5Short-terminvestments_receivables短期投资和

Chapter5Short-TermInvestments&[e-mail]2013LearningObjectives•Accountforshort-terminvestments•Applyinternalcontrolstoreceivables•Usetheallowancemethodforuncollectiblereceivables•Accountfornotesreceivable•Use2newratiostoevaluatefinancialpositionKeyTerms•Creditor•Debtor•Debtinstrument•Equitysecurity•Maturity•TermShort-TermInvestments•MarketableSecurities–investments–companyplanstoholdoneyearorless•TradingInvestments–intentistosellintheshorttermtogenerateprofits•Tradingsecuritiesarereportedonthebalancesheetatcurrentmarketvalue•Unrealizedgainsandlossesappearontheincomestatement.EntryforUnrealizedGainNov.18Short-TermInvestments100,000Cash100,000PurchasedInvestmentTorecordthepurchaseofshort-terminvestments.Torecordthereceiptofacashdividendfromshort-terminvestments.Nov.27Cash4,000DividendRevenue4,000ReceivedcashdividendEntryforUnrealizedGainDec31Short-TermInvestments2,000.00UnrealizedGainonInvestments2,000.00AdjustinvestmenttomarketvalueTorecordthe$2,000increaseinmarketvalueofmarketablesecuritiesheldasshort-terminvestments.EntryforUnrealizedLossDec.31Dr:Unrealizedlossoninvestments5,000Cr:Short-termInvestments5,000Torecordtheunrealizedlossof$5,000decreasedinmarketvalueofmarketablesecuritiesheldasshort-terminvestmenReportingShort-TermInvestments•BalanceSheet–CurrentAssets–Tradinginvestmentsreportedatcurrentmarketvalue•IncomeStatement–InterestanddividendrevenuereportedunderOtherRevenue.–GainsandlossesreportedunderOtherRevenue.ReportingShort-TermInvestmentsEntryforRealizedGainsandLosses20x6Jan.19Dr:Cash98,000LossonSaleofInvestments4,000Cr:Short-termInvestments102,000TorecordtherealizedLossof$4,000decreasedinmarketvalueofmarketablesecuritiesheldasshort-terminvestmenLendingAgreementsandtheCurrentRatio•Lendingagreementsoftenrequiretheborrowertomaintainacurrentratioatsomespecifiedlevel,say1.5orgreater.•Thereareseveralstrategiesofincreasingthecurrentratio.Receivables•Receivablesaremonetaryclaimsagainstothers.•Twomajortypes:–Accountsreceivable(tradereceivables)–amountscollectedfromcustomersfromthesaleofgoodsandservices–Notesreceivable–writtenpromisetopay•secured•unsecuredIssuesWhenExtendingCredit•Whatarethebenefitsandcostofextendingcredittocustomers?•Extendcreditonlytocreditworthycustomers.•Separatecash-handlingandaccountingduties.•Pursuecollectionfromcustomers.IssuesinAccountingforReceivables•Measureandreportreceivablesatnetrealizablevalue.•Measureandreporttheexpenseassociatedwithfailuretocollect.Accountingforuncollectiblereceivables•Sellingoncreditcreatesbothabenefitandacost:–Benefit:Customerswhocannotpaycashimmediatelycanbuyoncredit,sosalesandprofitsincrease;–Cost:Thecompanycannotcollectfromsomecustomers.Accountantslabelthiscostuncollectible-accountexpense,doubtful-accountexpense,orbad-debtexpenseUncollectibleReceivables•Allowancemethod–recordlossesbasedonanestimateofuncollectibleaccounts.–SetupAllowanceforuncollectibleaccounts,AllowancefordoubtfulaccountsandAllowanceforbaddebts.–Thisisacontra-accounttoAccountReceivableUncollectibleReceivablesUncollectibleReceivables•Allowancemethod–Percent-of-salesmethod•computesexpenseasapercentofrevenue•incomestatementapproach–Aging-of-receivablesmethod•individualreceivablesareanalyzedbasedonhowlongtheyhavebeenoutstanding•balancesheetapproachPercent-of-SalesTotalsalesare$35,000.Thecreditdepartmentestimatesthatuncollectible-accountexpenseis1%oftotalrevenues.Dec31Uncollectible-AccountExpense($35,000x.001)35AllowanceforUncollectibleAccounts35RecordedexpensefortheyearAccountsReceivable3,789Bal.3,789AllowanceforUncollectibleAccounts2935Bal.64NetAccountsReceivable$3,789–64=$3,725Aging-of-ReceivablesAgeofAccount(Dollaramountsinmillions)Customer1-30Days31-60Days61-90DaysOver90DaysTotalBalanceHertzRent-A-Car***********************************Totals$3,300$300$100$89$3.789Estimatedpercentuncollectible............X1%X2%X7%X20%AllowanceforUncollectibleAccountsbalanceshouldbe$33+$6+$7+$18=$64Aging-of-Receivables•Currentbalanceinallowanceaccountis$29.•Calculatetheadjustmentneededtobringthebalanceto$64.•Expense:$64–$29=$35Aging-of-ReceivablesDec31Uncollectible-AccountExpense35AllowanceforUncollectibleAccounts35RecordedexpensefortheyearAccountsReceivable3,789Bal.3,789AllowanceforUncollectibleAccounts2935Bal.64NetAccountsReceivable$3,789–64=$3,725WritingoffUncollectibleAccounts•DecreasetheAllowanceaccountandremovetheaccountreceivable.Mar31AllowanceforUncollectibleAccounts12AccountsReceivable–Fiesta9AccountsReceivable–Stop-N-Shop3WroteoffuncollectiblereceivablesWritingoffUncollectibleAccountsWritingoffUncollectibleAccountsDirectWrite-OffMethod•Noallowanceisestablishedandtheexpenseisrecognizedwhenaccountsarewrittenoff.Mar31UncollectibleAccountExpense12AccountsReceivable–Fiesta9AccountsReceivable–Stop-N-Shop3Wroteoffbadaccountsbydirectwrite-offmethodDirectWrite-OffMethod•Assetsareoverstatedonthebalancesheetbecausenoallowanceaccountisused.•Poormatchingofuncollectible-accountexpenseagainstrevenue.Netincomeisoverstated.NotesReceivable•Creditorhasanotereceivable.•Debtorhasa