Exercise 7-1

Requirement 1 Cash and cash equivalents includes: Cash in bank – checking account U.S. treasury bills Cash on hand Undeposited customer checks Total Requirement 2

EUR

25,000 5,000 1,350 1,840 33,190 The EUR 20,000 in 6-month treasury bills should be classified as a current asset along with other temporary investments.

Exercise 7-2

Requirement 1 Cash and cash equivalents includes: a. Balance in checking account Balance in savings account b. Undeposited customer checks c. Currency and coins on hand f. U.S. treasury bills with 2-month maturity Total Requirement 2

GBP 13,500 22,100 5,500 580 15,000 56,680 d. The GBP 500,000 savings account will be used for future plant expansion and therefore should be classified as a noncurrent asset, either in other assets or investments.

Solutions Manual, Vol.1, Chapter 7

? The McGraw-Hill Companies, Inc., 2007

7-1

Exercise 7-2 (concluded)

e. The GBP 25,000 in the checking account is a compensating balance for a long-term loan and should be classified as a noncurrent asset, either in other assets or investments.

f. The GBP 20,000 in 7-month treasury bills should be classified as a current asset along with other temporary investments.

? The McGraw-Hill Companies, Inc., 2007 7-2

Intermediate Accounting, 4/e

Exercise 7-3

Requirement 1

Sales price = 1,000 units x 55 = 55,000

July 15, 2006 Accounts receivable ....................................................... 55,000 Sales revenue .............................................................. 55,000 July 23, 2006 Cash (98% x 55,000) .......................................................... 53,900 Sales discounts (2% x 55,000) ........................................... 1,100 Accounts receivable ................................................... 55,000 Requirement 2 July 15, 2006 Accounts receivable ....................................................... 55,000 Sales revenue .............................................................. 55,000 Aug. 15, 2006 Cash ................................................................................ 55,000 Accounts receivable ................................................... 55,000 Solutions Manual, Vol.1, Chapter 7

? The McGraw-Hill Companies, Inc., 2007

7-3

Exercise 7-4

Requirement 1

July 15, 2006 Accounts receivable ........................................................ 53,900 Sales revenue (98% x 55,000) ........................................ 53,900 July 23, 2006 Cash ................................................................................. 53,900 Accounts receivable .................................................... 53,900 Requirement 2

July 15, 2006 Accounts receivable ........................................................ 53,900 Sales revenue (98% x 55,000) ........................................ 53,900

August 15, 2006 Cash ................................................................................. 55,000 Accounts receivable .................................................... 53,900 Interest revenue ........................................................... 1,100 ? The McGraw-Hill Companies, Inc., 2007 7-4

Intermediate Accounting, 4/e