Cash and Cash Equivalents

Balance in Checking
Balance in Savings
Undeposited Customer Checks
Currency and Coins on hand
Balance in Savings Account
Balance in checking account
U.S. Treasury bills

$15,200
$23,800
$6,900
$750
$0
$0
$32,000

Total

$78,650

The controller of the Red Wing Corporation is in the process of

preparing the companys 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:

a.

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

b.

Undeposited
customer checks
of $6,900.

c.

Currency and
coins on hand of
$750.

d.
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).

e.

$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.

f.

Required:

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

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

Date
March 17

General Journal
Allowance for uncollectible accounts
Accounts recivable

Debit
$

March 30

Note recievable
Note Payable

27,000

May 30

interest recievable
interest revenue

360

May 30

Cash
Loss on Sale of note recievable
Note Receivable
Interest receiveable

$
$

26,973
387

June 30

Accounts Receivable
Sales Rev

17,000

July 8

Cash
Sales Discounts
Accounts Receivable

$
$

16,490
510

August 31

Note receivable
discount on note rec
investments
gain on sale of investments

$
?

7,000

Dec 31

Bad Debt Expense

Allowance for uncollectible accounts

7,500

Record Accrued interest

Dec 31

Discount on note rec

Interest rev

2,200

Journal Entry Worksheet

Credit
$

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 met

Loaned an officer of the company $27,000 and received a note requiring principal and interest at 8% t

Discounted the $27,000 note at a local bank. The banks discount rate is 9%. The note was discounted
*the 8 is from 8% interest from march 30
Record the cash received on the discounted note.
Face Amount of Note
Interest to maturity = ($27,000 * 8%)
Maturity Value = $27,000 + 2160 =$29,160
Discount = ($29,160 * 9% * 10/12) = $2187
Cash = 29,160 - 2187 = $26973

Sold merchandise to the Blankenship Company for $17,000. Terms of the sale are 3/10, n/30. Weldon

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

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

Journal Entry
Event
1

General Journal
Allowance for uncollectible accounts
Accounts Rec

Debit
$
54,000

Accounts Receivable
Allowance for uncollectible accounts

4,500

Cash
Accounts Rec

4,500

Event
a

General Journal
Bad Debt Expense
Allowance for uncollectible accounts

Bad Debt Expense

Allowance for uncollectible accounts

46,300

Bad Debt Expense

Allowance for uncollectible accounts

44,210

Journal Bad Debt

Debit
$
73,000

a
b
c

Part Two
Net account rec reported
$
$
$

349,500
376,200
378,290

Journal Entry
Credit
Record accounts receivable written off during the year 2016.
$

54,000

4,500

Record entry to reinstate an account receivable previously written

4,500

Record collection of an account receivable previously written off.

Journal Bad Debts

Credit

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

$

73,000

Bad debt expense is estimated by computing net realizable value

$

46,300
2015 Receivables
Net allowance for uncollectable accounts
Credit sales
Cash Collections
Written off accounts rec
Allowance for uncollectable accounts

net allowance for uncollectable accounts

written off accounts rec
collected write off
Allowance for doubtful accounts

44,210

Bad debt expense is estimated by computing net realizable value

Age group
0-60
61-90
91-120
over 120

ff during the year 2016.

receivable previously written off.

vable previously written off.

4% of credit sales for the year.

mputing net realizable value of the receivables. The allowance for uncollectible accounts is estimated to be 10%

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

$
$
$
$

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

mputing net realizable value of the receivables. The allowance for uncollectible accounts is determined by an ag
% of year end re% uncollectible
70%
0.05
20%
0.15
5%
0.2
5%
0.4
Total
Debit bala

Bad debt
$ 14,630
$ 12,540
$ 4,180
$ 8,360
$ 39,710
$ 4,500
$ 44,210

estimated to be 10% of the year-end balance in accounts receivable.

determined by an aging of accounts receivable.

Date
July 1

General Journal
Cash
Note Payable

July 2016

cash
accounts rec

Interest Expense
Note payable
Cash

$
$

July 31

Date
July 1

General Journal
Cash
Loss on Transfer of rec
Accounts rec

july 31

Cash
Accounts Rec

Debit
$

Debit
$
$

Journal Entry
Credit
560,000
$
560,000
672,000
$

672,000

564,200

4,200
560,000

Journal Entry
Credit
556,800
23,200
$
580,000
208,000
$

208,000

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

Record the collection of receivables, assuming that 80% of all June 30 receivables are colle

At the end of each month, a remittance will be made to the bank that equals the amount o

Transfer $580,000 of specific receivables to the bank without recourse. The bank will charg

Record the collection of receivables, assuming that 80% of all June 30 receivables are colle

vable balance as collateral.

30 receivables are collected on July 31.

hat equals the amount of receivables collected plus 9% interest on the unpaid balance of the note at the beginn

urse. The bank will charge a 4% factoring fee on the amount of receivables transferred.

30 receivables are collected on July 31. The bank will collect the transferred receivables directly.

of the note at the beginning of the period.

s directly.

Date

General Journal
28-Feb Note Rec
sales Rev
31-Mar Note Receivable
Discount on note rec
sales rev

Journal Entry
Debit
$
20,000

18,000

17,000

11-Apr Cash
Sales Discount
Accounts Receivable

16,320

17-Apr Sales Return

Accounts Receivable

6,500

Inventory
Cost of Goods Sold

4,700

30-Apr Cash
Loss on Sale of AR
Accounts Rec

$
$

63,050
1,950

30-Jun Interest Receivable

Interest Rev

800

30-Jun Cash
Loss on Sale of Note Receivable
Interest Receivable
Note Receivable

$
$

20,651
149

3-Apr Account rec

Sales rev

30-Sep No journal Entry Req

Date

General Journal

Journal Entry
Debit

31-Dec Discount on Note Rec

Interest Rev

1,620

al Entry
Credit

Sold merchandise to Lennox, Inc. for $20,000 and accepted a 12%, 7-mon
$

20,000

$
$

2,160
15,840

17,000

Sold merchandise to Maddox Co. and accepted a noninterest-bearing not

Sold merchandise to Carr Co. for $17,000 with terms 4/10, n/30. Evergree

Collected the entire amount due from Carr Co

$
$

680 ???
17,000

A customer returned merchandise costing $4,700. Evergreen reduced the

$

6,500
A customer returned merchandise costing $4,700.

4,700

Transferred receivables of $65,000 to a factor without recourse. The facto

$

65,000

800

$
$

800
20,000

Face Amount
Interest to Maturity
Maturity value
Discount
Cash

$
$
$
$
$

20,000
1,400
21,400
749
20,651

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

al Entry
Credit

1,620

d accepted a 12%, 7-month note. 12% is an appropriate rate for this type of note.

noninterest-bearing note with a discount rate of 12%. The $18,000 payment is due on March 31, 2017.

rms 4/10, n/30. Evergreen uses the gross method to account for cash discounts.

0. Evergreen reduced the customers receivable balance by $6,500, the sales price of the merchandise. Sales re

thout recourse. The factor charged Evergreen a 3% finance charge on the receivables transferred. The sale crite

March 31, 2017.

he merchandise. Sales returns are recorded by the company as they occur.

ransferred. The sale criteria are met.