INTERMEDIATE ACCOUNTING VOLUME 2
7TH EDITION BEECHY FINAL PAPER
QUESTIONS AND SOLUTIONS
◉ 1,500
Answer: A company has the following items:
Cash
$ 10,000
Petty cash
$ 100
Short term paper
$ 1,500
Postdated customer check
$ 2,000
Bank overdraft
$ 50
How much should the company report as cash equivalents?
◉ Cash equivalents is
treasury bills,
commercial paper,
,money market funds,
money market savings certificates, certificates of deposit,
and similar types of deposits with liquidity of less than 3 months
(90 days).
Answer: Examples of cash equivalent (6)
◉ A current liability
Answer: A bank overdraft from a different bank should be
reported as
◉ Debit 20,000 Notes receivable
Credit cash 16,500
Credit Discount on NR 3,500
Answer: A company receives a three-year, $20,000, zero-interest-
bearing note that has a present value of $16,500.
What is the journal entry to record this transaction?
◉ 2 percent if paid within 10 days, gross amount due in 30 days
Answer: what does 2/10,n/30 mean
◉ Debit AR 5,000
Credit Sales Rev 5,000
Answer: assume on January 4, 2020, Max sells $5,000 of hurricane
glass to Oliver on account. Max records the sale on account as
follows.
,◉ Debit Sales R and A300
Credit AR 300
Answer: On January 16, 2020, Max grants an allowance of $300 to
Oliver because some of the hurricane glass is defective. The entry
to record this transaction is as follows.
◉ Debit Sales R and A 100
Credit Allowance for Sales R and A 100
Answer: On January 31, 2020, before preparing financial
statements, Max estimates that an additional $100 in sales returns
and allowances will result from the sale to Oliver on January 4,
2020. An adjusting entry to record this additional allowance is as
follows.
◉ Receivables
Answer: Claims held against customers and others for money
goods or services
◉ Accounts Receivable
Answer: oral promises of the purchaser to pay for goods and
services sold
◉ Debit notes receivable for $7,000;
credit revenue for $5,557;
, credit discount on notes receivable for $1,443.
The interest is implied at face value
Answer: A company issues a $7,000, noninterest-bearing note for
the sale of inventory. The market rate at the time of the sale is of
8%. The note is due in full at the end of three years. Assuming an
annual interest rate of 8% for three years is appropriate, the
present value of the principal is $7,000 × 0.79383 = $5,557.
Assuming an annual interest rate of 8% for eight years is
appropriate, the present value of the principal is $7,000 × 0.78941
= $5,527.
What is the journal entry to record this sale?
◉ 12,000-200=11,800
Answer: A company has sales of $12,000 and sales returns and
allowances of $200.
What should the company report as net sales?
◉ Contra revenue account
Answer: The sales returns and allowances account is
◉ A debit to Sales Returns and Allowances
Answer: The journal entry to record the return of goods from a
customer is
◉ 180,000/((11,000+15,000)/2))= 13.85
7TH EDITION BEECHY FINAL PAPER
QUESTIONS AND SOLUTIONS
◉ 1,500
Answer: A company has the following items:
Cash
$ 10,000
Petty cash
$ 100
Short term paper
$ 1,500
Postdated customer check
$ 2,000
Bank overdraft
$ 50
How much should the company report as cash equivalents?
◉ Cash equivalents is
treasury bills,
commercial paper,
,money market funds,
money market savings certificates, certificates of deposit,
and similar types of deposits with liquidity of less than 3 months
(90 days).
Answer: Examples of cash equivalent (6)
◉ A current liability
Answer: A bank overdraft from a different bank should be
reported as
◉ Debit 20,000 Notes receivable
Credit cash 16,500
Credit Discount on NR 3,500
Answer: A company receives a three-year, $20,000, zero-interest-
bearing note that has a present value of $16,500.
What is the journal entry to record this transaction?
◉ 2 percent if paid within 10 days, gross amount due in 30 days
Answer: what does 2/10,n/30 mean
◉ Debit AR 5,000
Credit Sales Rev 5,000
Answer: assume on January 4, 2020, Max sells $5,000 of hurricane
glass to Oliver on account. Max records the sale on account as
follows.
,◉ Debit Sales R and A300
Credit AR 300
Answer: On January 16, 2020, Max grants an allowance of $300 to
Oliver because some of the hurricane glass is defective. The entry
to record this transaction is as follows.
◉ Debit Sales R and A 100
Credit Allowance for Sales R and A 100
Answer: On January 31, 2020, before preparing financial
statements, Max estimates that an additional $100 in sales returns
and allowances will result from the sale to Oliver on January 4,
2020. An adjusting entry to record this additional allowance is as
follows.
◉ Receivables
Answer: Claims held against customers and others for money
goods or services
◉ Accounts Receivable
Answer: oral promises of the purchaser to pay for goods and
services sold
◉ Debit notes receivable for $7,000;
credit revenue for $5,557;
, credit discount on notes receivable for $1,443.
The interest is implied at face value
Answer: A company issues a $7,000, noninterest-bearing note for
the sale of inventory. The market rate at the time of the sale is of
8%. The note is due in full at the end of three years. Assuming an
annual interest rate of 8% for three years is appropriate, the
present value of the principal is $7,000 × 0.79383 = $5,557.
Assuming an annual interest rate of 8% for eight years is
appropriate, the present value of the principal is $7,000 × 0.78941
= $5,527.
What is the journal entry to record this sale?
◉ 12,000-200=11,800
Answer: A company has sales of $12,000 and sales returns and
allowances of $200.
What should the company report as net sales?
◉ Contra revenue account
Answer: The sales returns and allowances account is
◉ A debit to Sales Returns and Allowances
Answer: The journal entry to record the return of goods from a
customer is
◉ 180,000/((11,000+15,000)/2))= 13.85
