BE 7-11 Arness Woodcrafters sells $250,000 of receivables to Commercial Factor, Inc. on a with recourse basis, Commercial assesses a finance charge of 5% and retains an amount equal to 4% of accounts receivable. Arness estimates the fair value of the recourse liablitity to be $8,000. Prepare the journal entry for Arness to record the sale.

BE 7-12 Use the info in 7-11 for Arness Woodcrafters but assume that the recourse liability has a fair value of $4,000, instead of $8,000. Prepare the journal entry and discuss the effects of this change in the value of the recourse liability on Arness's financial statments.

BE 7-13 Recent financial statements of General Mills, Inc. reported net sales of $12,442,000,000. Accounts receivables are $912,000,000 at the beginning of the year and $953,000,000 at the end of the year. Compute General Mills' accounts receivable turnover. Compute General Mills' average collection period for accounts receivables in days.

E 7-1 (Determining cash balance) The controller for Clint Eastwood Co. is attempting to determine the amount of cash to be reported on its December 1,2014, balance sheet.
1. Commercial savings accounts of $600,000 and commercial checking accounts balance of 900,000 are held at First National Bank of Yojimbo.
2. Money market fund account held at Volonte Co. (a mutual fund organization) permits Eastwood to write checks on this balance, $5,000,000.
3. Travel advances of $180,000 for executive travel for the first quarter of next year (employee to reimburse through salary reduction).
4. A separate cash fund in the amount of $1,500,000 is restricted for the retirement of long-term debt
5. Petty cash fund of $1,000
6. An L.O.U. from Marianne Koch, a company customer, in the amount of $190,000
7. A bank overdraft of $110,000 has occurred at one of the banks the company uses to deposit its cash receipts. At the present time, the company has no deposits at this bank.
8. The company has two certificates pf deposit, each totaling $500,000. These CDs have a mortality of 120 days.
9. Eastwood has received a check that is dated January 12, 2015 in the amount of $125,000
10. Eastwood has agreed to maintain a cash balance of $500,000 at all times at First National Bank of Yojimbo to ensure future credit availability.
11. Eastwood has purchase $2,100,000 commercial paper of Sergio Leone Co. which is due in 60 days
12. Currency and coin on hand amounted to $7,700
a) Compute the amount of cash to be reported on Eastwood Co's balance sheet at December 31, 2014
b) Indicate the proper reporting for items that are not reported as cash on December 31, 2014, balance sheet.

E 7-2 (Determining Cash Balance) Presented below are a number of independent situations.
For each individual situation, determine the amount that should be reported as cash. If the item(s) is not reported as cash, explain the rationale.
1. checking account balance $925,000, certificate of deposit $1,400,000; cash advance to subsidiary of 980,000; utility deposit paid to gas company $180
2. checking account balance $600,000; an overdraft in special checking account at same bank as normal checking account of $17,000; cash held in a bond sinking fund $200,000; petty cash fund $300; coins and currency on hand $1,350
3. Checking account balance $590,000, postdated check from customer $11,000; cash restricted due to maintaining compensating balance requirement of $100,000, certified check from customer $ 9,800 postage stamps on hand $620
4. Checking account balance at bank $37,000; money market balance at mutual fund(has checking privileges) $48,000; NSF check received from customer $800
5. Checking account balance $700,000; cash restricted for future pant expansion $500,000; short-term Treasury bills $180,000; cash advance received from customer $900 (not included in checking account balance); cash advance of $7,000 to company executive, payable on demand; refundable deposit of $26,000 paid to federal government to guarantee performance on construction contract.

E 7-3 (Financial Statement Presentation of Receivables) Jim Carrie Company shows a balance of $181,140 in the accounts Receivable account on December 31, 2013.
Installment Account due in 2014 $23,000
Installment Account due after 2014 $34,000
overpayment to vendors $2,640
due from regular customer, of which $40,000 represents
accounts pledged as security for a bank loan $79,000
Advance to employees $1,500
advance to subsidiary company (due in 2015) $81,000
Illustrate how the info above should be shown on the balance sheet of Jim Carrie Company on December 31, 2013.

E 7-4 ( Determining Ending Accounts Receivable) Your accounts receivable clerk, Mitra Adams, to whom you pay a salary of $1,500 per month, has just purchased a new Acura. You decided to test the accuracy of the account receivable balance of $82,000 as shown in the ledger.
Follow info in the 1st year in business:
1. Collection from customer $198,000
2. Merchandise purchased $320,000
3. Ending merchandise inventory $90,000
4. Goods are marked to sell at 40% above cost
Compute an estimate of the ending balance of accounts receivables from customers that should appear in the ledger and nay apparent shortage. Assuming that all sales are made on account

E 7-5 (recording sales gross and net) On January 3, Arnold Company sold to Chester Company merchandise having a sale price of $3,000 with terms of 2/10; n/60, f.o.b. shipping point. An invoice totaling $90, term n/30, was received by Chester on January 8 from John Booth Transport Service for the freight cost. On January 12, the company received the check for the balance due from Chester Company.
a) prepare journal entries on the Arnold Company books to record all the events noted above under each of the following bases.
1) Sales and receivables are entered at gross selling price
2) Sales and receivables are entered at net of cash discounts.
b) Prepare the journal entry under the basis 2, assuming that Chester Company did not remit payments until July 29.

E 7-6 (Recording Sales Transactions) Presented below is information from Perez Computer Incorporated.
July 1 Sold $20,00 of computers to Robertson Company with terms 3/15, n/60. Perez uses the gross method to record cash discounts.
10 Perez received payment from Robertson from the full amount owed from July trns
17 Sold $200,000 in computers and peripherals to the Clark Store with terms of 2/10, n/30.
30 The Clark Store paid Perez for its purchase of July 17.
Prepare the necessary journal entries for Perez Computers.

E 7-7 (Recording Bad Debts) Duncan Company reports the following financial info before adjustments.
Dr. Cr.
Accounts Receivable $100,000
Allowance for Doubtful Accounts $2,000
Sales Revenue (all on credit) $900,000
Sales Returns and Allowances $50,000
Prepare the journal entry to record Bad debt Expense assuming Duncan Company estimates bad debt at a) 1% of net sales and b) 5% of accounts receivable.

E 7-8 (Recording bad Debts) At the end of 2014, Aramis Company has accounts receivable of $800,000 and allowance for doubtful accounts of $40,000. On January 16, 2015, Aramis Company determined that its receivable from Ramirez Company of $6,000 will not be collected, and management authorized its write-off.
a) prepare the journal entry for Aramis to write-off the Ramirez receivable.
b) What is the net realizable value of Aramis Company's accounts receivable before the write off of the Ramirez receivable?
c) What is the net realizable value of the Aramis Company's accounts receivable after the write-off of the Ramirez receivable?
E 7-9 (Computing Bad Debt and Preparing Journal Entries) The trial balance before adjustment of Reba McIntyre Inc. shows the following balances
Dr. Cr.
Accounts Receivables $90,000
Allowance for Doubtful Accounts $1,750
Sales Revenue(all on credit) $680,000
Give the entry for estimated bad debts assuming that the allowance is to provide for doubtful accounts on the basis of a) 4% of gross accounts receivable and b) 1% of net sales.