Question 3.1

Explain how and where accounts receivable are reported on the financial statements, and what the difference is between accounts receivable and notes receivable.

Question 3.3

Digital Solutions Inc is preparing its cash collection summary for 2018. Digital ended 2017 with cash of $81 million, and managers need to keep a cash balance of at least $75 million for operations.

Account Receivables are expected to total $11,284 million during 2018, and payments for the cost of services should reach $6,166 million. Estimate bad debt expense will be at $2,543 million.

During 2018, Digital expects to invest $1,825 million in new equipment and sell older assets for $115 million. Debt payments scheduled for 2018 will total $597 million. The company forecasts net income of $890 million for 2018 and plans to pay dividends of $338 million.

1.Prepare Digital Solutions cash balance for 2018. Will the cash receipts and payments leave Digital with the desired ending cash balance of $75 million, or will the company need additional financing? If it does, how much will it need?

Hint: cash collections - cash payments = ending cash - desired balance = financing (if needed)

Question 3.4

The October 31 bank statement of Spooky Halloween Costumes Ltd. (SHC) has just arrived from TD Bank. To prepare the SHC bank reconciliation, you gather the following data: