what amount should be reported as cash? a. $12,000 b. $13,800 c. $14,200 d. $16,000

(4827)

Cash in checking account $ Held check Cash and cash equivalents $

Adjusting Journal Entry: Cash Accounts Work space and notes:

Independently answer multiple-choice questions 3-6.

12,000+ 1,80013,800

payable1,800

1,800

Cash, Receivables & Marketable Securities

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MULTIPLE-CHOICE QUESTIONS 3 - 6

3. At October 31st Dingo Inc. had cash accounts at three different banks. One accountbalance is segregated solely for a November 15th payment into a bond sinking fund. A second account, used for branch operations, is overdrawn. The third account, used for regular corporate operations, has a positive balance. How should these accounts be reported in Dingos October 31st classified balance sheet?

a. The segregated account should be reported as a noncurrent asset, the regular accountshould be reported as a current asset and the overdraft should be reported as a currentliability.

b. The segregated and regular accounts should be reported as current assets, and theoverdraft should be reported as a current liability.

c. The segregated account should be reported as a noncurrent asset, and the regularaccount should be reported as a current asset net of the overdraft.

d. The segregated and regular accounts should be reported as current assets net of theoverdraft.

(3446)

Work space and notes:

C will be the answer if this is only one bank.

Cash, Receivables & Marketable Securities

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Items 4 and 5 are based on the following data:

Poe Inc. had the following bank reconciliation at March 31:

Balance per bank statement, 3/31 Add: Deposit in transit

Less: Outstanding checks Balance per books, 3/31

Data per bank for the month of April 20X7 follow:

Deposits Disbursements

All reconciling items at March 31 cleared the bank in April. Outstanding checks at April 30 totaled $7,000. There were no deposits in transit at April 30.

4. What is the cash balance per books at April 30?

a. $48,200b. $52,900c. $55,200d. $58,500

(0875) Bank Balance, 3/31 DepositsDisbursementsBank Balance, 4/30 Outstanding ChecksBook Balance, 4/30

Work space and notes:

46,50010,30056,800(12,600) 44,200

58,40049,700

46,50058,400-49,70055,200-7,000

48,200

Cash, Receivables & Marketable Securities

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5. What is the amount of cash disbursements per books in April?

a. $44,100b. $49,200c. $54,300d. $56,700

(9003) Disbursements per Bank Outstanding Checks, 3/31 Outstanding Checks, 4/30 Disbursements per Book

6. At June 30, Almond Co.s cash balance was $10,012 before adjustments, while itsending bank statement balance was $10,772. Check number 101 was issued June 2 in the amount of $95, but was erroneously recorded in Almonds general ledger balance as $59. Thecheck was correctly listed in the bank statement at $95. The bank statement also included a credit memo for interest earned in the amount of $35, and a debit memo for monthly service charges in the amount of $50. What was Almonds adjusted cash balance at June 30?

a. $9,598b. $9,961c. $10,048d. $10,462

(8106)

Unadjusted Cash Balance at 6/30 Check error Interest income Service Charge Adjusted Cash Balance

Work space and notes:

49,700-12,600+7,00044,100

10,012-36+35-509,961

Answer is b.

Cash, Receivables & Marketable Securities

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DIRECT WRITE-OFF METHOD

A. Accounting for Bad Debts Two Methods

1.

2.

B. Direct Write-off Method

1. No entry for bad debts until customer

2. At default, the customers account is

Example Journal Entry

Year 1: Accounts receivable Sales

Year 4: Bad debt expense Accounts receivable

3. Theoretically, the direct write-off method is because of the concept.

4. Acceptable under GAAP as long as bad debt expenses are

5. Material bad debt expense requires the

Work space and additional notes:

Direct write-off methodAllowance method

defaultwritten off

900

900900

900

weakmatching

not material

allowance method

Cash, Receivables & Marketable Securities

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ALLOWANCE METHOD Allowance Method: A company will accounts receivable expected to become bad debts and set up a for bad debts on the a sheet. Remember, there are approaches to the Allowance Method. A. approach

B. approach Work space and additional notes:

Independently answer multiple-choice questions 7-8.

estimateprovision balance

two

I/SB/S

provision = allowance

I/S = Income Statement

B/S = Balance Sheet