ASSETS

Current Assets: Are cash and other Assets expected to be converted into cash, sold, or consumed
either in One Year or in the operating cycle, which ever is longer.

. Cash: It is the money on deposit in banks and any items that banks will accept for deposit such
as, cheeks, money orders, and travelers' cheeks.
. Cash Equivalent: Are defined as short-term investments are so liquid such as money market
funds U.S. Treasury bills and high-grade commercial paper.

Money "flows" earning

The financial assets
Collections from Cash payment

Customers
Accounts Cash(and
Receivable cash
equivalents)
Excess
Investments
Cash is are sold as
Invested cash is
Temporarily needed
Marketable
Securities

Banks reconciliation: It is schedule explaining any differences between the balance shown in
bank statement and the balance shown in the depositors accounting records.
. The most common examples of certain transactions recorded by a depositor
may not have recorded by the bank such as:
1. Outstanding checks 2.Deposits in transit
3. Service charges 4. Charges for NSF checks
5. Credit for interest earned 6. Miscellaneous bank charges

.Steps in preparing a bank reconciliation:

1. Compare deposits listed on the bank statement with the deposits shown in the accounting records.
2. Arrange paid checks in sequence by serial numbers and compare each check with the corresponding
entry in the accounting records.
3. Add to the balance per the depositor's accounting records any credit memoranda issued by the bank.
4. Deduct from the balance per the depositor's records any debit memoranda issued by the bank.
5. Make appropriate adjustments to correct any errors.
6. Determine that the adjusted balance of the bank statement is equal the adjusted balance in the
depositor's Records.
7. Prepare journal entries.

. Illustration of bank reconciliation: The statement shows a balance of cash on deposit at

July 31 of
$5,000.17.Assume that on July 31, Parkview's ledger shows a bank balance of $4,262.83.
The employee preparing the bank reconciliation has identified the following reconciling items.
. Short Term Investment: Investment in Debit and equity securities are grouped into three
portfolios for
Valuation and reporting proposes:
1. Held to maturity: Debit securities that the enterprise has the positive intent and ability to hold to
maturity.
2. : Debit and equity securities bought and held primary for sale in the near term to generate income
Treading
3. Available-for-sale: Debit and equity securities bought and held-to-maturity.

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 Balance Sheet
Presentation of
Investment in Securities
(in thousands)
Assets

Cash and cash equivalents $ 45,784

Securities available for sale
Investment securities 10,284
Mortgage-related securities 51,814
Securities held to maturity
Mortgage- related securities (fair value of$134.2 million) 135,896
Loans receivable, net
Held for sale 16,542
Held for investment 1,066,945
Foreclosed properties and repossessed assets, net 5,294

Long-Term Investment: Referred to it as Investments, normally consist of one of four types:

1- Investments in Securities: such as bonds, common stock, or Long-Term notes
2- Investments in Tangible fixed assets: Those are currently used in operation, such
as
Land held for speculation.
3- Investments set aside in special funds: Such as sinking fund, pension fund, or
plant
Expansion fund.
4- Investments: In non consolidated subsidiaries or affiliated companies.
Balance Sheet
Presentation of Long-Term
Investment
Investments
Investment in Alco Health Services corporation $ 62,255,000
Other investments 37,533,000

Long-term receivable 22,191,000

Total investments 121,979,000

. Property, Plant, and Equipment: Are properties of durable nature used in regular operations
of the
Business, these assets consists of physical property such as land, buildings, machinery,
Furniture, Tools, with exception of land, most assets are depreciable.
Balance Sheet
Presentation of Property, Plant, and
Equipment
Property,Plant,and equipment

Land $ 5,812,000
Buildings 46,490,000
Machinery and equipment 72,513,000
Capitalized leases 39,425,000
Leasehold improvements 19,068,000

183,308,000
Less: Accumulated depreciation 55,496,000

127,812,000
Tools, dies and molds, less amortization
37,035,000

Property, Plant, and equipment, net

164,865,000

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 . Intangible Assets: It is characterize by:
A- Lack o physical.
B- Usually have high degree of uncertainty concerning their future benefits.
. They include patents, copy rights, franchises, good will, trade marks, and trade names.
. Current liabilities: Are the obligations that are reasonably expected to be liquidated either through
the use
Of current assets or the creation of other current liabilities, this concept include :
1- Payables resulting from the acquisition of goods and services: accounts
payable, wages payable, taxes payable and so on.
2- Collections received in advance for delivery of goods or performance of
services such as unearned rent revenue or unearned subscriptions revenue.
3- Other liabilities whose liquidation will take place within the operating cycle
such as short-term obligations arising from purchase.

Balance Sheet
Presentation of Current
Liabilities
Current liabilities

Short-term debt $ 22,500,000

Accounts payable-public 240,400,000
Accounts payable to unconsolidated titillates 18,200,000
Advances from customers on contracts 161,100,000
Accrued compensation and benefits 169,400,000
Accrued warranty costs 34,100,000
Accrued taxes other than income taxes 21,900,000
Accrued interest 28,300,000
Other accrued liabilities 151,000,000
Income taxes payable 112,200,000
Current portion of long term debt 12,400,000

Total current liabilities 971,500,000

. Long – Term liabilities: Are obligations that are not reasonably expected to be liquidated within
the
Normal operating cycle.
.Long – term liabilities are of three types:
1- Obligation arising from specific financing situations such as the issuance of bonds.
2- Obligations arising from the ordinary operations of the enterprise, such as pension
obligation and deferred income tax liabilities.
3- Obligation that are dependent upon the occurrence of one or more future events to
confirm the amount payable such as service or product warranties and other
contingencies.

Balance Sheet
Presentation of
Long-Term Debt
Total current liabilities $ 978,109,000
Long-term debt (See note) 254,312,000
Obligations under capital leases 252,618,000
Deferred income taxes 57,167,000
Other non-current liabilities 127,321,000

Note: Indebtedness. Debt consists of:

9.5% Senior notes, due in annual installments of $10,000,000 $ 40,000,000
Mortgages and other notes due through 2011 (average interest rate
Of 9.9%) 107,604,000
Bank borrowings at 9.7% 67,225,000
Commercial paper at 9.4% 100,102,000

314,931,000
Less: Current portion (60,619,000)

Total long-term debt $ 254,312,000

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. Account receivables:
. Uncollectible Accounts:
.To illustrate, assume that World Famous Toy Company Co. begins business on January 1,1997, and
makes most of its sales on account. At January 31, accounts receivable amount to $ 250,000.
. On this date, the credit manager reviews the accounts receivable and estimates that approximately $
10,000 of these accounts will prove to be uncollectible. The following adjusting entry should be made
at January31:

Uncollectible accounts Expense 10,000

Allowance for doubtful accounts
10,000
To record the portion of total accounts receivable estimated to be uncollectible.

Writing off an uncollectible account Receivable:

To illustrate, assume that early in February World Famous Toy Co. learns that Discount Stores
has gone out of business and that the $4,000 account receivable from this customer is now worthless. The
entry to write off this uncollectible account receivable is:

Accounts for doubtful Accounts 4,000

Accounts Receivable (Discount Stores) 4,000
To write off receivable from Discount stores as uncollectible.

.Hint: If the amounts written off as uncollectible turn out to be less than the estimated amount, the
allowance for Doubtful accounts will continue to show a credit balance. If the amounts written off as
uncollectible are greater than the estimated amount, the allowance For Doubtful Accounts will acquire a
temporary debit balance , which will be eliminated by the adjustment at the end of the period.

. Direct write-off Method: Uncollectible accounts expense is recorded in the period in which
individual accounts receivable are determined to be worthless rather than in the period in which the sales
were made.
When a particular customer's account is determined to be uncollectible, it is written off directly to
uncollectible accounts expense, as follows:

Uncollectible Accounts Expense 250

Accounts Receivable 250

DEMONSTRATION PROBLEM
Shown below are selected transactions of Gulf corp. during the month of Dec.
Dec. 5 Sold 2,000 shares of AT&T capital stock at $53 per share, less a
brokerage commission of $200. These marketable securities had been
acquired nine month earlier at a total cost of $112,000
Dec. 8 an account receivable from S. Willis in the amount of $700 is
determined to be uncollectible and is written off against the allowance
for doubtful Accounts.
Dec.15 unexpectedly received $200 from F. Hill in full payment of her
account. The $200 account receivable from Hill had previously been
written of as uncollectible.
Dec.20 Sold 1,000 shares of IBM capital stock at price of $60 per share, less a
brokerage commission of $150. These investment shares had been
acquired at a total cost of $52,000
Dec.31 Wrote a check for $76 replenish the petty cash fund. Petty cash
vouchers indicated office supplies expense, $44 miscellaneous
expense, $32
Dec.31 The month –end bank reconciliation includes the following items:
outstanding checks, $12,320, deposit in transit, $3,150; check from
customer T. Jones returned "NSF" $358; bank service charges,
$10; bank collected $20,000 in maturing U.S. Treasury bills (a cash
equivalent) on the company's behalf. (These Treasury bills had cost
$19,760, so the amount collected includes $330 interest revenue).

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DATA FOR ADJUSTING 1- An aging of account receivable indicates probable uncollectible
ENTRIES
accounts totaling $90,000. Prior to the month-end adjustment, the
allowance for Doubtful Accounts has a credit balance of $5,210.

2- Prior to any year-end adjustment, the balance in the Marketable

Securities account was $213,800. At a year-end, marketable
securities owned had a cost of $198,000 and a market value
of$210,000.

INSTRUCTION a- Prepare entries in general journal entry from for the Dec.
transaction. In adjusting the accounting records from the bank
reconciliation, make one entry to record any increases the Cash
account and separate entry to record any decreases.
b- Prepare the month-end adjustments indicated by the tow numbered
paragraphs.
c- What is the adjusted balance in the Unrealized Gain (or loss) on
Investments account at Dec. 31? Where in the financial statement
does this account appear?

Sowtion to Demonstration Problem

a- GENERAL JOURNAL
Dec. 5 Cash 105,800
Loss on sale of investments 6,200
Marketing Securities 112,000
Sold 2,000 shares of AT&T capital stock at a price
below cost.
Dec. 8 Allowance for Doubtful Accounts 700
Accounts Receivable (s.Willis) 700
To write off receivable from S. Willis as
uncollectible.
Dec. 15 Accounts Receivable (F. Willis) 200
Allowance for Doubtful Accounts 200
To reinstate account receivable previously written
off as uncollectible.
Dec. 15 Cash 200
Accounts Receivable(F. Hill) 200
To record collection of account receivable.
Dec. 20 Cash 59,850
Marketable Securities 52,000
Gain on sale of investments 7,850
Sold 1,000 shares of IBM at a price above cost.
Dec. 31 Office Supplies Expense 44
Miscellaneous Expense 32
Cash 76
To replenish petty cash fund
Dec. 31 Cash 20,000
Cash Equivalents 19,670
Interest Revenue 330
To record collection of maturing T-Bills by bank
Dec. 31 Accounts Receivable (T-Jones) 358
Bank Service Charges 10
Cash 368
To record bank service charge and to reclassify NSF
checks from T-Jones as an account receivable.

b- Adjusting Entries
Dec. 31 Uncollectible Accounts Expense 3,790
Allowance for Doubtful Accounts 3,790
To increase Allowance for Doubtful Accounts to
$9,000 ($9,000 - $5,210 = $3,790).
Dec. 31 Unrealized Gain (or loss) on investments 3,800
Marketable Securities 3,800
To reduce the balance in the Marketable Securities
account to a market value of $210,000

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c- The Unrealized Gain (or loss) on Investments account will have a $12,000 credit balance, representing
the unrealized gain on securities owned as of Dec. 31. (The unrealized gain is equal to the $210,000 market
value of these securities, less their $198,000 cost.) The account appears in the stockholder's equity section of
Gulf Corp.'s balance sheet.

1- A deposit of $410.90 made after banking hours on July 31 does not appear in the
bank statement.
2- Four checks issued in July have not yet been paid by the bank. These checks are:
Check no Date Amount
801 July 15 $100, 00
888 July 24 10, 00
890 July 27 402, 50
891 July 30 205, 00

3- Tow credit memoranda were included in the bank statement:

Date Amount Explanation
July 22 $ 500, 00 Proceeds from collection of a non-interest bearing note receivable from J.
David. Parkview Company had left their note with the bank's
collection department.
July 31 24, 74 Interest earned on average account balance during July.

4- Three debit memoranda accompanied the bank statement:

Date Amount Explanation
July 22 $ 5.00 free charged by bank for handling collection of note receivable.
July 30 50.25 Check from customer J.B. Ball deposited by Parkview Company charged
back as NSF.
July 31 12.00 Service charge by bank for the month of July.

5- Check no. 875 was issued July 20 in the amount of $85 but was erroneously recorded
in the cash payments journal as $58. The check, in payment of telephone expense, was
paid by the bank and correctly listed at $85 in the bank statement. In Parkview's
ledger, the cash account is overstated by $27 because of this error ($85 - $58 = $27).

PARKVIEW COMPANY
Bank Reconciliation
July 31, 1997

Balance per bank statement, July 31, 1996……………………………………………………………$5,000,17

Add: Deposit of July 31 not recorded by bank…………………………………………………………..410,90

$ 5,411.07
Deduct: Outstanding checks:

No. 801……………………………………………………….. $100.00

No. 888....................................................................................... 10.25
No. 890....................................................................................... 402.50
No. 891....................................................................................... 205.00 717.75

Adjusted cash balance....................................................................................................................... $4,693.32

Balance per depositor's records, July 31, 1997……………………………………………………. $4,262.83

Add: Note receivable collected for us by bank………………………………. $500.00
Interest earned during July………………………………………. 24.74 524.74

$4,787.57
Deduct: collection fee………………………………………………………… $ 5.00
NSF check of J.B. Ball………………………………………….. 50.25
Service charge………………………………………………….. 12.00
Error on check stub no. 875…………………………………….. 27.00 94.25

Adjusted cash balance (as above)………………………………………………………… $ 4,693.32

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 In this illustration and in our assignment material, we will follow a policy
of making one journal entry to record the unrecorded cash receipts, and
another to record the unrecorded cash reductions. (Acceptable
alternatives would be to make separate journal entries for each item or
to make one compound entry for all items.) Based on our recording policy,
the entries to update the accounting records of Parkview Company are:

Per bank credit memoranda… Cash………………………… 524.74

Notes Receivable………… 500.00
Interest Revenue…………. 24.74
To record collection of note receivable from J. David
collected by bank and interest earned on bank account in
July.
Per bank debit Bank Service Charges………… 17.00
Memoranda (and Accounts Receivable (J.B. Ball)… 50.25
Correction of an error) Telephone Expense……………. 27.00
Cash…………. 94.25
To record bank charges (service charge, $12; collection fee,
$5), to reclassify NSF check from customer J.B. Ball as
an account receivable, and to correct understatement
of cash payment for telephone expense.

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