I. Sun Ins. factors $6,000,000 of its acgounts receivables with recourse for a f
ID: 2594983 • Letter: I
Question
I. Sun Ins. factors $6,000,000 of its acgounts receivables with recourse for a finance charge of 3% The finance company retains an amount equal to i 0% of the accounts receivable for passible adjustments. Sun estimates the fair value of the recourse liability at $300,000. What would be recorded as a gain (loss) on the transfer of receivables? A) Loss of $480,000 B) Gain of $1.080,000. C) Loss of $300,000. D) Gain of S180,000 2. Which method may be used to record eash discounts a company receives for paying suppliers promptly? A) Gross method. B) Average method. Net method D Both the net method and the gross method. 3. At the close of its first year of operations, December 31. 2017, Ming Company had accounts receivable of S1,620,000, after deducting the related allowance for doubtful accounts. During 2017, the company had charges to bad debt expense of $270,000 and wrote off, as uncollectible, accounts receivable of S120,000. What should the company report on its balance sheet at December 31, 2017, as accounts receivable before the allowance for doubtful accounts? A) $1,320,000 20,003 $2,010,.000 C) $1,770,000 D) S1,470,000 4. Risers Inc. reported total assets of $2,400,000 and net income of $320,000 for the current year. Risers determined that inventory was overstated by $24,000 at the beginning of the year (this was not corrected). What is the corrected amount for total assets and net income for the year? $2,400,000 and $344,000. $2,376,000 and $296,000. $2.424.000 and $344.000. 52.400,000 and $320,000, C) D)Explanation / Answer
Ans 1) A -Loss of $ 480000
Calculation-;
= 3% of $ 6000000 + reccource liability of $ 300000
= 180000+300000
= $ 480000
2) Ans -D -Both the net method and the gross method.
3) Ans - C- $ 1770000 .
Calculation
Account receivable after allowance for bad debts = 1620000
Add :Allowance for bad debts = 270000
Actual Account receivable = 1890000
Less : Bad debts written off = 120000
Account receivable to be reported = 1770000
4)Ans - A ) $ 2400000 and $ 344000.
Due to overvauation of beginning inventory net income of the current year will be reduced .
To correct it , we have to add the same ( $ 320000 + $24000 = 344000)
It will not affect the closing value of asset hence it will be remain unchanged ($2400000)