Determine the specific citation for accounting for each of the following items: 1. Accounts receivables from related parties should be shown separately from trade receivables. 2. The definition of cash equivalents. 3. Notes exchanged for cash are valued at the cash proceeds. 4. The two conditions that must be met to accrue a loss on an accounts receivable.
1. Related Party and Trade Receivables are separated in Accounting:
Loans or trade receivables may be presented on the balance sheet as aggregate amounts. However, such receivables held for sale shall be a separate balance sheet category. Major categories of loans or trade receivables shall be presented separately either in the balance sheet or in the notes to the financial statements. The definition of cash equivalents:
Cash equivalents are short-term, highly liquid investments that have both of the following characteristics:
• a. Readily convertible to known amounts of cash
• b. So near their maturity that they present insignificant risk of changes in value because of changes in interest rates.
3. Notes exchanged for cash are valued at the cash proceeds:
Notes Exchanged for Cash:
if notes received solely for cash and no other right or privilege is exchanged, it is presumed to have a present value at issuance measured by the cash proceeds exchanged. If cash and some other rights or privileges are exchanged for a note, the value of the rights or privileges shall be given accounting recognition
The two conditions that must be met to accrue a loss on an accounts receivable:
General Rule
When a loss contingency exists, the likelihood that the future event or events will confirm the loss or impairment of an asset or the incurrence of a liability can range from probable to remote. As indicated in the definition of contingency, the term loss is used for convenience to include many charges against income that are commonly referred to as expenses and others that are commonly referred to as losses. The Contingencies Topic uses the terms probable, reasonably possible, and remote to identify three areas within that range.
An estimated loss from a loss contingency shall be accrued by a charge to income if both of the following conditions are met:
a. Information available before the financial statements are issued or are available to be issued indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements.