Week 4 notes
Week 4 notes ACCT - 23020 - 002
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ACCT - 23020 - 002
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This 7 page Class Notes was uploaded by Alyssa Brutsche on Tuesday March 29, 2016. The Class Notes belongs to ACCT - 23020 - 002 at Kent State University taught by Wendy M. Tietz (P) in Fall 2015. Since its upload, it has received 17 views. For similar materials see INTRODUCTION TO FINANCIAL ACCOUNTING in Accounting at Kent State University.
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Date Created: 03/29/16
What type of account is accounts receivable? -Answer Asset Short term investments may be divided into held-to-maturity securities, trading securities and available-for-sale securities -Answer True An unrealized gain occurs when a company sells a trading security -Answer False Book Question-Inverness Investments purchased Dorr Corp. shares as a trading security on December 16 for $85,000 Suppose that Door Corp. shares decreased in value to $78,000 at Dec. 31. Make the Inverness journal entry to adjust the investment in trading securities accounts to market value -Unrealized Loss on Trading Securities $85,000-$78,000 $7,000 investment in trading securities $7,000 show how inverness would report the investment in trading securities on its balance sheet and the unrealized gain or loss on its income statement. -Balance sheet Current assets: investment in trading securities…………………………………… $78,000 Income Statement Other revenues and gains(losses): Unrealized loss on trading securities……………………………. ($7,000) A company will have an unrealized loss if the fair value of the investment is greater than its cost. -Answer False ABC Company purchases a trading security for $12,000. The entry to record this transaction will include a -Answer debit investment credit cash An unrealized gain: -Answer Is recorded when the fair value of the trading security is more than its cost When goods are shipped FOB destination revenue is recognized by the seller when goods leave the shipping dock -Answer False Which of the following is true regarding FOB shipping point? -Answer Ownership changes hands when the merchandise is shipped ABC company has shipped goods to one of its customers FOB shipping point. ABC Co. will recognize sales revenue when: -Answer The goods leave ABC’s shipping dock A business offers credit terms of 1/15, n/30. These terms indicate that: -Answer a discount of 1% can be taken if the invoice is paid within 15 days An unrealized gain or loss occurs when a company sells a trading security -Answer False Scribbles purchases paper products on account from OfficeMax. Which company has an accounts receivable? -Answer OfficeMax The ____ method records collection losses based on estimates developed from the company’s collection experience. -Answer Allowance The Allowance for Uncollectible Accounts normally has a credit balance -Answer True Allowance for uncollectible accounts is classified as: -Answer contra-asset account There are two basic ways to estimate uncollectibles, the direct write off method and the allowance method. -Answer False The net realizable value of accounts receivable is the difference between accounts receivable and -Answer allowance for uncollectible accounts The party to whom the money is owed is -Answer Creditor The creditor has a note payable -Answer False The maturity value of a note is the sum of the principal less interest due at maturity -Answer False S5-11 Compute the amount of interest during 2014 2015 2016 for the following not receivable on May 31, 2014 Main Street Bank lent $220,000 to Ron Rowlette on a two year 5% note -2014 interest = $6,417 ($220,000 x .05 x 7/12) -2015 interest = $11,000 ($220,000 x .05) -2016 interest = $4,583 ($220,000 x .05 x 5/12) Which party has a Note receivable? Main Street Bank Note payable? Ron Rowlette Interest revenue? Main Street Bank Interest expense? Ron Rowlette How much in total would main street bank collect if Ron Rowlette paid off the note early say on Nov 30, 2014 -Principle = $220,000 interest ($220,000 x .05 x 6/12) = $5,500 Total = $225,500 A separate account for each customer is kept in a -Answer subsidiary ledger
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