Chapter 7

Question 1

Restricted Cash

Answer 1

funds set aside to be used on specific things

Question 2

Things to pay attention to with bank reconciliations

Answer 2

deposits in transit, outstanding checks, bank charges and credits, bank or depositor error

Question 3

coupons sales and promotions-not listed in the accounting records

Answer 3

trade discounts

Question 4

Gross Method

Answer 4

journalize it assuming they won’t take the discounts, if they do make the adjustment later

Question 5

Journal Entry for Gross Method

Answer 5

Cash
Sales Discounts
Accounts Receivable

Question 6

Net Method

Answer 6

journalize it assuming they will take the discount

Question 7

Journal Entry for Net Method

Answer 7

Cash
Sales Discounts Forfeited
Accounts Receivable

Question 8

Why do accounts receivable write-offs

Answer 8

must write off uncollectible accounts because it is no longer an asset to us. Therefore, we must report short-term receivables at net realizable value

Question 9

Allowance method

Answer 9

Reports net realizable value

Question 10

Better method for matching revenues and expenses. Ignore any previous balance in the allowance
(Percent of Sales or Percent of Receivables)

Answer 10

Percent of Sales

Question 11

Better estimate of net realizable value. can be valued using a composite rate or aging schedule. The balance in the allowance carries forward.
(Percent of Sales or Percent of Receivables)

Answer 11

Percent of Receivables

Question 12

Recording Short Term Notes Receivable

Answer 12

recorded at face value less allowance

Question 13

Recording Long Term Notes Receivable

Answer 13

recorded at present value of cash expected to be collected

Question 14

Calculating PV of Interest Bearing Notes

Answer 14

calculate in two steps like a bond. PV of interest and principal