excercise 7-11,7-5

Exercises a. The purchase of the CD. b. The accrual of interest adjustment for interest earned through June 30, the end of the com- pany's fiscal year c. The redemption of the CD Assume 360 days in a year. Exercise 7-11 Classification of Cash Equivalents and Investments on a Balance Sheet Classify each of the following items as a cash equivalent (CE), a short-term investment (STI), or a long-term investment (LTI) LOS 1. A 120-day certificate of deposit. 2. Three hundred shares of MG common stock. The company plans on selling the stock in six months 3. A six-month U.S. Treasury bill. 4. A 60-day certificate of deposit. 5 Maple Co. bonds maturing in 5 years. The company intends to hold the bonds until maturity 6. Commercial paper issued by ABC Corp., maturing in four months. Five hundred shares of Copper common tock. The company plans to sell he stock in 60 7. Five hundred days to help pay for a note due at that time at the bank. 8. Two hundred shares of EG preferre 9. Ten year U.S. Treasury bonds. The company plans to sell the bonds on the open market in 10. A 90-day U.S. Treasury bill. d stock. The company intends to hold the stock for ten yea rs and then sell it to help finance construction of a new factory six months. xercise 7-12 Purchase and Sale of Bonds Starship Enterprises enters into the following transactions during 2017 and 2018 05 EXAMPLE 7-10 2017 Purchased $100,000 face value of Northern Lights Inc. bonds at face value. The newly issued bonds have an interest rate of 8% paid semiannually on June 30 and December 31. The bonds mature in five years. Received interest on the Northern Lights Inc. bonds. Reccived interest on the Northern Lights Inc, bonds. mc how Tune 30: Determine the amount of bad debts expense for 2017. 2. Exercise 7-4 Using an Aging Schedule to Account for Bad Debts LO1 Carter Company sells on credit with terms of n/30. For the $500,000 of accounts at the end of EXAMPLE 7 the year that are not overdue, there is a 90% probability of collection. For the $200,000 of accounts that are less than a month past due, Carter estimates the likelihood of collection going down to 70%. The probability of collecting the $100,000 of accounts more than a month past due is estimated to be 25%. Required 1. Prepare an aging schedule to estimate the amount of uncollectible accounts. 2. On the basis of the schedule in part (1), identify and analyze the adjustment needed to estimate bad debts. Assume that the balance in Allowance for Doubtful Accounts is $20,000. Exercise 7-5 Accounts Receivable Turnover for Nike The financial statements included in the 2015 Form 10-K of Nike reported the following amounts (in millions of dollars): LO2 7-6 Revenues, for the year ended May 31, 2015 Accounts receivable, net, May 31, 2015 Accounts receivable, net, May 31, 2014 $30,601 3,358 3,434 REAL WORLD Required 1. Compute Nike's accoun Show (Assume that all sales are on credit.) Vhat is the average collection period in days for an account receivable? Explain your answer Giye some examples of the types of customers you would expect Nike to have. Do you think the average collection period for sales to these custome tion do you need to fully answer that question? me how 3. rs is reasonable? What other informa