Question

Question 1 Part A and B

A. Logistics Company had the following items listed in its trial balance at 12/31/2018:

Balance in checking account, Bank of the East	$	352,000
Treasury bills, purchased on 11/1/2018, mature on 1/30/2019		25,000
Loan payable, long-term, Bank of the East		210,000

Included in the checking account balance is $55,000 of restricted cash that Bank of the East requires as a compensating balance for the $210,000 note. What amount will Logistics include in its year-end balance sheet as cash and cash equivalents?

Multiple Choice

• $322,000.

• $352,000.

• $377,000.

• $297,000.

B. On November 10 of the current year, Flores Mills sold carpet to a customer for $7,400 with credit terms 2/10, n/30. Flores uses the gross method of accounting for cash discounts.

What is the correct entry for Flores on November 17, assuming the correct payment was received on that date?

Multiple Choice

• Cash	7,400
  Sales discounts	148
  Accounts receivable		7,400
  Sales		148

• Cash	7,252
  Sales	148
  Accounts receivable		7,400

• Cash	7,252
  Accounts receivable		7,252

• Cash	7,252
  Sales discounts	148
  Accounts receivable		7,400

Answer 1

A)

Answer - A ($322,000)

Cash and Cash Equivalent at Year End = Opening Balance in Checking Account - Restricted Balance + Maturity Amount = 352000 - 55000 + 25000 = $322000

Answer is $322000.

B)

Answer -

Flores Mills
Payment is made within 10 days, so 2% discount on Gross
Accounts Receivable will be accounted as sales discount
Accounting entry on Nov 17
by Gross method of sales recognition
Account Title	Dr $	Cr $
Cash	7,252
Accounts Receivable		7,400
Sales Discount	148
So the last option is correct.

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