E7.1 (a&b)
1- Amount of cash to report is 600000+900000= 1500000. The bank over draft will be reported as
liability
2- The 100000 will be reported as restricted cash
3- Amount of cash to report is 5,000,000
4- No cash will be reported, the travel advance will be reported as a prepaid expense
5- No cash will be reported because the 1.5 million is restricted so it will be classified as noncurrent asset
6- Amount of cash to report is 3000
7- No cash will be reported the collectible IOU is receivables
8- Amount of cash to report is 11000
9- Neither will be reported in cash because it’s maturity more than three month. So, it will be
reported as a short term investment
10- Only the cheque dated January 12 will be reported in cash with an amount of 25000, the other
cheque will not be recorded in cash in Dec. 2020
11- Will be reported as a cash equivalents because the maturity is less than 3 months
12- Amount of cash 7700
13- The shares will be reported as Equity
The Cash and cash equivalents are 3646700
c. by requiring this balance, the bank gets an effective interest rate on its loan.
d. the proper reporting of restricted cash to offset certain dept for lender is they know the liquidity
and the real position for the company.
E7.6
a. Journal Entry to write of the Morganfield receivable
Allowance for doubtful account
Accounts Receivables
20000
20000
Journal entry to record the amount to be collected from Morganfield
Accounts Receivables
6000
Allowance for doubtful account
(0.10x60000)
6000
b. The estimated Net realizable value before the entry is 2366000 (2500000-120000-14000)
The estimated net realizable value after the entry is 2366000(2500000-120000-14000)
The Book value before the entry was 2380000(2500000-120000)
The book value after the entry is 2366000 (2500000-12000-14000)
E7.9
a.
1- Journal entry for the bad depts if the allowance is 4% from the gross Accounts receivables
Allowance for doubtful account = 4% x 105000= 4200
Bad dept expense
6150
Allowance for doubtful account
( 4200+1950)
6150
2Balance
0-30 days
31-60 days
61-90
Over 90 days
36000
48000
12200
8800
Percentage
estimated to be
Uncollectible
1%
5%
12%
18%
Amount
estimated to be
uncollectible
360
2400
1464
1584
5808
Bad debt expense
7758
Allowance for doubtful account
(5808+1905)
3- Bad debt expense
7758
2295
Allowance for doubtful account
(4200-1905)
4- bad debt expense
Allowance for doubtful account
2295
3903
3903
b. The debit balance for allowance for doubtful accounts means that the company under estimates
the bad debt expense. As a independent reviewer I should focus on analyzing and measure this
part to ensure it’s recorded correctly this year.
c. Under IFRS 9’s Expected Credit Losses are required to be recognized at all times, taking into
account past events, current conditions and forecast information, and to update the amount of
ECLs recognized at each reporting date to reflect changes in an asset’s credit risk. The current
approach considers the expected credit losses, but the percentage of sales doesn’t consider the
changes and risks might happen in the future, so it doesn’t consider the ECLa.
E7.10
Forward balance of 850 partially paid (850-155) 695- More than 90 days
INV 1710 Paid
INV 2116 Paid
INV 2412 partially paid (2110-1300) has balance of 810 – More than 90 days
INV 3614 Paid
Inv 4912 Paid
INV 5681 partially paid and has a balance of 750 (2000-1250)- 30 to 60 days
INV 6347 Paid
The company needs to make an allowance for the balances which more than 60 days.
P 7.4
November–
December 2020
Balance in each
category
1080000-69000=
1011000
Estimated %
uncollectible
8%
Estimated uncollectible
amount
80880
July–October 2020
January–June 2020
Before January 1, 2020
650000
420000
150000
12.5%
20%
60%
81250
84000
90000
336130
b.
Dr
CR
336130