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Lecture Issues in financial accounting – Lecture 9: Practical issues in cash and receivable: Disposition and recognitions

In this chapter, the following content will be discussed: Describe the current asset classification and its role in financial analysis and control; explain the techniques used to manage, account for, and control cash; define accounts receivable and indicate how the allowance method is used to value accounts receivable on the financial statements. | Practical Issues in Cash and Receivable: Disposition and Recognitions PART II: Corporate Accounting Concepts and Issues Lecture 09 Explain accounting issues related to recognition and valuation of notes receivable. Explain the fair value option. Explain accounting issues related to disposition of accounts and notes receivable. Describe how to report and analyze receivables. Learning Objectives What is cash? Reporting cash Summary of cash-related items Cash Special Issues Recognition of notes receivable Valuation of notes receivable Cash and Receivables Accounts Receivable Notes Receivable Recognition of accounts receivable Valuation of accounts receivable Fair value option Disposition of accounts and notes receivable Presentation and analysis Supported by a formal promissory note. Recognition of Notes Receivable LO 1 Explain accounting issues related to recognition of notes receivable. Notes Receivable A negotiable instrument. Maker signs in favor of a Payee. Interest-bearing (has a . | Practical Issues in Cash and Receivable: Disposition and Recognitions PART II: Corporate Accounting Concepts and Issues Lecture 09 Explain accounting issues related to recognition and valuation of notes receivable. Explain the fair value option. Explain accounting issues related to disposition of accounts and notes receivable. Describe how to report and analyze receivables. Learning Objectives What is cash? Reporting cash Summary of cash-related items Cash Special Issues Recognition of notes receivable Valuation of notes receivable Cash and Receivables Accounts Receivable Notes Receivable Recognition of accounts receivable Valuation of accounts receivable Fair value option Disposition of accounts and notes receivable Presentation and analysis Supported by a formal promissory note. Recognition of Notes Receivable LO 1 Explain accounting issues related to recognition of notes receivable. Notes Receivable A negotiable instrument. Maker signs in favor of a Payee. Interest-bearing (has a stated rate of interest) OR Zero-interest-bearing (interest included in face amount). Recognition of Notes Receivable LO 1 Explain accounting issues related to recognition of notes receivable. Generally originate from: Customers who need to extend payment period of an outstanding receivable. High-risk or new customers. Loans to employees and subsidiaries. Sales of property, plant, and equipment. Lending transactions (the majority of notes). LO 1 Explain accounting issues related to recognition of notes receivable. Recognition of Notes Receivable Short-Term Long-Term Record at Face Value, less allowance Record at Present Value of cash expected to be collected Interest Rates Stated rate = Market rate Stated rate > Market rate Stated rate < Market rate Note Issued at Face Value Premium Discount Illustration: Bigelow Corp. lends Scandinavian Imports $10,000 in exchange for a $10,000, three-year note bearing interest at 10 percent annually. The market rate of interest for a note of similar .